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2022 (10) TMI 384 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - discrepancy in the debt amount which is payable - pending litigation due to family dispute between two groups of the Data Family and after division in the family assets, the issue of this loan is being used to settle scores - demand notice was issued by the Appellant after assignment of the loan in 2007 till 2018 - HELD THAT - Part-IV of section 7 application filed by the financial creditor Deepak Vegpro Pvt. Ltd., the amount of financial debt claimed to be default is Rs.412.52 crores, which according to the Appellant is the amount due to it by way of principal amount, interest, penal interest and liquidated damages. It is quite clear from a note in the balance sheets for the FY 2008-09 onwards that even the principal amount of Rs. 4.50 crores which is the loan taken by the corporate debtor from IDBI is settled by the assignee Deepak Vegpro Pvt. Ltd. and thereafter a loan amount of Rs.1.35 crores is shown in the balance sheets for the successive years but significantly no interest amount pertaining to the debt is shown as being outstanding and liable to the purported financial creditor. Quite obviously the principal amount of loan gets changed due to the settlement entered into by the corporate debtor with its secured creditors including Deepak Vegpro Pvt. Ltd. When there is discrepancy between the amount appearing in the balance sheets itself from one year to another, and in addition, there is a huge discrepancy between the amount claimed in default in section 7 application and the amount appearing as purported debt, the existence of debt as claimed and the jural relationship are very much doubtful - In the present case, it is found that the amount of loan given by IDBI, which was in default in the year 1998. This loan was taken over by SASF for a total consideration of Rs.2.50 crores by an Assignment Deed executed on 17.1.2007, the alleged loan was assigned by SASF to Deepak Vegpro Pvt. Ltd., after a no objection by the corporate debtor. The claim of the appellant that the loan was due and payable by the corporate debtor is contested by the Respondent by stating that after the assignee of IDBI/SASF loan to Deepak Vegpro Pvt. Ltd., the remaining amount of Rs. 1.35 crores is considered as an investment and not any loan transaction. For an applicant to be a financial creditor, a debt along with interest should be disbursed against the consideration time value of money, whereas in the present case the entries in the balance sheets by which the acknowledgment of debt claimed to be in limitation, do not show any interest accruing on the claimed loan amount, even the Assignment Agreement dated 17.1.2007 executed between SASF and Deepak Vegpro Pvt. Ltd. makes the procedure full and absolute legal owner and the only person legally entitled to financial assets or any part thereof - A plain reading of the above-stated provision under section 7 and the use of the word may in clause (a) of sub-section (2) of section 7 makes it clear that the Adjudicating Authority has the discretion to either admit it or reject the application, of course depending on the facts of the case and whether such facts and circumstances call for admission of the section 7 application. The language of section 7 can be contrasted with the language of section 9 where no word such as may is used in sub-section (5) of section 9 and an exhaustive list of conditions given in clause (i) of sub-section (5) of section 9 are satisfied. The said loan or its part thereof is not proven to be a financial debt, and the section 7 application is also barred by limitation since the acknowledgements do not provide for unequivocal and unambiguous acknowledgement of the alleged debt as claimed in the section 7 application - the Impugned Order does not suffer from any error in holding that section 7 application does not deserve to be admitted. Appeal dismissed.
Issues Involved:
1. Whether the debt is time-barred. 2. Discrepancy in the debt amount claimed. 3. Impact of family dispute on the loan issue. 4. Absence of demand notice post-assignment of the loan. Detailed Analysis: 1. Whether the Debt is Time-Barred: The appellant argued that the debt was acknowledged in the balance sheets from FY 2006-07 to FY 2015-16, thus extending the limitation period. The appellant cited the Supreme Court judgment in Asset Reconstruction Co. (India) Ltd. v. Bishal Jaiswal, which states that acknowledgments in balance sheets can extend the limitation period under Section 18 of the Limitation Act. The respondent countered that the balance sheets did not unequivocally acknowledge the debt, especially since the amount of Rs. 1.35 crores was shown without any interest liability, indicating a settlement rather than an outstanding loan. The Tribunal found discrepancies between the amounts in the balance sheets and the section 7 application, concluding that the debt was time-barred. 2. Discrepancy in the Debt Amount Claimed: The appellant claimed Rs. 412.52 crores, while the balance sheets showed Rs. 1.35 crores. The appellant argued that the balance sheets only reflected the principal amount, not the accrued interest. The respondent argued that the balance sheets should be read with the notes, which indicated settlements and waivers, reducing the debt amount. The Tribunal noted that the balance sheets from FY 2008-09 onwards showed Rs. 1.35 crores without any interest, indicating a settlement. The Tribunal concluded that the discrepancy in amounts made the debt claim questionable. 3. Impact of Family Dispute on the Loan Issue: The appellant argued that the family dispute did not affect the corporate debtor's liability. The respondent contended that the loan issue was being used to settle family scores. The Tribunal noted that the family settlement and disputes between the two groups of the Data family influenced the claims and counterclaims. The Tribunal found that the family dispute added complexity and doubt to the debt claim. 4. Absence of Demand Notice Post-Assignment of the Loan: The appellant claimed continuous efforts to recover the debt through various legal forums. The respondent argued that no demand was made for the alleged amount post-assignment, indicating the debt was not pursued. The Tribunal found that the absence of a repayment schedule and demand notice post-assignment weakened the appellant's claim of default. The Tribunal concluded that no explicit default was established. Conclusion: The Tribunal concluded that the debt was not unequivocally acknowledged in the balance sheets, and the section 7 application was barred by limitation. The discrepancies in the debt amounts and the influence of family disputes further weakened the appellant's claim. The absence of a demand notice post-assignment indicated no explicit default. Therefore, the Tribunal upheld the dismissal of the section 7 application and dismissed the appeal.
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