2022 (8) TMI 1109 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT - On perusal of the records, it is seen that no Agreement or prior approval for such loan has been annexed to the Petition, to reflect that the Corporate Debtor had taken a commercial debt. This Adjudicating Authority is a summary court and hence, we cannot venture into a detailed proceeding, the main points in a section 7 petition is to check whether there is a debt and default with the aid of the documents annexed with the pleadings. In the present case, the debt has been converted into equity shares, hence there is no debt at the present. Application filed under section 7 of Insolvency and Bankruptcy Code, 2016 is dismissed.

Issues:
1. Jurisdiction of the Bench in a Company Petition under section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Default in payment by the Corporate Debtor and the Financial Creditor's claim.
3. Conversion of loan into equity shares and objections raised by the Financial Creditor.
4. Proceedings under section 9 of the Code initiated by the Financial Creditor.

Jurisdiction of the Bench:
The judgment establishes the jurisdiction of the Bench to deal with the Company Petition under section 7 of the Insolvency and Bankruptcy Code, 2016. It confirms that the Corporate Debtor falls within the jurisdiction of the Bench based on its incorporation details.

Default in Payment and Financial Creditor's Claim:
The Financial Creditor filed a petition against the Corporate Debtor for failing to repay a loan amount with interest. The Financial Creditor provided evidence of the loan disbursement and subsequent requests for repayment, including relevant documents such as bank statements and correspondences.

Conversion of Loan into Equity Shares and Objections:
The Corporate Debtor converted the loan into equity shares, as reflected in the audited Balance Sheet. However, objections were raised by the Financial Creditor regarding the conversion, stating that consent was not given for the equity share conversion. The Corporate Debtor claimed that the Financial Creditor accepted the conversion during the Annual General Meeting.

Proceedings under Section 9 of the Code:
The Corporate Debtor alleged that the Financial Creditor's actions were aimed at extorting money, citing another proceeding initiated by the Financial Creditor under section 9 of the Code. The Corporate Debtor presented arguments related to the removal of the Financial Creditor and actions taken by the Board of Directors regarding payments to the Financial Creditor.

Analysis and Findings:
The judgment analyzed the evidence presented by both parties. It noted that the loan was converted into equity shares with the Financial Creditor's knowledge. The Adjudicating Authority concluded that since the debt was converted into equity shares, there was no existing debt at the time of the petition. As a summary court, detailed proceedings were not pursued, and the petition under section 7 of the Insolvency and Bankruptcy Code, 2016 was dismissed. The applicant was advised to explore other available legal remedies.

This detailed analysis of the judgment covers the key issues involved in the legal matter, providing a comprehensive overview of the proceedings and the final decision rendered by the National Company Law Tribunal, Kolkata Bench.

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