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TMI Blog2022 (6) TMI 1289X X X X Extracts X X X X X X X X Extracts X X X X ..... rporate Debtor as a part of the investment made and hence it cannot be treated as a financial debt and the C.P. should be dismissed - There are force in the submissions made by the Learned Senior Counsel appearing for the Petitioner/Financial Creditor. The Memorandum of Understanding dated 07.01.2012, on which the Respondent placed reliance was admittedly executed between the Petitioner and a separate legal entity known as M/s. Lepakshi Knowledge Hub Private Limited. Further, the amount received by the Respondent/Corporate Debtor under the subject Inter Corporate Deposit dated 19.03.2012 was not for purchasing of any shares by the Petitioner in the Respondent Company. On the other hand, it was for meeting certain expenses by the Respondent/Corporate Debtor. Hence, the contention of the Petitioner in this regard is rejected. The Petitioner/Financial Creditor is able to prove the debt and default by placing reliance on various documents enclosed to the instant company petition. Time Limitation - HELD THAT:- The instant C.P. was filed on 13.10.2021. The Corporate Debtor/Respondent has acknowledged the receipt of Rs. 5,00,00,000/- from the Financial Creditors/Petitioners in its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... process of transferring 2000 acres and 650 acres of land to the Corporate Debtor and the Guarantor. 4. Under the MOU with the Project Proponent the Financial Creditor agreed to purchase 100% equity shareholding in the Corporate Debtor and the Guarantor for a total consideration of Rs. 2,38,50,00,000/- and it was agreed that within 5 days from the date of MOU, the Financial Creditor shall forward an amount of Rs. 5,00,00,000/- to the Corporate Debtor through an Inter Corporate Deposit or a similar instrument. Consequently, the ICD was entered into. 5. The purpose of the ICD was solely for payment of agreed amount of stamp duty for transfer of 2,650 acres of land from the Project Proponent to the Corporate Debtor and the Guarantor. The term of the ICD was set as 6 months with an interest of 18% per annum after the term of the ICD. Further consequent to the ICD on 29.03.2012 the Guarantor had executed a corporate guarantee in favour of the Financial Creditor guarantying repayment of the amount transferred by the Financial Creditor to the Corporate Debtor. On 16.04.2012 the Financial Creditor, Project Proponent and Induslnd Bank Limited (escrow agent) entered into an escrow agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idavit filed by the Financial Creditor, viii. Written Communication by the proposed Interim Resolution Professional in Form 2 ix. Board Resolution dated 04.02.2020 x. Record of Default with Information Utility (Form C) xi. Copy of the Master Data of Corporate Debtor 8. The Corporate Debtor/Respondent while opposing the Company Petition has filed the reply/objections to the petition contending as follows: i. It is stated that the contents of the petition and each and every averment are denied as incorrect unless the same are specifically admitted to hereunder. The instant proceeding by the Petitioner is a sheer of abuse of process as explained hereinafter, also attracting penalty under Section 65 of IBC. ii. It is stated that the Petitioner and Respondent are already engaged in a full-blown litigation in multiple for a, with the principal dispute pending before a three-judge arbitration tribunal. After failing to get the desired interim relief in the ongoing litigation, the Petitioner has maliciously instituted the instant proceedings blatantly suppressing material facts and information, iii. The Respondent is a fully owned subsidi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 25 crores) along with definitive agreement towards first tranche of share purchase (26% of the paid-up shareholding of LST and LHW). v. In the year 2012, after the execution of the MOU, the Petitioner transferred Rs. 5 crores to LST. Thereafter, LKH duly transferred the subject land to LST and LHW. As contemplated by the MOU's order of performance, the next obligation was on the Petitioner to transfer the initial payment towards the initial closing along with the definitive agreements. However, despite negotiations and discussions, Petitioner deliberately did not take the transaction forward by performing its part of the promise. After the transfer of land from LKH to LST and LHW, there was no further obligation to be performed by the Lepakshi companies before the initial closing. It was fully incumbent on the Petitioner to perform further steps so that LKH was paid the initial payment consideration towards the transfer of the first tranche of shares. vi. It is stated that despite some follow-up and negotiations, the Petitioner did not come forward to pay the first tranche of sale consideration. As the Petitioner deliberately and intentionally backed out from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, the Board of LST and LHW consistently had another director(s) which demonstrate that the parties gave no credence to the MOU as it did not fructify into any definitive agreements, that too because of Petitioner's nonperformance. Infact, the entire project got mired in legal controversy because of certain criminal allegations levelled against the Promoters of IPL (Indu Projects Limited) which resulted inter alia in criminal proceedings initiated by the Central bureau of Investigation (CBI) and the Enforcement Directorate (ED). The CBI filed a charge sheet dated 17.09.2013 towards the subject project. This was followed by the ED issuing a Provisional Attachment Order dated 25.03.2015 attaching the total land, including the subject land way back in the year 2015. The ED's provisional attachment order was also contested