2022 (12) TMI 608 - AT - Insolvency and Bankruptcy

Initiation of CIRP - inter corporate deposit - Proof of debt - Appellant failed to produce any proof of the RTGS by way of bank statement indicating that the amount has in fact been transferred from its account to the account of the Corporate Debtor - NCLT dismissed the application - HELD THAT - During the course of hearing, Counsel for the Appellant was repeatedly asked as to how 25.04.2018 has been determined the date of default to which she could not give any answer. Moreover, the amount involved also does not fall within the definition of financial debt because the financial debt would be a debt alongwith interest if any which is disbursed against consideration for the time value of money whereas in the present case no reliance can be placed upon the alleged acknowledgement in which the rate of interest has been hand written besides other entries made by hand whereas the rest of the document has been typed. There is no initials of the parties concerned on the hand written corrections, therefore, it could not be disciphered as to whether these were the agreed term between the parties at the time when document was executed or were later on incorporated. Be that as it may, the intercorporate deposit is a loan is not substantiated by the Appellant. There is no error found in the finding recorded by the Adjudicating Authority particularly in para 7 of the impugned order in which all aspects of the matter have been discussed. Appeal dismissed.

Summary

Issues Involved:
1. Validity of the financial debt claim.
2. Sufficiency of evidence provided by the Appellant.
3. Adherence to procedural requirements under the Insolvency and Bankruptcy Code, 2016.
4. Relevance and admissibility of additional documents during the appeal.

Issue-wise Detailed Analysis:

1. Validity of the Financial Debt Claim:
The Appellant claimed that the Respondent had approached it for an inter-corporate deposit of Rs. 10,00,000/- for 90 days, disbursed on 25.10.2017. The Corporate Debtor issued a postdated cheque and an acknowledgment letter dated 25.10.2017. However, the Adjudicating Authority found that the Appellant failed to produce any request letter, email, or proof of RTGS transfer. The acknowledgment letter was disbelieved due to interpolations, and the post-dated cheque was not produced. The Adjudicating Authority concluded that the Appellant did not substantiate the claim of financial debt.

2. Sufficiency of Evidence Provided by the Appellant:
The Appellant's application lacked substantial evidence to prove the financial debt. The Adjudicating Authority noted that the Appellant did not produce a bank statement showing the RTGS transfer. The acknowledgment letter was partly typed and partly handwritten, raising doubts about its authenticity. The Appellant also failed to provide the post-dated cheque and did not attempt to recall the alleged debt through any written communication before filing the application.

3. Adherence to Procedural Requirements:
The Appellant did not comply with the procedural requirements under Section 7 of the Insolvency and Bankruptcy Code, 2016. The application form (Form-1) was incomplete, particularly in Part-3, which required the particulars of the proposed Interim Resolution Professional (IRP). The Appellant marked it as "N.A." and later sought to introduce additional documents (Annexure A1 and A2) during the appeal. The Adjudicating Authority emphasized that an application under Section 7 should be complete and supported by necessary documents, including the consent of the proposed IRP.

4. Relevance and Admissibility of Additional Documents During the Appeal:
The Appellant sought to introduce two additional documents: a bank statement (Annexure A1) and a written communication by the proposed IRP (Annexure A2). The application to introduce Annexure A2 was dismissed, as the Appellant had initially marked Part-3 of Form-1 as "N.A." and did not seek to amend it before the Adjudicating Authority. The introduction of Annexure A1 was kept open for consideration during the final hearing. However, the Tribunal concluded that the application lacked material particulars and was incomplete, and thus, the additional documents could not rectify these deficiencies.

Conclusion:
The Tribunal upheld the Adjudicating Authority's decision to dismiss the application under Section 7 of the Insolvency and Bankruptcy Code, 2016, due to the Appellant's failure to substantiate the claim of financial debt, lack of sufficient evidence, and non-compliance with procedural requirements. The appeal was dismissed, affirming that the initiation of Corporate Insolvency Resolution Process (CIRP) should not be done mechanically and must be based on substantial evidence and adherence to the prescribed procedures.