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2020 (8) TMI 540 - AT - Insolvency and BankruptcyAdmissibility of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - debt due and payable or not - order of admission challenged on the ground that the debt has been satisfied and set off in diminution of the amount of ₹ 1,561.87 Crores against debt of ₹ 226.50 Crores claimed by Respondent No. 1 herein - HELD THAT - Form-1 filed by the Respondent No. 1 with regard to the debt and default is perused - there are no hesitation to say that the grounds raised by the learned Counsel for the Appellant does not have any merit. In view of the legal position, Respondent No. 1 is a Financial Creditor and the debt is a Financial Debt. In accordance of Section 5(8) of IBC, the Application filed by the Respondent No. 1 is maintained and the same is in accordance with law. The Appellant has failed to show by actionable material that the Valuation Report, got done officially when Receiver seized stock at the instance of ICICI has been held to be wrong. Mere averment to the contrary to claim set off that the stock was worth ₹ 1561.87 Crores without official valuation got done is not helpful. With regard to Counter claim is concerned, the Adjudicating Authority cannot decide while admitting the Application. As such, all the essential requirements have been fulfilled and Application under Section 7 IBC was rightly admitted by the Adjudicating Authority - The Counter Claim and the set off as claimed by the Appellant herein cannot be decided either by the Adjudicating Authority or by this Appellate Tribunal, such issues not decided. Appeal dismissed.
Issues Involved:
1. Whether the debt owed by Respondent No. 2 to Respondent No. 1 was satisfied or extinguished. 2. Whether Respondent No. 1 qualifies as a Financial Creditor under Section 5(7) of the Insolvency and Bankruptcy Code (IBC). 3. Whether the Adjudicating Authority correctly admitted the application under Section 7 of the IBC. 4. Whether the alleged misappropriation or tampering of stock by the Respondent No. 1 and its consortium affects the initiation of Corporate Insolvency Resolution Process (CIRP). 5. Whether the Counter Claim and set-off claimed by the Appellant can be decided by the Adjudicating Authority or the Appellate Tribunal. Detailed Analysis: 1. Whether the debt owed by Respondent No. 2 to Respondent No. 1 was satisfied or extinguished: The Appellant contended that the debt had been satisfied and set off due to the alleged misappropriation of the company's stock valued at ?1561.87 Crores, which was more than sufficient to cover the loan facilities. However, the Adjudicating Authority found that the Appellant did not deny the financial debt due and payable. The Authority noted that the financial facilities were duly granted and disbursed, and there was an admitted default in repayment. The Appellant's claim that the debt was extinguished was not supported by actionable material, and mere averments were insufficient. 2. Whether Respondent No. 1 qualifies as a Financial Creditor under Section 5(7) of the IBC: The Appellant argued that Respondent No. 1 was not a Financial Creditor and had no locus to file the application under Section 7 of the IBC. However, the Tribunal found that Respondent No. 1 had fulfilled the criteria under Section 7 of the IBC. The definition of a Financial Creditor under Section 5(7) includes any person to whom a financial debt is owed. The Tribunal concluded that Respondent No. 1 was indeed a Financial Creditor, and the debt was a Financial Debt as defined under Section 5(8) of the IBC. 3. Whether the Adjudicating Authority correctly admitted the application under Section 7 of the IBC: The Adjudicating Authority admitted the application based on the established debt and default. The Tribunal noted that the Corporate Debtor did not deny the debt amount and had acknowledged temporary financial difficulties in a letter dated 09.05.2016. The Tribunal affirmed that the essential ingredients for filing an application under Section 7 of the IBC were met, including the existence of a financial debt and default. The Tribunal upheld the Adjudicating Authority's decision to admit the application. 4. Whether the alleged misappropriation or tampering of stock by the Respondent No. 1 and its consortium affects the initiation of CIRP: The Appellant alleged that the stock seized by ICICI Bank was tampered with or misappropriated, leading to a significant discrepancy in its valuation. However, the Tribunal found no evidence to support these claims. The valuation was conducted officially, and the Appellant failed to provide actionable material to prove the alleged tampering. The Tribunal held that such allegations could not be decided by the Adjudicating Authority or the Appellate Tribunal and did not affect the initiation of CIRP. 5. Whether the Counter Claim and set-off claimed by the Appellant can be decided by the Adjudicating Authority or the Appellate Tribunal: The Tribunal referred to the Supreme Court's decision in "Swiss Ribbons Pvt. Ltd. & Ors. Vs. Union of India & Ors." which clarified that counterclaims and set-offs are independent rights that are preserved for the stage of admission of claims during the resolution process. The Tribunal concluded that the Adjudicating Authority or the Appellate Tribunal could not decide on the Counter Claim and set-off at the stage of admitting the application under Section 7 of the IBC. The Tribunal refrained from interfering with such issues. Conclusion: The Tribunal dismissed the appeal, finding it devoid of merits. It upheld the Adjudicating Authority's decision to admit the application under Section 7 of the IBC, confirming that Respondent No. 1 was a Financial Creditor and that the debt and default were established. The Tribunal also concluded that the allegations of misappropriation and the Counter Claim could not be decided at the admission stage of the CIRP.
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