2022 (6) TMI 918 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - Financial Debt or not - Dishonor of Cheque - time limitation - HELD THAT - Admittedly, Mrs. Maya Goel has given the loan amount in the Financial Year 2011-12, 2012-13 and 2013-14 whereas Mr. N.C. Goel has given loan in the Financial Year 2011-12, 2013-14 and 2015-16. In the absence of any documentation, the date of default cannot be established. The date of default can only be calculated when the tenure of the loan is established, or when there is a demand for repayment. In the present case there is nothing to establish this. In summary jurisdiction, without adequate documentation, it is difficult to establish the purpose for which the money was lent and accepted. It is also not possible to establish whether there was any interest required to be paid. The time value of money is an important factor to be considered in order to establish whether this is a financial debt. Ex facie, this appears to be a petition which has been filed for recovery of money and not for resolution of the corporate debtor. The Insolvency Bankruptcy Code, 2016, should not be allowed to be used as an easy way of recovery of money. The present petition cannot be admitted under section 7 of the Code, and the same shall stand dismissed. - Petition dismissed.

Summary

Issues:
- Application filed under section 7 of the Insolvency & Bankruptcy Code, 2016 by Financial Creditors.
- Claim of repayment of principal amount and interest by Financial Creditors.
- Corporate Debtor's denial of interest payment and existence of a written agreement.
- Claim of limitation by Corporate Debtor regarding transactions.
- Dispute over the validity of letters and cheques presented.
- Rebuttal by Financial Creditor regarding the complaint under section 138 of Negotiable Instruments Act, 1881.
- Adjudication on limitation, documentation, and purpose of loan for considering as a financial debt.
- Decision on the admission of the petition under section 7 of the Code.

Analysis:
1. The application was filed under section 7 of the Insolvency & Bankruptcy Code, 2016 by Financial Creditors claiming repayment of principal amounts with interest. The Financial Creditors alleged that interest was payable at the rate of 18% per annum and provided details of the amounts given by each creditor.

2. The Corporate Debtor denied paying interest to the Financial Creditors and argued the absence of a written agreement to support the claim. Additionally, the Corporate Debtor raised the issue of limitation, stating that the transactions dated back to 2012-2014, making the application time-barred.

3. The Corporate Debtor disputed the validity of certain letters and cheques presented by the Financial Creditors, alleging fabrication and non-presentation of cheques for payment. The Corporate Debtor contended that the Financial Creditors approached the Adjudicating Authority with unclean hands.

4. In response, the Financial Creditor highlighted a pending complaint under section 138 of the Negotiable Instruments Act, 1881, and argued against the limitation claim by pointing out dishonoured cheques given in 2018.

5. The Tribunal analyzed the submissions and evidence provided by both parties. It deliberated on the issue of limitation, lack of documentation establishing the loan tenure and default date, and the unsubstantiated claims of interest receipt by the Financial Creditors.

6. The Tribunal emphasized the importance of adequate documentation to determine the purpose of the loan, existence of interest obligations, and the nature of the debt as financial. It noted the need to consider the time value of money and cautioned against misusing the insolvency process for simple debt recovery.

7. Ultimately, the Tribunal dismissed the petition under section 7 of the Code, citing insufficient evidence, lack of clarity on loan terms, and the petition's nature as a mere money recovery attempt. It allowed the parties to pursue other legal remedies outside the insolvency framework.

8. The Tribunal clarified that its decision did not prevent the parties from seeking recourse under alternative laws and directed the issuance of a certified copy of the order to all concerned parties upon request.