2019 (2) TMI 965 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - outstanding loan - claim of applicant that the original loan agreement is with the borrower, has been vehemently denied as illogical and unbelievable - Held that - Onus lies on the applicant to establish that the loan was given against the consideration for time value of money. When the respondent debtor disputes that there is no question of payment of interest at any point of time on the debt in question and also disputed the existence of the loan agreement, it becomes more onerous on the part of the applicant to prove that the amount was disbursed against the consideration for time value of money. Admittedly, original loan agreement has not been produced. Expert opinions have been placed in support of the pleading that the loan agreement is a forged one. In the facts discussed above and in the absence of the original loan agreement and in the light of serious dispute and allegation of fraud; it appears that the matter requires proper trial and investigation. Admission of the application under the Code has serious civil consequences. Heavy onus lies on the applicant to prove the claim of interest component, date of default and as to when the repayment is due. Simply, relying upon the copy of a seriously disputed document would not suffice in the present summary proceedings. For the reasons stated above this petition fails and the same stands dismissed as not maintainable.

Issues Involved:
1. Whether the applicant qualifies as a "financial creditor" under the Insolvency and Bankruptcy Code, 2016.
2. The authenticity and validity of the loan agreement dated 11.05.2007.
3. Whether the debt claimed is a "financial debt" as per the Code.
4. The maintainability of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016.

Issue-wise Detailed Analysis:

1. Whether the applicant qualifies as a "financial creditor" under the Insolvency and Bankruptcy Code, 2016:
The applicant, M/s. Carnoustie Management India Private Limited (CMIPL), filed the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, claiming to be a financial creditor. According to the Code, a "financial creditor" is defined as any person to whom a financial debt is owed. The applicant contended that the respondent, CBS International Projects Private Limited (CBS), owed them a financial debt arising from a loan agreement dated 11.05.2007. However, the respondent disputed this claim, arguing that the transactions were interest-free and thus did not constitute a financial debt.

2. The authenticity and validity of the loan agreement dated 11.05.2007:
The applicant relied on a loan agreement dated 11.05.2007 to substantiate their claim. The respondent challenged the authenticity of this agreement, alleging it was false and fabricated. They pointed out several inconsistencies, such as the loan agreement referring to CBS as a subsidiary of CMIPL on a date when CMIPL was not even a shareholder. Additionally, the stamp paper for the agreement was dated before the incorporation of CBS, raising further doubts. Expert opinions and an FIR alleging forgery were also presented by the respondent.

3. Whether the debt claimed is a "financial debt" as per the Code:
A "financial debt" under the Code is defined as a debt along with interest, if any, which is disbursed against consideration for time value of money. The applicant claimed that the loan was disbursed with an interest component, as per the loan agreement. The respondent countered this by presenting audited balance sheets and auditors' reports indicating that the transactions were interest-free. The Tribunal noted that the original loan agreement was not produced, and the applicant failed to provide adequate explanations or evidence to support their claim that the debt was disbursed against the consideration for time value of money.

4. The maintainability of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016:
The Tribunal emphasized that for an application under Section 7 to be maintainable, the applicant must be a financial creditor and the debt must be a financial debt. Given the serious disputes regarding the authenticity of the loan agreement and the nature of the debt, the Tribunal found that the applicant failed to establish that the debt was disbursed against the consideration for time value of money. Consequently, the application was deemed not maintainable.

Conclusion:
The Tribunal dismissed the application, concluding that the applicant did not qualify as a financial creditor and the debt claimed did not constitute a financial debt under the Code. The Tribunal also noted that the matter required proper trial and investigation due to the serious disputes and allegations of fraud. The dismissal of the application was without prejudice to the applicant's rights to pursue the matter before a competent forum.

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