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2023 (7) TMI 637 - AT - Insolvency and BankruptcyInitiation of CIRP - sufficient cause for the Adjudicating Authority to return the application of the Financial Creditor instead of adjudicating on the Company petition - HELD THAT - Present is a case where it is an undisputed fact that the Appellant in its capacity as NBFC had sanctioned three loans to the Respondent totaling an amount of Rs.5,95,00,000/-. The three sanction letters are placed at pages 158, 161 and 164 of the Appeal Paper Book ( APB in short). It is also an admitted fact that the loan amounts had actually been disbursed by the Appellant and had been credited to the accounts of the Corporate Debtor. The Corporate Debtor has also admitted taking the said loan amount before the Adjudicating Authority. As per the respective loan sanction letters, the tenure of each of the three loans was 36 months. The sanction letters also clearly provided that the loan was repayable on demand. The first loan was for an amount of Rs.25,00,000/- sanctioned on 20.05.2015 with an interest of 10% per annum. The second loan amount for Rs.4,70,00,000/- was sanctioned on 22.05.2017 with 12% interest per annum while the third loan was for Rs.1,00,00,000/- with 10% per annum which was sanctioned on 15.02.2018 - It is noticed that the first tranche of loan which had been disbursed on 26.05.2015 (as placed at page 167 of APB) had already become due having crossed the 36 months tenure. Section 5(8) of the IBC which is relevant for the present case defines financial debt to mean a debt along with interest which is disbursed against the consideration for the time value of money. Further, clauses (a) to (i) of Section 5(8) delineates the nature of transactions which are included in the definition of financial debt which includes money borrowed against payment of interest - In the facts of the present case, the Appellant has issued a demand notice which contained cumulative demand of all the three loan amounts. In the given factual matrix, the Adjudicating Authority is required to notice as to whether the application is complete or not and if there is a debt and the Corporate Debtor has defaulted in the payment, whether the amount so defaulted is more than the threshold limit of Rs. 1 lakh. The corpus of facts and documents are sufficiently adequate to consider a Section 7 application - there are no cogent basis for the Adjudicating Authority to have returned the application of the Financial Creditor. The appeal is allowed.
Issues involved:
The appeal under Section 61 of Insolvency and Bankruptcy Code, 2016 arising from an Order dated 24.06.2022 passed by the Adjudicating Authority returning the Company Petition filed under Section 7 of the IBC by the Financial Creditor due to factual deficiencies, particularly regarding a loan account. Details of the Judgment: Issue 1: Loan Details and Default The Appellant, a Non-Banking Financial Company, advanced unsecured business loans to the Corporate Debtor. The Corporate Debtor accepted the loans and terms but failed to pay interest quarterly as required. A demand notice was issued for repayment, leading to the Section 7 application. Issue 2: Default Contention The Corporate Debtor argued no default occurred as the 36-month period had not elapsed for two loan tranches. However, the Appellant highlighted the breach in payment of interest since March 2018, contradicting the Corporate Debtor's stance. Issue 3: Adjudicating Authority's Conclusion The Adjudicating Authority deemed the outstanding amount not a financial debt due to perceived discrepancies in interest calculations and lack of proper documentation. The Financial Creditor's claims were not adequately substantiated, according to the Authority. Issue 4: Adjudication and Remand The Tribunal reviewed the arguments and records, noting the absence of the Respondent during proceedings. Despite the Adjudicating Authority's decision to return the application, the Tribunal found sufficient grounds to consider the Section 7 application, setting aside the impugned order and remanding the matter for further consideration. Conclusion The Tribunal allowed the appeal, remanding the case to the Adjudicating Authority for proper evaluation of the Section 7 application. Both parties were permitted to present additional evidence. No costs were awarded, and the Respondent was restrained from selling the Corporate Debtor's assets until further proceedings.
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