2023 (7) TMI 314 - AT - Insolvency and Bankruptcy

Admission of application - CIRP initiated - existence of financial debt not established. Case of appellant is that the financial creditor though has failed to establish financial debt of any written agreement, learned Adjudicating Authority incorrectly admitted the application and initiated CIRP. HELD THAT - The learned Adjudicating Authority has rightly passed the impugned order which requires no interference. It is true that on the record there is no written agreement regarding claim of sanctioning loan to the corporate debtor. However, there are number of circumstances which in unequivocal term shows that financial creditor had been approached by the appellant for a loan of Rs.1,01,00,000/- and the loan was given to the corporate debtor in two tranches. 1st tranche was paid through cheque for an amount of Rs.51 lakh on 26.05.2017 and second amount i.e. Rs.50 lakh was given to the corporate debtor by financial creditor through RTGS and through RTGS it was paid on 03.06.2017 which has not been disputed by the either side. However, since there was no written agreement for sanctioning loan with interest the appellant has taken a futile stand that in absence of any written agreement it cannot be said that there was a financial debt. The circumstances and documents which have been brought on record suggest that impliedly there was an agreement for providing loan to the corporate debtor for time value and also with interest. In view of the provisions for the admission of a petition under Section 7 of the IBC there are certain relevant criteria. There must be debt and default. If an application fulfils the said criteria, the Adjudicating Authority is to admit such application. However, proviso 1st to Section 7 (5) speaks that only for rejection of an application reasons are required to be assigned. Meaning thereby if an application fulfils certain criteria, the Adjudicating Authority is to admit the said application and while admitting there is no requirement for assigning detailed reasons. However, if the Adjudicating Authority is going to dismiss the application as per provisions contained Section 7 of the IBC reasons are mandatory. Accordingly it is evident that admission of an application under Section 7, if fulfils certain criteria is a rule, however, rejection of such application is an exception. The Learned Adjudicating Authority has not committed any error in passing the impugned order. There is no reason to interfere with the impugned order - Appeal dismissed.

Summary

Issues Involved:
1. Validity of the financial debt without a written agreement.
2. Admissibility of the application under Section 7 of the IBC.
3. Delay in filing the appeal and its condonation.
4. Grounds for interference with the Adjudicating Authority's order.

Summary:

1. Validity of the Financial Debt Without a Written Agreement:
The appellant argued that there was no written agreement regarding the loan, and thus, no financial debt existed. The appellant contended that the amount in question was an investment in the corporate debtor's property, not a loan. However, the tribunal found that the circumstances and documents, including the Board Resolution dated 20.05.2017, implied an agreement for providing a loan with interest. The Board Resolution authorized a loan of Rs.1,01,00,000/- with 9% interest per annum, to be repaid by 31.03.2018. The tribunal concluded that the financial debt was established despite the absence of a written agreement.

2. Admissibility of the Application Under Section 7 of the IBC:
The financial creditor filed an application under Section 7 of the IBC, claiming that the corporate debtor defaulted on the loan repayment. The tribunal noted that the financial creditor provided necessary documents, including bank statements, the balance sheet of the corporate debtor, and a certificate from NeSL, which confirmed the debt and default. The tribunal emphasized that the debt was owed to the financial creditor and met the criteria under Sections 5(vii) and 5(viii) of the IBC. The tribunal upheld the Adjudicating Authority's decision to admit the application and initiate the Corporate Insolvency Resolution Process (CIRP).

3. Delay in Filing the Appeal and Its Condonation:
The appeal was filed with a delay of 10 days. The tribunal noted that an application for condonation of delay was filed, and after reviewing the grounds, the delay was condoned. The tribunal allowed the application for condonation of delay, enabling the appeal to proceed.

4. Grounds for Interference with the Adjudicating Authority's Order:
The appellant cited judgments to argue that the financial debt was not established and the application under Section 7 should be rejected. However, the tribunal found that the cited judgments were not relevant to the present case. The tribunal highlighted that the financial creditor's Board Resolution, bank statements, and the balance sheet of the corporate debtor collectively established the financial debt and default. The tribunal concluded that the Adjudicating Authority rightly admitted the application under Section 7, fulfilling the necessary criteria of debt and default.

Conclusion:
The tribunal dismissed the appeal, affirming the Adjudicating Authority's order to initiate CIRP against the corporate debtor. The tribunal found no error in the Adjudicating Authority's decision and emphasized that the criteria for admitting an application under Section 7 were met. The appeal was dismissed without any cost imposed.