2024 (8) TMI 1279 - AT - Insolvency and Bankruptcy

Admission of Section 7 Application filed by the Financial Creditor (Respondent herein) - premature application - disbursement of loan or not - Appellant challenging the impugned order submits that no debt was due or payable as the Application was filed on 28.04.2020. Whether Financial Creditor has able to prove disbursement of loan to the Corporate Debtor? - HELD THAT - It is relevant to notice that in the present case, this Tribunal has directed the Appellant to file an affidavit and explain the entry of Rs.10,01,16,474. After the order of this Tribunal, an affidavit has been filed dated 17.01.2023, which is nothing but misleading affidavit containing false averments - the amount which was advanced to the Appellant by the Financial Creditor, was duly disbursed, which is proved by the Bank statement and is reflected in the balance sheet of 2010-11. The amount reflected in the balance sheet of year 2010-11 under the heading long term borrowing have been increasing in subsequent years, which indicates that interest component was added in subsequent balance sheets, which fully supports the case of the Financial Creditor that loan was with interest @ 12%. The plea of the Appellant that amount of Rs.10,01,16,474/- reflected in the balance sheet of 2016-17 and 2017-18 are amount which was given by loan to the Corporate Debtor by Romell Real Estates Pvt. Ltd. is rejected, which is false and misleading plea. Time limitation of application filed - Appellant submits that there is no acknowledgement in the balance sheet of the year 2017-18, since name of Respondent No.1 Financial Creditor is not reflected in the balance sheet, hence, there is no acknowledgement within the meaning of Section 18 of the Limitation Act and Adjudicating Authority committed error in reading the acknowledgement - HELD THAT - The mere fact that name of Respondent No.1 is not mentioned as creditor in subsequent balance sheet including the balance sheet of 2017-18 is of no consequence, since the name of Respondent No.1 was mentioned as under the unsecured/ long term borrowings in 2011-12, which unsecured loan/ borrowings continued to be reflected in subsequent balance sheet of the Corporate Debtor. It is already noted the plea raised by the Appellant that amount of long term borrowings mentioned in balance sheet for the year 2017-18 is borrowing from Romell Real Estates Pvt. Ltd., which plea has not been accepted for reasons given above. The debt, which was reflected in 2011-12 of the Financial Creditor, continued to be reflected under the long term borrowing and there being continuous acknowledgement, the Application cannot be said to be barred by time. When the Corporate Debtor s case is that the Loan Agreement is fabricated and forged, it does not lie in the mouth of the Corporate Debtor to contend that as per Loan Agreement, the Application under Section 7 was premature. From the facts of the present case, as reflected from materials brought on the record, it is clear that the Corporate Debtor, who has not denied the disbursement of the amount in balance sheet of 2010-11 and subsequent balance sheet has not made any pleading or brought on record any material that amount at any time was paid to the Financial Creditor, although some repayment was made to the other family members of the Financial Creditor in 2015. Disbursement, reflection in the balance sheets and repayment to family members, who were part of the same Loan Agreement, are the materials on which conclusion can be drawn that loan was taken by the Corporate Debtor, but was not repaid and now the Appellant is making false and misleading pleas to somehow get out from the liability from the debt and default, which has been committed by the Corporate Debtor. Appeal dismissed.

Issues Involved:
1. Admissibility of Section 7 Application
2. Acknowledgment of Debt
3. Prematurity of the Application
4. Authenticity of the Loan Agreement
5. Reflection of Debt in Balance Sheets
6. Limitation Period
7. False and Misleading Pleas by the Appellant

Detailed Analysis:

1. Admissibility of Section 7 Application
The Appeal was filed by a Suspended Director of the Corporate Debtor challenging the order dated 20.04.2022, which admitted a Section 7 Application filed by the Financial Creditor. The Adjudicating Authority found that the debt and default were clearly established and within limitation, thus admitting the Section 7 Application.

2. Acknowledgment of Debt
The Financial Creditor disbursed a loan of Rs.2 crores to the Corporate Debtor on 23.06.2010, which was reflected in the balance sheet for the year ending 31.03.2011. The subsequent balance sheets continued to reflect this debt, including the interest component. The Adjudicating Authority held that the acknowledgment of liability in the balance sheet ending on 31.03.2014 was valid, thus supporting the Financial Creditor's claim.

3. Prematurity of the Application
The Appellant argued that the Section 7 Application was premature as the loan was repayable on or before 23.06.2020. However, the Corporate Debtor had issued a repayment notice on 18.12.2019, which was not honored. The Tribunal noted that the loan could have been repaid before 23.06.2020, and thus the application was not premature.

4. Authenticity of the Loan Agreement
The Corporate Debtor denied the execution of the Loan Agreement dated 31.12.2010, alleging it was a forged document. However, the balance sheets reflected the loan, and the Adjudicating Authority found the Loan Agreement to be genuine, with stamp duty paid as per the Maharashtra Stamp Act, 1958.

5. Reflection of Debt in Balance Sheets
The balance sheets from 2010-11 to 2017-18 consistently reflected the loan under 'long term borrowing,' including the interest component. The Tribunal found that the balance sheets provided continuous acknowledgment of the debt, which supported the Financial Creditor's claim.

6. Limitation Period
The Appellant argued that the application was barred by time since the loan was disbursed on 23.06.2010, and the Section 7 Application was filed on 22.04.2020. However, the Tribunal held that continuous acknowledgment of the debt in the balance sheets extended the limitation period under Section 18 of the Limitation Act, making the application timely.

7. False and Misleading Pleas by the Appellant
The Appellant claimed that the amount of Rs.10,01,16,474/- reflected in the balance sheets was a loan from Romell Real Estates Pvt. Ltd. rather than the Financial Creditor. The Tribunal found this claim to be false and misleading, as the balance sheets clearly showed that the amount included the loan from the Financial Creditor. The Appellant's attempt to mislead the Tribunal by filing false affidavits was noted, and a cost of Rs.1,00,000/- was imposed on the Appellant.

Conclusion
The Tribunal dismissed the Appeal, confirming the Adjudicating Authority's order admitting the Section 7 Application. The Tribunal imposed a cost of Rs.1,00,000/- on the Appellant for filing false and misleading affidavits. The judgment emphasized the continuous acknowledgment of debt in balance sheets and the validity of the Loan Agreement, rejecting the Appellant's claims of forgery and prematurity.

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