2022 (2) TMI 206 - AT - Insolvency and Bankruptcy

Seeking direction to Interim Resolution Professional (IRP) to admit the claim of the applicant company towards the interest component - seeking direction to Resolution Professional to re-examine the principle of law on the point of limitation and reconsider the claim of the petitioner on the point of principal amount - Resolution Professional only admitted the claim towards Principal amount and without any cogent basis, rejected the interest component - rejection of interest component on the ground that interest amount claimed by the Appellant was not booked by the Corporate debtor in its books of accounts and no TDS was deducted by the Corporate debtor - HELD THAT - The interest for the period from 01st August 2010 to 29th January 2019 (being CIRP commencement date) can be recognised as a liability of the Corporate Debtor and corresponding claim of interest can be admitted by the Resolution Professional, despite the fact that the interest for the said period is nowhere reflected in the Audited Financial statements of the Corporate Debtor or the Appellant. The data provided by the ex-management of the Corporate Debtor to the Resolution Professional, also nowhere match the amount of claim for interest. The interest was never booked as an expense by the Corporate Debtor (at page 25 of the Reply Affidavit) and never recognised as income by the Appellant (at page 17 of the Reply Affidavit) - The TDS was never deducted by Corporate Debtor and never availed by the Appellant - The loan agreement is ex-facie bogus, as it bears the rubber stamp of CIN of the Corporate Debtor and is neither Notarised nor registered, no stamp duty paid thereon. There was no requirement of mentioning CIN on the letterhead of the companies at the time of the purported date of the agreement and no subsequent requirement to mention the same on documents executed prior to enforcement of new Companies Act, 2013. This makes it clear that the said document at Annexure B of the Appeal is a fabricated document by ante-dating the same. The statement of accounts annexed as Annexure C at page 63 of the Appeal, purporting to be the ledger account of Appellant in the books of Corporate Debtor is also bogus as the same does not match with the audited account nor does it match with the tally data provided by the Ex- Management of the Corporate Debtor. It is also an admitted fact that the inordinate delay of 9 years in recognising of interest income by the Appellant in its Balance Sheet and also of no corresponding booking of interest in its accounts by the Corporate Debtor. There is no illegality committed by the Ld. Adjudicating Authority while passing the impugned order, therefore, we do not need to interfere in the impugned order - Appeal dismissed.

Summary

Issues Involved:
1. Admissibility of the interest component claimed by the Appellant.
2. Determination of the limitation period for the claim.
3. Validity of the loan agreement and related documentation.
4. Compliance with accounting standards and recognition of interest.

Detailed Analysis:

1. Admissibility of the Interest Component Claimed by the Appellant:
The Appellant, Himalayan Crest Power Pvt. Limited, provided a loan facility to the Corporate Debtor under an agreement dated 06.07.2010. The Corporate Debtor failed to discharge its liability, leading to the initiation of Corporate Insolvency Resolution Process (CIRP) against it on 29.01.2020. The Appellant filed a claim for ?10,46,64,5558/- (?4,82,93,938/- as Principal Amount and ?5,63,67,620/- as Interest Component). The Resolution Professional admitted the principal amount but rejected the interest component, stating that the interest was not booked in the Corporate Debtor's accounts and no TDS was deducted. The Appellant argued that the interest accrued as per the Loan Agreement was never disputed by the Corporate Debtor and that the claim was within the limitation period due to part payments extending the limitation.

2. Determination of the Limitation Period for the Claim:
The Appellant contended that part payments made by the Corporate Debtor extended the limitation period, citing the judgment in "Hussan Kadri Vs. Edelweiss Asset Reconstruction Co. Ltd. & Anr." The last payment was made on 22.03.2019, and the claim was filed on 12.02.2020, thus within the extended limitation period. The Appellant also referenced the acknowledgment of liability in the Corporate Debtor's Balance Sheet as on 31.03.2019, arguing that this acknowledgment extended the limitation period as per the law laid down in "S. Natarajan Vs. Sama Dharman & Anr." and "Vivek Jha Vs. Daimler Financial Services India Pvt. Ltd."

3. Validity of the Loan Agreement and Related Documentation:
The Respondent challenged the validity of the loan agreement, alleging it was bogus and fabricated. The agreement bore the rubber stamp of CIN of the Corporate Debtor, was neither notarized nor registered, and no stamp duty was paid. The Respondent argued that the document was ante-dated, making it invalid. Additionally, the statement of accounts provided by the Appellant did not match the audited accounts or the tally data from the Corporate Debtor's ex-management.

4. Compliance with Accounting Standards and Recognition of Interest:
The Respondent argued that the interest was not reflected in the audited financial statements of either the Corporate Debtor or the Appellant. The interest was never booked as an expense by the Corporate Debtor nor recognized as income by the Appellant. The Respondent cited the accounting standards (AS-9) and the Companies Act, 1956, emphasizing that the interest should have been recognized on an accrual basis. The inordinate delay of 9 years in recognizing the interest income led to the inference that there was no agreement for the payment of interest.

Findings:
The Tribunal found that the facts of the case indicated a significant delay in recognizing the interest income, and the loan agreement appeared to be fabricated. The Tribunal referenced the Supreme Court's judgment in "Urvashi Aggarwal (Since Dead) Vs. Kushagr Ansal," which held that prolonged silence amounted to abandonment of the agreement. The Tribunal concluded that the Ld. Adjudicating Authority rightly rejected the Appellant's claim for the interest component and directed reconsideration of the principal amount due to the limitation issue.

Order:
The Tribunal affirmed the impugned order dated 08.10.2020 passed by the Ld. Adjudicating Authority (National Company Law Tribunal), New Delhi, Court-V, rejecting the Appellant's claim for the interest component and directing reconsideration of the principal amount. The appeal was dismissed with no order as to costs. The Registry was directed to upload the judgment on the Appellate Tribunal's website and send a copy to the Ld. Adjudicating Authority.