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2022 (8) TMI 323 - AT - Insolvency and BankruptcyInitiation of CIRP - Validity of order of NCLT admitting the application - Corporate Debtor failed to make repayment of its dues - Financial Creditors - relief was sought for or pending in another Forum - existence of debt and default or not - HELD THAT - In the instant case, the reference made pertaining to the Arbitration Proceedings, etc, are not germane for deciding the Application filed under Section 7 of the Code. There is no provision which bars referring to the Code, if already relief was sought for or pending in another Forum. In fact, Section 238 of the I B Code, 2016, shall have effect notwithstanding anything inconsistent therein contained in any other Law for the time being inforce or any instrument having effect by virtue of any such Law. Besides this, to put it pinpointedly, the Execution and Transfer of Money in terms of Inter-Corporate Deposit cannot be disputed. Viewed in that perspective, the emphatic plea taken on behalf of the Corporate Debtor is not acceded to by this Tribunal. Likewise, the stand of the Corporate Debtor that the 1st Respondent/Petitioner/Financial Creditor in its Balance Sheets from 2011-12 to 2018-19 had described the sum in issue as other investments but had not mentioned specifically as ICD, is a futile one, besides, the same being unworthy of acceptance. The twin aspects of Debt and Default as against the Principal Borrower/M/s. Lepakshi Science and Technology Park Private Limited was established clinchingly on the side of the 1st Respondent/Petitioner/Financial Creditor and further in the teeth of the Corporate Guarantee being executed by the 2nd Respondent/Corporate Debtor (M/s. Lepakshi Heritage Wellness Village Pvt. Ltd.) to and in favour of the 1st Respondent/Petitioner/Financial Creditor guaranteeing the repayment of the sum transferred by the 1st Respondent/Petitioner/Financial Creditor to the 2nd Respondent/Borrower (M/s.Lepakshi Science and Technology Park Pvt. Ltd.) in CP(IB)/98/BB/2021 and the factum of same being invoked was established (on the side of the 1st Respondent/Petitioner/Financial Creditor), in the present case, the view arrived at by the Adjudicating Authority in admitting the main CP(IB)/107/BB/2021, declaring Moratorium and appointing the Interim Resolution Professional are free from legal flaws. Resultantly, the instant Appeal is devoid of merits and it fails. Maintainability of application - initiation of CIRP - non-payment of a debt once it becomes due and payable - Financial Creditors - clear cut stand of the Appellant is that but for the transaction and promise of the 1st Respondent/Financial Creditor/Petitioner to pay Rs.238.5 Crores there would have been no necessity to transfer the subject land from LKH to LST and LSW - HELD THAT - In the instant case, it is pertinently pointed out by this Tribunal that the Memorandum of Understanding dated 07.01.2012 was entered into between the 1st Respondent/Financial Creditor/Petitioner and the Appellant/Lepakshi Knowledge Hub Private Limited. It is latently and patently quite clear that the money received in terms of the Inter-Corporate Deposit dated 19.03.2012, was to deal with the expenses of the 2nd Respondent/Corporate Debtor/LST. Because of the fact that the transfer of money as per Inter-Corporate Deposit was not in controversy/disputed, the stance of the 2nd Respondent/LST that in the Balance Sheets the money in question was not described as Inter-Corporate Deposit , but only mentioned under the caption other investments has no legs to stand, in the considered opinion of this Tribunal . In the instant case, considering the fact that the receipt of Rs. 5 Crores was tacitly admitted by the 2nd Respondent/LST by way of an acknowledgement as per the Balance Sheets of the 1st Respondent/Financial Creditor for the period from 2011-12 to 2018-19, the main CP(IB)/98/BB/2021 filed by the 1st Respondent/Financial Creditor/Petitioner, before the Adjudicating Authority ( National Company Law Tribunal , Bengaluru Bench), is maintainable in Law , based on the filing of the Petition on 06.07.2021 (vide Vol. I - Page 100;Form Iin CP(IB)/98/BB/2021) and signed by the Counsel for the 1st Respondent/Financial Creditor/Petitioner dated 07.07.2021 (vide Page No.98 of Vol. I in CA (AT) (CH) (INS) No. 216 of 2022) and looking at from that angle, the main CP (IB)/98/BB/2021 is not barred by limitation. This Tribunal comes to an inescapable and inevitable conclusion that the 1st Respondent/Petitioner/Financial Creditor had established the aspect of subsisting Debt and Default which are the pre-requisites for an admission of an Application filed under Section 7 of the I B Code, 2016 - The proceedings under the I B Code, 2016, are not adversarial in character and in the instant case, the Adjudicating Authority cannot determine the default sum as per Section 4 of the I B Code, 2016. Looking at from any point of view, the instant Appeal sans merits - Appeal dismissed.
