9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (9) TMI 328 - AT - IBCAdmission of Section 7 Application filed by the Financial Creditor Respondent - transaction between the Parties was a financial transaction or not - nature of debt - HELD THAT - The present is the case where Corporate Debtor has not denied the debt but has categorically denied Letter under which loan is claimed to have been given with 12% interest. It is well settled that there has to be a transaction within a meaning of Section 5(8) of the IBC to treat a debt as a Financial Debt. The Hon ble Supreme Court in ANUJ JAIN VERSUS AXIS BANK LIMITED AND ORS. 2020 (2) TMI 1259 - SUPREME COURT has held that transaction stated in Clauses (a) to (i) of Section 5(8) would be falling within the ambit of Financial Debt only carrying the essential element stated in the principal Clause or at least has the feature which could be traced to such element in the principal Clause. The element of disbursal for time value of money is one essential condition which need to be proved for proving the debt as a Financial Debt - In the present case the Financial Creditor came up with the case that Letter dated 20.09.2010 contains terms and conditions of the loan which letter was relied and filed along with Section 7 Application. The letter was impeached by Corporate Debtor before the Adjudicating Authority. Adjudicating Authority has also directed Financial Creditor to bring the proof of service of letter. The sequence of the event and transaction between the Parties clearly proves that transfer of the amount by Financial Creditor to the Appellant were transferred by one Family Company to another Family Company and was not by way of loan nor any disbursal for any time value of money has been proved from any material on the record. Essential elements i.e. disbursal for time value of money having not been proved in the facts of the present case we are satisfied that Adjudicating Authority committed an error in admitting Section 7 Application without adverting to the real nature of transaction between the Parties and without adverting to the Letter dated 20.09.2010 which was the very basis of the case of the Financial Creditor. There was no disbursal for time value of money and the Corporate Debtor having admitted the amount of 1, 22, 50, 000/- as debt which debt having not been proved to be a Financial Debt we are satisfied that Adjudicating Authority erred in committing an error in admitting Section 7 Application however in the ends of justice where the amount by Draft has been handed over to the Financial Creditor by the Corporate Debtor the amount is allowed to be retained by Financial Creditor although Counsel for the Financial Creditor during hearing has expressed his willingness to return the Draft. Appeal allowed.
Issues Involved:
1. Validity of the financial transaction and the nature of the debt. 2. Admissibility of the Letter dated 20.09.2010. 3. Admission of debt and default by the Corporate Debtor. 4. The role of family disputes in the transaction. 5. Compliance with Section 5(8) of the Insolvency and Bankruptcy Code (IBC). 6. The decision of the Adjudicating Authority and its correctness. Issue-wise Detailed Analysis: 1. Validity of the financial transaction and the nature of the debt: The Appellant contended that the transaction between the parties was not a financial transaction but a family arrangement without any loan or interest payment. The Corporate Debtor admitted to owing Rs. 1,22,50,000 but denied the existence of any financial debt or interest obligations. 2. Admissibility of the Letter dated 20.09.2010: The Financial Creditor relied on a Letter dated 20.09.2010, allegedly signed by Ajay Kumar Bajaj, to establish the terms and conditions of the loan, including a 12% interest rate. However, the Corporate Debtor argued that Ajay Kumar Bajaj was not a director on the date the letter was issued, making the letter fabricated and unauthorised. The Adjudicating Authority directed the Financial Creditor to produce the original letter, which was not done. 3. Admission of debt and default by the Corporate Debtor: The Corporate Debtor admitted owing Rs. 1,22,50,000 but denied that it was a financial debt. The Adjudicating Authority admitted the Section 7 Application based on the admission of debt by the Corporate Debtor, despite the dispute over the nature of the debt and the validity of the Letter dated 20.09.2010. 4. The role of family disputes in the transaction: The Appellant argued that the transaction was part of a family arrangement, with no intent of creating a financial debt. The Financial Creditor denied this characterization, asserting that the debt was a financial transaction. The MoU/family partition on 17.02.2021 was not specifically denied by the Financial Creditor, suggesting its acceptance. 5. Compliance with Section 5(8) of the Insolvency and Bankruptcy Code (IBC): For a debt to qualify as a financial debt under Section 5(8) of the IBC, it must involve disbursal against the consideration for the time value of money. The Financial Creditor's claim relied on the disputed Letter dated 20.09.2010, which was not proven. The Supreme Court's rulings in relevant cases emphasized the need for disbursal against the time value of money to constitute a financial debt. 6. The decision of the Adjudicating Authority and its correctness: The Adjudicating Authority admitted the Section 7 Application based on the admission of debt by the Corporate Debtor without addressing the dispute over the nature of the debt and the validity of the Letter dated 20.09.2010. The Appellate Tribunal found that the Adjudicating Authority erred in not considering the impeached letter and the real nature of the transaction. The Tribunal concluded that the transaction was not a financial debt but a family arrangement, and the Corporate Debtor had admitted the debt of Rs. 1,22,50,000, which was not a financial debt. Conclusion: The Tribunal allowed the appeal, set aside the order admitting the Section 7 Application, and permitted the amount of Rs. 1,22,50,000 to be retained by the Financial Creditor to give a quietus to the issue. The Tribunal emphasized the need for disbursal against the time value of money to constitute a financial debt and found that the Adjudicating Authority had erred in its decision.
|
