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TMI Blog2021 (8) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... bank entries filed by the Financial Creditor and the Corporate Debtor has not denied that the Corporate Debtor has not received such amount - the aforesaid amount has been disbursed by the Financial Creditor to the Corporate Debtor. However, there is no written agreement between the parties to show that the disbursement of such amount is a loan transaction. Whether such amount is disbursed for a consideration for time value of money? - HELD THAT:- The Financial Contract as per the Rule 3(1) (d) is must between the corporate Debtor and the Financial Creditor for setting out the terms of a Financial Debt including the tenure of the Debt, interest payable and the date of repayment. In the absence of such Financial Contract, the Financial Creditor has failed to satisfy that when the debt and interest become due and payable. Whether the Corporate Debtor failed to pay (Whole or any part or instalment of the debt) when the debt become due and payable? - HELD THAT:- Financial Creditor has not filed any writing to show that when the debt become due and payable. As per the Financial Creditor the debt in question is payable on demand. From the notice and the Application, it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vocates for R-2 JUDGMENT Jarat Kumar Jain: J. The Appellant Pawan Kumar who is ex-director of the Corporate Debtor Vogue Clothiers Pvt. Ltd. filed this Appeal against the order dated 30.01.2020 passed by the Adjudicating Authority (National Company Law Tribunal, New Delhi Bench) in CP (IB) No. 1593/(ND)/2019 whereby admitted the Financial Creditor s Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) and initiated Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. 2. Brief facts of this case are that the business of the Financial Creditor is that of Non-Banking Finance company and having the Certificate of Registration issued by the RBI. The Financial Creditor had granted financial assistance to the Corporate Debtor for a total of ₹ 6.10 Cr in between 16.02.2017 to 22.02.2017 through Bank Account. The Corporate Debtor has paid interest ₹ 6,05,718, once on 14.02.2018 after deduction of TDS. Thereafter corporate debtor failed to pay interest. Therefore, the Financial Creditor vide notice dated 27.04.2019 has recalled the loan. The Corporate Debtor has not liquidated the outstanding liabilities. Hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities Pvt. Ltd. Vs. Timeline Buildcon Pvt. Ltd. CP (IB) NO. 1559 (PB)/2019 and Judgement passed by this Appellate Tribunal in the case of, Caliber Associates Pvt. Ltd. Vs. M/s Tripat Kaur CA (AT) (Ins) No. 52 of 2017 and Judgement passed by the Hon ble Delhi High Court in the case of M/s Utility Powertech Ltd. Vs. Amit Traders 2018 SCC Online DL 9096. 8. Ld. Counsel for the Appellant further submitted that this Appellate Tribunal in the case of Sanjay Kewalramani Vs. Sunil Parman and Kewalramani Ors. 2018 SCC Online NCLAT 310 held that the mere facts that the Company paid interest and deducted TDS, itself cannot be sufficient to impose liability on the Corporate Debtor. 9. Ld. Counsel for the Appellant lastly submitted that the demand notice shows that there was regular transaction in business between the parties, therefore, such transaction cannot be termed as Financial Debt. There was no loan granted by the Financial Creditor (R1) to the Corporate Debtor and the transaction in question is in normal course of business for other purposes. Hence, the Financial Creditor failed to prove that the amount disbursed against the consideration for the time value of money. Ld. Adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll conditions are to be satisfied by the Financial Creditor then Adjudicating Authority may admit the Application under Section 7 of the IBC and initiate the CIRP against the Corporate Debtor. In the present case, it is an admitted fact that financial Creditor transferred ₹ 6.10 Crs. through RTGS between 16.02.2017 to 22.02.2017 to the Corporate Debtor s bank account. This fact is corroborated by the bank entries filed by the Financial Creditor and the Corporate Debtor has not denied that the Corporate Debtor has not received such amount. Thus, we hold that aforesaid amount has been disbursed by the Financial Creditor to the Corporate Debtor. However, there is no written agreement between the parties to show that the disbursement of such amount is a loan transaction. 15. Now, we have considered whether such amount is disbursed for a consideration for time value of money? 16. According to the Financial Creditor the Corporate Debtor has paid interest ₹ 6,05, 718 on 14.02.2018 after deduction of TDS and this fact is undisputed. Therefore, it is proved that such disbursal has been made for a consideration for time value of money. However, as per the Corporate Debtor, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to show any record showing financial debt to be there. As such, we are unable to find any fault in the impugned order while rejecting Section 7 application. 22. With the aforesaid, we are of the view that the Financial Contract as per the Rule 3(1) (d) is must between the corporate Debtor and the Financial Creditor for setting out the terms of a Financial Debt including the tenure of the Debt, interest payable and the date of repayment. In the absence of such Financial Contract, the Financial Creditor has failed to satisfy that when the debt and interest become due and payable. 23. Now, we have considered, whether the Corporate Debtor failed to pay (Whole or any part or instalment of the debt) when the debt become due and payable? 24. As we have already discussed that the Financial Creditor has not filed any writing to show that when the debt become due and payable. As per the Financial Creditor the debt in question is payable on demand. From the notice and the Application, it is not clear that on which date the demand was made and the loan and interest become due and payable. In Para 7 of the notice there is vague allegation that: Despite repeated request and remi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors in the event of the initiation of CIRP. Such avoidable transactions include: (i) preferential transactions under Section 43 of the IBC; (ii) undervalued transactions under Section 45(2) of the IBC; (iii) transactions defrauding creditors under Section 49 of the IBC; and (iv) extortionate transactions under Section 50 of the IBC. The IBC recognizes that for the success of an insolvency regime, the real nature of the transactions has to be unearthed in order to prevent any person from taking undue benefit of its provisions to the detriment of the rights of legitimate creditors. 29. With the aforesaid preposition of law, it is clear that the IBC recognizes that for the success of Insolvency regime the real nature of transaction has to be unearthed in order to prevent any person from taking undue benefit of its provisions to the detriment of the rights of legitimate creditors. It means, while admitting the Application under Section 7 of the IBC, it is the duty of the Adjudicating Authority to investigate the real nature of the transaction in order to prevent any person from taking undue benefit of its provisions to the detriment of the rights of legitimate creditors. 30. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscretion carefully to prevent and protect the Corporate Debtor from being dragged into the Corporate Insolvency Resolution Process malafide. 32. Thus, it is clear that the Adjudicating Authority is obliged to investigate the nature of the transaction and should be very cautious in admitting the Application in order to prevent taking undue benefit of provisions of IBC to detriment of the rights of legitimate creditors as well as to protect the Corporate Debtor from being dragged into CIRP with malafide. Section 65 provides that if any person initiates the Insolvency Resolution Process or liquidation proceedings fraudulently or with malicious intend for any purpose other than for resolution of Insolvency or Liquidation, the Adjudicating Authority may impose upon such person a penalty. Section 65 provides that where any person furnishes any information under Section 7, which is false in material particulars, knowing it to be false or omits any material facts, knowing it to be material such person shall be punished with fine. 33. With the aforesaid discussion, we are of the considered view that Ld. Adjudicating Authority has erroneously admitted the Application under Section 7 o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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