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2022 (12) TMI 272 - AT - Insolvency and BankruptcyForfeiture of right to file reply - Financial Debt or not - financial assistance or loan - HELD THAT - It is seen from the material on record that first notice was directed to be issued by the Adjudicating Authority on 09.12.2019 and Ms. Shivangi Agarwal had appeared before the Adjudicating Authority and offered to file her vakalatnama on 20.01.2020. On 06.02.2020 time was sought to file Reply and the matter was adjourned. On 05.03.2020, the Respondent Counsel was absent. On 08.02.2021, since the matter was taken up after the covid situation, the Counsel for the Petitioner was directed again to issue a notice informing the Respondent regarding the next date of hearing - there is no illegality in the Order of the Adjudicating Authority in forfeiting the right of the Appellant in filing a Reply. The amount is a Financial Debt or not - HELD THAT - The Promisory Note only indicates that there was an acknowledgement of a debt to be repaid with interest. It is significant to mention that the Financial Creditor had not sought for enforcement of this promisory note and therefore, the question of it being stamped and the provisions of Indian Stamp Act, 1899 being applicable, does not arise in this case. The material on record evidences that the amount of Rs. 1 Crore disbursed to the Corporate Debtor has the essential ingredients of a Financial Debt as defined under Section 5(8) of the Code. It is submitted by the Resolution Professional that the Resolution Plan is under consideration and the time has expired on 09.10.2022. For the aforenoted reasons, we do not see any substantial grounds to set the clock back and hence this Appeal is dismissed accordingly.
Issues:
1. Admission of Section 7 Application by the Adjudicating Authority. 2. Opportunity given to the Appellant to file a Reply. 3. Nature of the amount disbursed to the Corporate Debtor. 4. Enforceability of the Promissory Notes. 5. Conduct of the Corporate Debtor in the proceedings. 6. Consideration of the amount as a Financial Debt under the Code. 7. Publication of Expression of Interest and Resolution Plan submission. 1. Admission of Section 7 Application: The Appellate Tribunal reviewed the Impugned Order where the Adjudicating Authority admitted the Section 7 Application under the Insolvency and Bankruptcy Code. The Financial Creditor had provided documents supporting the debt and default, leading to the admission of the Company Petition. The Tribunal found that all necessary requirements for admission were satisfied. 2. Opportunity to file a Reply: The Appellant argued that they were not given a proper opportunity to file a Reply. The Tribunal examined the timeline of events and noted that the Respondent had multiple chances to respond but failed to do so, leading to the forfeiture of the right to file a Reply. The Tribunal upheld the Adjudicating Authority's decision in this regard. 3. Nature of the amount disbursed: The Appellant contended that the amount disbursed was not a Financial Debt but an investment. However, the Tribunal found evidence that the amount was indeed a Financial Debt as per the Code, involving interest payments and acknowledgments of due amounts, ultimately leading to the conclusion that it met the criteria of a Financial Debt. 4. Enforceability of Promissory Notes: The Appellant raised concerns about the unstamped Promissory Notes. The Tribunal clarified that since the Financial Creditor did not seek enforcement of the Promissory Notes, the issue of stamping and enforceability did not arise, as the Notes merely indicated a financial transaction and debt acknowledgment. 5. Conduct of the Corporate Debtor: The Tribunal assessed the conduct of the Corporate Debtor in the proceedings, noting the failure to file a Reply despite multiple adjournments. The Adjudicating Authority's decision to forfeit the right to file a Reply was deemed appropriate based on the Corporate Debtor's conduct throughout the process. 6. Consideration as Financial Debt: Based on the evidence presented, including acknowledgments of debt and interest payments, the Tribunal concluded that the amount disbursed to the Corporate Debtor qualified as a Financial Debt under the Code, meeting the necessary criteria for classification. 7. Publication of Expression of Interest and Resolution Plan: The Resolution Professional provided updates on the publication of Expression of Interest and the consideration of Resolution Plans. The Tribunal noted the timelines and submissions, ultimately dismissing the Appeal due to the lack of substantial grounds to reverse the proceedings. In conclusion, the Appellate Tribunal dismissed the Appeal, upholding the Adjudicating Authority's decision to admit the Section 7 Application, considering the amount as a Financial Debt, and finding no grounds to set aside the proceedings based on the conduct of the parties and the resolution process.
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