before the Adjudicating Authority, which was followed up with an appeal before the Appellate Authority, where it is currently pending, ix. It is stated that, in view of the allegations and the attachment proceedings, and lack of support from the Government, the subject project could not be implemented as contemplated. As such, the company's bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ICD or a loan (short term or long term) in its books. The Petitioner also never depicted any interest on ICD in its income. Rs. 5 cr. is not classified as an ICD in Petitioner's Balance sheet despite the Claimant's Balance Sheet having a separate head for Advances and ICD's . The Petitioner has intentionally deliberately suppressed its own financial statements to mislead this Hon'ble Tribunal. xiii. It is stated that while everyone considered the transaction contemplated in the MOU as failed and abandoned, the Petitioner curiously in 2019 started a malicious litigation. Around 2018-19, Indu Project Limited (IPL) (the ultimate holding company of M/s. Lepakshi) was on the brink of Insolvency proceedings and the whole pursuit of the Petitioner to claim rights from an abandoned transaction was to scuttle IPL's Insolvency Proceedings and unduly gain therefrom by using this litigation as an arm twisting measure. The true intentions of the Petitioner would be apparent if one appreciates the Petitioner's emails to the IPL's Resolution Professional and Bankers as explained hereinafter, xiv. In the year 2019, the Petitioner's executives persona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill go unnoticed, so that they can later claim to have corresponded with the RP and the RP acknowledged their transaction. The mala fide intent of the Petitioner would be evident by the emails from December 2019 sent by the Petitioner to IPL's RP, along with all the banks who formed the IPL's Committee of Creditors. xvii. The Petitioner who in early and mid 2019 was conveniently corresponding with personal email id of Mr. Balaji, all of a sudden from December 2019 ensured that correspondence is addressed to M/s. Lepakshi's official email-id's apart from copying IPL's RP and CoC. Vide multiple letters, IPL's RP inter alia cogently responded setting the record straight informing the Petitioner that the MOU does not have any legal effect after 8 years as no definitive agreements were executed pursuant to the MoU. Further stated that the Petitioner addressed a letter dated 19.09.2020 to M/s. Lepakshi, again falsely claiming that it is the 100% shareholder of LST and LHW and the MOU is binding after 8 years. The Petitioner baselessly sought the amount of Rs. 5 crores along with 18% interest apart from disputing the Directorships. M/s. Lepakshi cogently res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances in the Statement of Defense. The same is not elaborated herein given the scope of instant proceedings. The Respondent craves leave to rely on the pleadings in the Statement of Defense and the contents may be read as part and parcel of Respondent's reply. xxi. After having failed to get the desired interim relief in the arbitration proceedings, the Petitioner started a malicious pursuit of parallel litigations as further arm-twisting tactics. The Petitioner knows fully well that its claim on merits is baseless. Therefore, after the passage of the interim order (s) stage in the arbitration proceedings, the Petitioner began delaying the arbitration proceedings by taking adjournments at every procedural stage to delay the arbitration. As on last date, the Parties were to inter alia file their evidence affidavits in the arbitration proceedings. However, the Petitioner again sought an adjournment of 6 weeks to further delay the arbitration. It is stated that concerning the Petitioner objection on IPL's Insolvency process and its effect on Petitioner's claim before the arbitration, the Hon'ble High Court granted liberty to the Petitioner to approach t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entry towards Rs. 5 cr. subsisted on the balance sheets of LST and how any reference to the ICD qua the Rs. 5 cr., was also removed after FY 2016-17 and the Rs. 5 cr., subsisted as an 'other liability' as a balancing entry towards the cost of land transfer which was incurred as capital expenditure (occurring on the asset's side of the Respondent No. 2 balance sheets). From FY 2016-17, the balance sheets do not contain any reference to the Petitioner. Infact, the Petitioner's own financial statements do not depict the Rs. 5 cr., as a debt, much less financial. No entries in this regard exist in the Petitioner's books. The Petitioner also failed to demonstrate any written acknowledgement of debt in 3 years prior to the instant Section 7 proceedings making any reference to the alleged ICD in a manner that extends the time as provided under the Limitation Act. Therefore, apart from being baseless on merits any claim in this regard is also hopelessly barred under the law of limitation. xxvi. It is stated that the Petitioner's malicious invocation of Insolvency jurisdiction of this Ld. Tribunal, in the facts and circumstances of the present case, is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gins afresh each year that the Respondent records an entry of debt in its own financial records. In the present case, the Respondent has recorded the ICD amount as an outstanding liability consistently from the date of its issuance, till the present. Further it is submitted that the manner in which the Financial Creditor records an entry pertaining to a loan/ICD/financial assistance can have no bearing on the initiation of CIRP. Notwithstanding the same, the Petitioner seeks permission of this Hon'ble Tribunal to place on record an opinion dated 17.01.2022 issued by a firm of Chartered Accountants which states