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2024 (9) TMI 1498 - AT - IBCMaintainability of petition filed under Section 7 of the IBC 2016 - dismissal on the ground that there is no evidence to show the loan given to the Corporate Debtor was due and payable - no record of default or demand letter placed by the Financial Creditor to show debt and default - failure of settlement between the parties - HELD THAT - The Tribunal was prima facie satisfied the debt is due and not paid on demand the application needs to be admitted unless it is incomplete in which case a notice to be given to the applicant to rectify the defects within seven days of receipt of notice from the Adjudicating Authority per Innoventive Inds Ltd 2017 (9) TMI 58 - SUPREME COURT . In Shobhnath Ors Vs Prism Industrial Complex Ltd 2019 (8) TMI 1700 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI this Tribunal held the Adjudicating Authority is only required to ensure there is a debt and default on the basis of the record produced before it. On perusing the record Balance Sheets of the corporate debtor as also the legal notice of demand prima facie reveal there is no impediment to admit the petition under Section 7 of the Code against the Respondent/Corporate Debtor. Matter remanded to the Ld. NCLT to proceed further as per law - appeal allowed.
Issues:
Appeal against dismissal of petition under Section 7 of IBC due to lack of evidence of loan default, debt, and settlement failure. Analysis: The judgment pertains to an appeal filed against the dismissal of a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016. The grounds for dismissal included the absence of evidence showing the loan given to the Corporate Debtor was due and payable, lack of record of default or demand letter, and failure of settlement between the parties, deemed an abuse of the legal process. The Tribunal considered the arguments presented by the counsels and reviewed the financial records, specifically the Balance Sheets of the years 2019-20 and 2020-21, which indicated a significant loan given by the appellant to the Corporate Debtor. The Tribunal referenced previous judgments to establish that such loans, even if unsecured, can be classified as financial debts under the Code, emphasizing the obligation of the Corporate Debtor to repay such debts. The Tribunal cited the case of Shailesh Sangani V Joel Cardoso, which highlighted the commercial nature of loans given by stakeholders to address financial crises within a company. Additionally, the judgment in Rajesh Gupta V Dinesh Jain clarified that unsecured loans constitute financial debt under the Code, especially when there is a clear liability on the Corporate Debtor to repay the borrowed amount. The Tribunal also referred to the decision in Innoventive Industries Ltd V ICICI Bank, emphasizing that the Adjudicating Authority must verify evidence of default produced by the financial creditor to establish the debt's due nature, regardless of any dispute raised by the debtor. Moreover, the Tribunal examined a notice sent by the appellant to the respondent, demanding payment of the debt within a specified period, which remained unpaid. This non-payment further substantiated the existence of both the debt and default. The judgment in Jayanthi G Ravi V Chemizol Additives reiterated that loans are taken for the borrower's benefit, with an immediate obligation to repay upon receipt. The Tribunal concluded that once satisfied with the due and unpaid nature of the debt, the application should be admitted unless incomplete, in which case the applicant must rectify the defects within a stipulated timeframe. In light of the evidence presented and the legal precedents cited, the Tribunal allowed the appeal, set aside the previous order, and remanded the matter to the National Company Law Tribunal (NCLT) for further proceedings in accordance with the law. The judgment emphasized the Adjudicating Authority's role in ensuring the existence of debt and default based on the records before it, ultimately facilitating the admission of the petition under Section 7 of the Code against the Corporate Debtor.
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