Issues Involved:
1. Jurisdiction of the Adjudicating Authority under Section 7 of the IBC, 2016. 2. The nature of the Inter-Corporate Deposit (ICD) as a financial debt. 3. Limitation period for filing the application under Section 7 of the IBC, 2016. 4. The relevance of arbitration proceedings in the context of the IBC application. 5. The impact of the Memorandum of Understanding (MoU) and other related agreements on the ICD. 6. The validity of the recall notice issued by the Financial Creditor. 7. The acknowledgment of debt in the balance sheets. 8. The applicability of penalties under Sections 65 and 75 of the IBC, 2016. Detailed Analysis: 1. Jurisdiction of the Adjudicating Authority under Section 7 of the IBC, 2016: The Appellant argued that the Adjudicating Authority failed to appreciate its jurisdiction under Section 7 of the IBC, 2016, and disregarded the arbitration proceedings. The Tribunal clarified that the Adjudicating Authority is only required to ascertain the existence of a financial debt and default. It cited the Supreme Court's decision in M/s. Innoventive Industries Ltd. vs. ICICI Bank & Anr., emphasizing that the insolvency resolution process begins upon default, irrespective of ongoing arbitration. 2. The nature of the Inter-Corporate Deposit (ICD) as a financial debt: The Appellant contended that the ICD was part of an investment scheme and not a financial debt. The Tribunal upheld the Adjudicating Authority's finding that the ICD was an independent transaction and constituted a financial debt under Section 5(8) of the IBC, 2016. The Tribunal found force in the Financial Creditor's submission that the ICD was for meeting certain expenses and not for purchasing shares. 3. Limitation period for filing the application under Section 7 of the IBC, 2016: The Appellant argued that the application was barred by limitation. The Tribunal noted that the ICD was dated 19.03.2012, and the recall notice was issued on 19.09.2020. The application was filed on 13.10.2021. The Tribunal held that the acknowledgment of the debt in the balance sheets from 2011-2012 to 2018-2019 extended the limitation period, making the application timely. 4. The relevance of arbitration proceedings in the context of the IBC application: The Appellant claimed that the Adjudicating Authority ignored the arbitration proceedings. The Tribunal reiterated that the existence of arbitration proceedings does not bar the initiation of insolvency proceedings under the IBC, 2016. It emphasized that the IBC has an overriding effect as per Section 238. 5. The impact of the Memorandum of Understanding (MoU) and other related agreements on the ICD: The Appellant argued that the ICD was part of a composite transaction under the MoU. The Tribunal found that the MoU was between the Financial Creditor and a separate legal entity, and the ICD was an independent transaction. It rejected the contention that the ICD was part of the investment scheme. 6. The validity of the recall notice issued by the Financial Creditor: The Tribunal upheld the validity of the recall notice dated 19.09.2020, issued by the Financial Creditor. It noted that the Corporate Debtor had acknowledged the debt in its balance sheets and failed to repay the amount within the specified period. 7. The acknowledgment of debt in the balance sheets: The Appellant contended that the debt was shown as "other investments" and not as an ICD in the balance sheets. The Tribunal held that the acknowledgment of the debt in the balance sheets from 2011-2012 to 2018-2019 was sufficient to constitute an acknowledgment under Section 18 of the Limitation Act, 1963, extending the limitation period. 8. The applicability of penalties under Sections 65 and 75 of the IBC, 2016: The Appellant argued for the imposition of penalties under Sections 65 and 75 for the Financial Creditor's malafide conduct. The Tribunal found no merit in this contention, as the Financial Creditor had established the existence of debt and default. Conclusion: The Tribunal dismissed both appeals, upholding the Adjudicating Authority's orders admitting the company petitions, declaring moratoriums, and appointing Interim Resolution Professionals. The Tribunal found no legal flaws in the Adjudicating Authority's decisions and held that the Financial Creditor had successfully established the existence of debt and default. The appeals were dismissed with no costs, and the connected interim applications were closed.
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