unequivocally that the ICD amount provided to the Respondent, has infact been properly and consistently reflected in its books of account and also an affidavit dated 27.01.2022 issued by Mr. Gulshan Jhurani, presently a director of the Respondent affirms that payment of the ICD amount of Rs. 5,00,00,000/- was in the nature of a short term loan, iv. It is stated that nothing in the objections filed by the Respondent disputes the delivery and acceptance of neither the ICD amount, which constitutes the financial debt. Once the financial debt is acknowledged, and a def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent has conveniently failed to state the reason for the delay in the execution of the MOU was not the failure of the Petitioner to comply with its obligations, but due to external legal disputes cropping up over the subject matter of the MOU, i.e. the land, soon after the payment of the ICD amount of Rs. 5,00,00,000/- (Rupees Five crores only). It is matter of record that soon after the payment of the ICD amount of Rs. 5,00,00,000/- by the Petitioner concessions granted by the Govt., of Andhra Pradesh in respect of the MOA dated 22.12.2018 (executed with the parent company of the present Respondent) came to be withdrawn. In fact, on 09.07.2012, the Petitioner received a letter from the Dept. of Information Technology and Communication, AP Govt., stating that certain audit objections had been raised against the Respondent's parent company. In light of the same, the letter stated that the MOA dated 22.12.2008 would be kept in abeyance. viii. It is stated that following the same, the Petitioner made inquiries with the Respondent's parent company about the status of the execution of the MOU. To this, the Petitioner was informed that the Respondent's parent compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... now, for its own convenience, seeking to weave a narrative of a failed/still-born transaction. Further, it is quite hard to fathom a situation where a Director remains in his position fortuitously. If, as per the Respondent, the MOU indeed stood lapsed or terminated, it could have taken steps to remove the Petitioner's representative, Mr. Gulshan Jhurani, as a Director, but it took no such steps is indicative of the falsity in the Respondent's case. xi. As far as the ICD amount goes, the Respondent has taken the facetious and factually incorrect position that the same was only cost towards land transfer and was to be treated as sale consideration payable by the Petitioner to the Lepakshi Group. It is submitted this is a direct contradiction of the terms of the ICD Agreement. And for the purposes of this petition it is only the ICD agreement that is material. The relevant terms of the ICD Agreement is extracted at Para 15, Page-6 of the rejoinder filed by the Petitioner. xii. The ICD Agreement was to be secured by way of bank guarantee for the same amount. However, borrower was unable to furnish the said bank guarantee and in lieu of the same the Respondent in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within its rights in informing the concerned RP of its contractual rights qua the subsidiaries of Indu Projects Limited. xvi. It is stated that a conjoint reading of the ICD Agreement along with Corporate Guarantee Agreement reflects the terms of repayment and default. The pendency of the Arbitration proceeding between the parties does not in any way affect the present petition. The Petitioner has approached the present Tribunal u/s. 7 of the Code and all the elements necessary for initiation of CIRP have been shown to exist by the Petitioner. Therefore, the pendency of Arbitration proceedings or any other proceedings bears no water before the present Tribunal. 10. The Petitioner has filed its written submissions by reiterating the facts stated in the synopsis and in the rejoinder and the same is taken on record. The Petitioner further stated as follows: i. It is stated that the Respondent has, at no point disputed or denied the execution of the ICD and the Corporate Guarantee, the receipt of the ICD amount of Rs. 5,00,00,000/-, the receipt of the recall notice dated 19.09.2020 and the non-payment of the ICD amount along with accrued interest. Infact the ICD amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of L2 and L3 to its creditors, and the present petition has been filed in respect of one such financial liability, and nothing else. iv. It is further stated that all the share of the Respondent are pledged as security and continue to remain in the custody of the Escrow Agent (Indusland Bank) and have been further subject to protective orders passed by the Hon'ble High Court of Delhi. The escrow account held with Indusland bank is still active and operational which making it evident that the Respondent's position that it considered the MOU has lapsed or terminated is false. v. It is submitted that the reliance of the Respondent on the decision of the Supreme Court in Indus Biotech is thoroughly misplaced. Nowhere in the said decision has the Supreme Court departed from the general rule relating to the limited scope of inquiry where a petition u/s. 7 has been filed. Further, the facts in Indus Biotech were completely different from the present case, and infact, the reason for dismissal of the Section 7 petition as determined by the Hon'ble Supreme Court was because the Adjudicating Authority found that there was no default committed by the proposed Corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incipal agreement. Further, stated that the Petitioner is not a bank or financial institution who loaned Rs. 5 crores to the Respondents. Rs. 5 crores is a part of series of reciprocal promises whereby, ultimately it was the Petitioner who should have paid Rs. 238.5 crores to Lepakshi. But the Petitioner did not pay a single rupee of the promised