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2022 (7) TMI 1191 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - list of charges appearing in the Applicant s/Corporate Debtor s Master Data, in respect of the immovable property even though in the Applicant's/Corporate Debtor's audited accounts there is no immovable property reflected - did the default occur? If yes, then when? - HELD THAT - It is apparent that there is no dispute to the fact that the Corporate Debtor was in need of funds and had approached the Financial Creditor for financial support. Subsequently, the Financial Creditor invested in the Corporate Debtor in the form of ICD, between 29 November, 2016 to 08 March, 2017. However, be that as it may there is no agreement on record which would support the terms and conditions upon which that transaction took place between the parties. With respect to the question of default, it is pertinent to mention that the Financial Creditor is relying on the letter dated 09 January, 2019, whereas, as per the contention of the Corporate Debtor, only letter sent by the Financial Creditor to the Corporate Debtor is letter dated 08 May, 2020. The notice dated 08 May, 2020 by the Financial Creditor nowhere mentioned of their previous letter dated 09 January, 2019. It is also relevant to divulge that, albeit, the Balance Sheet as on 31 March, 2019 of the Corporate Debtor at page 36 of the Petition reflects the name of the Financial Creditor under the heading of Long- Term borrowings, but mere entry in the Balance Sheet cannot be construed as default; neither, the Independent Auditors report talks about any such default by the Corporate Debtor. For initiation of a CIRP under section 7 of the Code, one of the pivotal point is the establishment of default. However, in this instant application the authencity of the letter dated 09 January, 2019 as relied on by the Financial Creditor, which would be the cornerstone for initiation of CIRP against the Corporate Debtor, is itself under consideration before the Ld. CJM. It is also pertinent to mention that the proceeding before this Adjudicating Authority is summary proceeding, we cannot call on for the trial of the parties to substantiate their evidences relied on. Thus, there is a debt and default, which are that win ingredients to warrant initiation of CIRP proceedings in terms of section 7 of the Code, against the Corporate Debtor - petition dismissed.
Issues Involved:
1. Whether the Corporate Debtor defaulted on the loan repayment. 2. The authenticity of the letter dated 09 January 2019. 3. Compliance with Section 7(3)(a) of the Insolvency and Bankruptcy Code. 4. Rectification of charges against the immovable property in the Corporate Debtor's Master Data. Issue-wise Detailed Analysis: 1. Whether the Corporate Debtor defaulted on the loan repayment: The Financial Creditor argued that the Corporate Debtor defaulted on a loan of Rs.2,59,43,883, including interest calculated at 9% up to 30 June 2020. The Financial Creditor provided the loan through Inter Corporate Deposit (ICD) between 29 November 2016 and 08 March 2017. The Financial Creditor repeatedly requested repayment, but the Corporate Debtor failed to comply. The Financial Creditor relied on a demand letter dated 09 January 2019 to substantiate the default claim. 2. The authenticity of the letter dated 09 January 2019: The Corporate Debtor contended that the letter dated 09 January 2019 was forged by the Financial Creditor. They argued that the only demand letter received was dated 08 May 2020. The Corporate Debtor filed a criminal complaint, leading to an FIR against the Financial Creditor for forgery. The police enquiry report supported the Corporate Debtor's claim of forgery. The tribunal noted that the authenticity of the letter dated 09 January 2019 was under judicial consideration, which is crucial for establishing default. 3. Compliance with Section 7(3)(a) of the Insolvency and Bankruptcy Code: The Corporate Debtor argued non-compliance with Section 7(3)(a) of the Code and Part IV (2) of FORM 1 by the Financial Creditor. However, the tribunal did not delve deeply into this issue, focusing instead on the authenticity of the default claim. 4. Rectification of charges against the immovable property in the Corporate Debtor's Master Data: The Corporate Debtor, along with other companies, had mortgaged a property to secure loans from LIC Housing Finance Limited and Tata Capital Housing Finance Limited. These loans were repaid in full, and 'No Outstanding Certificates' were issued. However, due to an inadvertent error, the charges were not updated in the Registrar of Companies' records. The Corporate Debtor is taking steps to rectify this error. Analysis & Findings: The tribunal focused on whether a default occurred and when. It noted that there was no dispute about the Corporate Debtor needing funds and receiving an ICD from the Financial Creditor. However, there was no agreement on record detailing the transaction terms. The tribunal observed discrepancies in the letters dated 09 January 2019 and 08 May 2020. The tribunal highlighted that the authenticity of the letter dated 09 January 2019, crucial for establishing default, was under judicial consideration. Given the summary nature of the proceedings, the tribunal could not substantiate the evidences relied on by the parties. Conclusion: The tribunal concluded that there was insufficient evidence to establish a debt and default, essential for initiating Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Code. Consequently, the petition C.P. (IB)/1379/KB/2020 was dismissed. The tribunal also addressed the rectification of charges in the Corporate Debtor's Master Data, noting that the Corporate Debtor was taking appropriate steps to correct the records. The application I.A. (IB) No.284/KB/2022 was disposed of accordingly. The Petitioner was granted liberty to seek legal recourse before other judicial forums if necessary. Order Pronounced: The order was pronounced on 26th July 2022.
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