9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (7) TMI 309 - AT - Insolvency and BankruptcyInitiation of CIRP - Purchase of litigation by the applicant - Financial Debt or not - NCLT dismissed the application - non-speaking order which does not deal with contentions raised by the Appellant - closure of the arbitration proceedings which have been relied by Ld. Adjudicating Authority has a bearing on the claim of the Appellant or not - neither the Appellant nor its assignor and nor Corporate Debtor were parties to the arbitration proceedings - debt in question was assigned to the Appellant in the year 2017 by which time Arbitration Proceeding has not even come to an end. HELD THAT - IFS was entered into between Members of Jayaswal Family. The assets and properties including CIAL and JNIL were distributed among the two groups i.e. BLS Group and MKJ Group. CIAL was allocated to MKJ Group whereas JNIL was given to BLS Group. Strip Mill Division of CIAL was to be demerged from CIAL and was to be merged with JNIL. IFS provided for payment of lease rental by JNIL and payment towards loan and interest was from out of lease rental. IFS further clearly contemplated that after units are merged with JNIL, the liability for payment of the balance loans and interest shall be on JNIL. In the arbitration proceedings MKJ Group filed an Application under Section 31(6) of the Arbitration and Conciliation Act claiming for an Interim Award for an amount of Rs. 102,26,78,728/- which amount according to the MKJ Group was admitted in the balance sheet of Corporate Debtor JNIL. The Application praying for Interim Award for aforesaid amount by MKJ Group was dismissed by Sole Arbitrator on 26th November, 2014 which order was not challenged. It is clear that in the arbitration proceedings which was between two groups i.e. BLS and MKJ Groups. MKJ Group claimed the amount paid by CIAL towards installments to the lenders and claim of Rs. 102,26,78,728/- was made which claim was repelled in the arbitration proceedings thus the claim of assignor of the Appellant was very much raised as a counter claim. It is admitted fact that after approval of the scheme of arrangement by the High Court on 13th April, 2013, payment of servicing of the loan is being done by the JNIL for which there is no dispute - there are no error in the finding of the Adjudicating Authority that there is no financial debt owed by JNIL to the CIAL on basis of which an Application under Section 7 to be filed either by CIAL or its assignee. From the sequence of events as noted above it is clear that assignor had assigned its debt of Rs. 104 Crores to the Appellant on 24th March, 2017 when it failed to obtain an Interim Award from the sole arbitrator by filing an application under Section 31(6) of the Arbitration and Conciliation Act which was rejected on 23rd September, 2016. Entries in balance sheets of the Corporate Debtor. Annual Report of 2013-14 contains an entry of unsecured loan to CIAL of Rs. 10432.79/- Lakhs - HELD THAT - When at the relevant time i.e. Annual Year 2014, it is immediately after demerger, dispute arose with regard to payments made by CIAL to Lenders of the Strip Mill Division which CIAL claimed from the Corporate Debtor which liability were denied by the Corporate Debtor, the claim of the Appellant that JNIL has acknowledged its debt in the balance sheet cannot be accepted as admission of any liability by JNIL. The record indicates that from the year 2015-16 till 2020-21 in the financial statements of the Corporate Debtor there was categorical note denying the liability of 102,26,78,728/- as claimed, financial statement thus cannot be read as acknowledgement of the debt by Corporate Debtor. The submission of Appellant that there is acknowledgement of debt by Corporate Debtor towards CIAL i.e. assignor of Appellant, cannot be accepted. The claim of amount of Rs. 104,43,67,347.94/- was throughout disputed by the BLS Group/Corporate Debtor which sequence of the events we have noticed above. The sequence of events and facts noticed above clearly indicate that MKJ Group who did not succeed in any proceedings to establish the claim of Rs. 104,43,67,347.94/- against the Corporate Debtor assigned its debt to the Appellant to further litigate and involve the corporate debtor in proceedings. MKJ Group despite raising the claim in the arbitration proceedings by means of counter claim and despite their application for Interim Award for an amount of Rs. 102,26,78,728/- having been dismissed in the year 2016 assigned the debt to Appellant, Appellant by means of assignment only purchased the litigation. Thus, no error has been committed by the Adjudicating Authority in allowing I.A. filed by the Corporate Debtor for dismissing the Section 7 Application - appeal dismissed.
Issues Involved:
1. Maintainability of the Section 7 Application under the Insolvency and Bankruptcy Code, 2016. 2. Existence of Financial Debt. 3. Impact of Arbitration Proceedings and Settlement. 4. Acknowledgement of Debt in Balance Sheets. 5. Limitation Period for Filing the Section 7 Application. Summary: 1. Maintainability of the Section 7 Application: The Appellant challenged the Order dated 09.02.2023 passed by the National Company Law Tribunal (NCLT), Mumbai Bench, which dismissed the Section 7 Application of the Insolvency and Bankruptcy Code, 2016 (the Code) as not maintainable. The Adjudicating Authority held that the claim made by the Financial Creditor emanated from an Indenture of Family Settlement (IFS) dated 31st July, 2008, which had been amicably settled and compromised, leaving no debt due and payable by the Corporate Debtor. 2. Existence of Financial Debt: The Adjudicating Authority found that the payments made by CIAL to various banks and institutions were not disbursed to the Corporate Debtor-JNIL and no money was received by JNIL for the time value of money. Thus, it concluded that there was no financial debt. The Appellant argued that the liability of the Corporate Debtor was set out in the scheme of arrangement between CIAL and JNIL and that the debt was acknowledged in the balance sheets. 3. Impact of Arbitration Proceedings and Settlement: The arbitration proceedings between BLS Group and MKJ Group, which included a counterclaim by MKJ Group for Rs. 102,26,78,728/-, were settled and all claims and counterclaims were withdrawn. The Adjudicating Authority held that since the alleged debt was the subject of arbitration and had been amicably settled, no debt remained payable by the Corporate Debtor. 4. Acknowledgement of Debt in Balance Sheets: The Appellant contended that the debt was acknowledged in the balance sheets of the Corporate Debtor. However, the Adjudicating Authority noted that subsequent financial statements from 2015-16 to 2020-21 contained notes disputing the claim. The Tribunal emphasized that the entries in the balance sheets, accompanied by caveats, did not constitute an unequivocal acknowledgment of debt. 5. Limitation Period for Filing the Section 7 Application: The Respondent argued that the claim was barred by limitation, as the assignment deed was executed on 24th March, 2017, and the Section 7 Application was filed in 2022, more than five years later. The Tribunal did not find merit in the Appellant's claim of acknowledgment of debt extending the limitation period. Conclusion: The Tribunal concluded that there was no financial debt owed by JNIL to CIAL, and the Section 7 Application was not maintainable. The Appeal was dismissed, affirming the Adjudicating Authority's decision. The Tribunal also rejected the Appellant's contention that the order was non-speaking, noting that the Adjudicating Authority had provided detailed reasons for its decision.
|