Rs. 238.5 crores after the land was transferred to LST and LHW and deliberately backed out from the transaction. If Clause 4 of the MOU, which contained the reciprocal obligations, is appreciated, then it would be evident that there was no further obligation on Lepakshi and it was the Petitioner who had to pay the amounts, which admittedly was never done. In the instant case, right from inception, the ICD of Rs. 5 crores was only a small part of reciprocal promises with the final payment obligation of the Petitioner unlike Indus Biotech where the discussions towards converting the debt into equity happened subsequently. Therefore, entertaining the current Section 7 petition would be punishing the Respondent for the Petitioner's contractual default. iv. It is stated that there is nothing in the balance sheet three years before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of even part there of or an instalment amount. For the meaning of debt , we have to go to Section 3(11), which in turn tells us that a debt means a liability of obligation in respect of a claim and for the meaning of claim , we have to go back to Section 3(6) which defines claim to mean a right to payment even if it is disputed. The Code gets triggered the moment default is of rupees one lakh or more (Section 4). The corporate insolvency resolution process may be triggered by the corporate debtor itself or a financial creditor or operational creditor. A distinction is made by the Code between debts owed to financial creditors and operational creditors. A financial creditor has been defined under Section 5(7) as a person to whom a financial debt is owed and a financial debt is defined in Section 5 to mean a debt which is disbursed against consideration for the time value of money. As opposed to this, an operational creditor means a person to whom an operational debt is owed and an operational debt under Section 5(21) means a claim in respect of provision of goods or services. 28. When it comes to a financial creditor triggering the process, Section 7 becomes rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no disciplinary proceedings pending against the proposed resolution professional, it may, by order, admit such application. 16. As per the enunciation of law by the Hon'ble Apex Court, in an Application under Section 7 of the IBC, 2016, what is required to be seen by this Adjudicating Authority, is whether the application filed within the period of limitation and whether the Petitioner/Financial Creditor proved the debt and default thereon. 17. It is the settled principle of law that the amount given under an Inter Corporate Deposit is a financial debt. The Learned Counsel appearing for the Respondent/Corporate Debtor while not disputing the said principle, however, mainly contended that the subject Inter Corporate Deposit was given by the Petitioner/Financial Creditor to the Respondent/Corporate Debtor as a part of the investment made and hence it cannot be treated as a financial debt and the C.P. should be dismissed. The Learned Counsel, in order to substantiate this submission drawn our attention to various Clauses of the Memorandum of Understanding dated 07.01.2012 executed between M/s. Lepakshi Knowledge Hub Private Limited and Global Emerging Markets India Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m, the Corporate Debtor undertakes to repay Rs. 5,00,00,0000/- (Rupees Five Crores only) along with interest at the rate of 18% per annum to the Financial Creditor/Petitioner. As the Corporate Debtor admittedly not repaid the amount received under Inter Corporate Deposit within the specified period, the Financial Creditor/Petitioner recalled the Inter Corporate Deposit amount along with 18% interest from the Corporate Debtor/Respondent vide recall letter dated 19.09.2020. The instant C.P. was filed on 13.10.2021. The Corporate Debtor/Respondent has acknowledged the receipt of Rs. 5,00,00,000/- (Rupees Five Crores only) from the Financial Creditors/Petitioners in its Balance Sheets from the Financial Years 2011-2012 to 2018-2019. Hence the C.P. is well within the period of limitation. 22. The various decisions, on which the Learned Counsel for the Respondent/Corporate Debtor placed reliance, have no relevance to the facts of the present case. 23. The application filed in the prescribed Form No. 1 is found to be complete. 24. In the circumstances and for the aforesaid reasons and since the C.P. is complete, the same is admitted in terms of Section 7(5) of the IBC and accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eja Eternity, Thakur Village, Kandivali East, Mumbai-400101, email- [email protected], as the Interim Resolution Professional. The IRP is directed to take the steps as mandated under the IBC, specially under Sections 15, 17, 18, 20 and 21 of IBC, 2016. 26. The Interim Resolution Professional shall after collation of all the claims received against Corporate Debtor and the determination of the financial position of the Corporate Debtor constitute a Committee of Creditors and shall file a report, certifying constitution of the Committee to this Tribunal on or before the expiry of thirty days from the date of his appointment, and shall convene first meeting of the Committee within seven days for filing the report of Constitution of the Committee. The Interim Resolution Professional is further directed to send regular progress reports to this Tribunal every fortnight. 27. A copy of the order shall be communicated to both the parties. The learned Counsel for the Petitioner shall deliver copy of this order to the Interim Resolution Professional forthwith. The Registry is also directed to send the copy of this order to the Interim Resolution Professional at his e-mail addre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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