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2022 (5) TMI 874 - AT - Insolvency and BankruptcyAdmitting the petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - It is claimed that the transaction entered into between the parties is not covered under the definition of financial debt under section 5(8) and any of the nine clauses of section 5(8) to be in the nature of financial debt - HELD THAT - It is clear that in case the record of Information Utility shows that there is a debt which is in default, the Adjudicating Authority or the Appellate Authority are not required to further examine the record maintained by the Information Utility, moreso when the record of the Information Utility is deemed authenticated and no dispute or refutation of said record has been done by the corporate debtor earlier. It is also noted that in the judgment of RUSHABH CIVIL CONTRACTORS PVT. LTD. VERSUS CENTRIO LIFESPACES LTD. 2022 (1) TMI 461 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI , which has been cited by the Learned Counsel for Appellant, the record that formed the basis for financial debt and default was found to be forged and fabricated, which is not the case in the present appeal. Therefore, this judgment does not come to the rescue of the Appellant. The Adjudicating Authority has not committed any error in admitting the section 7 application filed by the financial creditor M/s. Teco Industries - Appeal dismissed.
Issues Involved:
1. Validity of the financial debt claimed by Respondent No. 1. 2. Authentication and verification of the debt information by Information Utility. 3. Investment vs. loan dispute. 4. Admissibility of the Section 7 application under IBC. Issue-wise Detailed Analysis: 1. Validity of the financial debt claimed by Respondent No. 1: The Appellants, ex-directors of the corporate debtor, contended that the amount of Rs. 19,40,81,000 transferred by Respondent No. 1 was a part payment towards a promised investment of Rs. 50 crores. They argued that this amount was not a financial loan but an investment, and thus, it should not be treated as a financial debt. They further claimed that due to the partial investment, the corporate debtor filed a civil suit for declaration and damages, which is pending adjudication. 2. Authentication and verification of the debt information by Information Utility: The Appellants argued that the Information Utility (NESL) used incorrect email IDs for the corporate debtor, which belonged to the directors and not the corporate debtor itself. They claimed that this violated Regulation 21 of the Insolvency and Bankruptcy Board of India (Information Utilities) Regulations, 2017, which stipulates the process of authentication and verification of information of debt and default. The Appellants asserted that the emails were not sent to the correct address, leading to incorrect authentication of the financial debt. 3. Investment vs. loan dispute: The Appellants maintained that the amount transferred was part of an investment deal and not a loan. They argued that since the full amount of Rs. 50 crores was not invested, the shares were not transferred, and the amount should not be considered a financial loan. They also claimed that the financial stress caused by the partial investment led to the filing of a civil suit, further supporting their argument that the transaction was an investment and not a loan. 4. Admissibility of the Section 7 application under IBC: The Respondent No. 1 argued that the corporate debtor did not respond to the emails sent by the Information Utility, leading to the deemed authentication of the financial debt. They referred to Regulation 21 of the Insolvency and Bankruptcy Board of India (Information Utilities) Regulations, 2017, which states that if the debtor does not respond after three reminders, the information is deemed authenticated. The Respondent also pointed out that the corporate debtor did not take any action under the Grievance Redressal Policy to correct the record, further establishing the authenticity of the financial debt. Judgment Analysis: The Tribunal found that the claim of the amount being a part payment towards an investment was not supported by any document or record. The Information Utility's record showed that the loan of Rs. 19,40,81,000 was given at 14% interest, with an outstanding amount of Rs. 26,49,46,085. The Tribunal noted that the Appellants did not dispute receiving the emails and did not respond or forward them to the appropriate address, leading to deemed authentication of the financial debt as per Regulation 21(3). The Tribunal also highlighted that the authorized share capital of the corporate debtor was Rs. 2 crores, with a paid-up share capital of Rs. 1,99,95,540. It was illogical to claim a fresh investment of Rs. 50 crores without the authorized share capital accommodating such an investment. The Tribunal referred to the judgment of the Hon’ble Supreme Court in Innoventive Industries vs. ICICI Bank (2018) 1 SCC 407, which emphasized that if the record of the Information Utility shows a debt in default, the Adjudicating Authority or the Appellate Authority need not further examine the record. The Tribunal also distinguished the present case from the judgment in Rushabh Civil Contractors Pvt. Ltd. vs. Centrio Lifespaces Ltd., where the record was found to be forged and fabricated. Conclusion: The Tribunal concluded that the Adjudicating Authority did not err in admitting the Section 7 application filed by the financial creditor. The appeal was dismissed as devoid of merit, with no order as to costs.
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