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TMI Blog2023 (3) TMI 1017X X X X Extracts X X X X X X X X Extracts X X X X ..... IBC. There are no merit in the Appeal to interfere with the order impugned passed by the Adjudicating Authority - appeal dismissed. - Company Appeal (AT) (Insolvency) No. 778 of 2020 - - - Dated:- 22-3-2023 - [ Justice Anant Bijay Singh ] Member ( Judicial ) And [ Mr. Kanthi Narahari ] Member ( Technical ) For the Appellant : Mr. Samar Bansal, Mr. Shreeyash U. Lalit, Mr. Manan Shishodia, Mr. Abhinav Aggarwal, Ms. Runjhun Garg, Mr. K. Abhay, Advocates For the Respondent : Mr. Gaurav Mitra, Mr. Ishan Ray Chaudhury, Advocates JUDGMENT Justice Anant Bijay Singh; The instant Appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 (for short IBC) has been preferred by the Appellant being aggrieved and dissatisfied by the order 20.03.2020 passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench) in Company Petition (IB) 4186/MB/2019 whereby petition under Section 7 of the IBC filed by Appellant with a prayer to initiate the Corporate Insolvency Resolution Process against Respondent herein VRG Infrastructure Private Limited (Corporate Debtor) was dismissed holding that the claim of the Petitioner is not a Financial Debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to the Appellant company) was payable to Mr. Gitesh Muttemwar. iii) On 25.03.2013, an amount of INR 10,55,000/- was again paid to Mr. Gitesh Muttemwar as against his contribution towards the purchase of additional shares of the Appellant company. Thus, the Ledger Account of the Appellant company as on 31.03.2013 would demonstrate that the outstanding amount payable to Mr. Muttemwar was INR 43,74,963/-. On 30.04.2015, the Appellant company refunded the amount against redemption of previously purchased shares of Buldhana Urban Cooperative Society (Bank) in the name of Mr. Gitesh Muttemwar amounting to INR 22,00,000/- towards the loan given to the Appellant by its Director, Mr. Muttemwar. The Ledger Account of the Appellant as on 31.03.2016 would demonstrate that the outstanding amount payable to Mr. Muttemwar was INR 21,74,963/-. Finally, as on 31.05.2016, the entire outstanding amount payable to Mr. Gitesh Muttemwar to the tune of INR 21,74,963/- was paid off. The Ledger Account of the Appellant maintained by the Appellant company as on 31.03.2017, also indicates that the monies payable to Mr. Gitesh Muttemwar were fully paid off and settled. The said fact can also be corrobora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Chairman cum Managing Director of the Appellant company till 17.11.2017. vi) Despite the exit of Mr. Gitesh Muttemwar from the Appellant company on 03.08.2016, Mr. Gitesh Muttemwar continued to be the CMD of the said company. Furthermore, Mr. Ganesh Chakkarwar was also a common Director of the Appellant as well as Respondent company and was evidently the promoter, shareholder of both companies and signatory to the balance sheets of both the companies. During the tenure of Mr. Chakkarwar as the CMD of the Appellant company, that the Appellant gave an unsecured loan of INR 25,00,000/- to the Respondent company by way of Cheques dated 21.07.2017 was for an amount of INR 15,00,000/- and dated 05.08.2017 was for an amount of INR 10,00,000/. On 17.11.2017, owing to the demand for explanations for the financial irregularities and improprieties, Mr. Ganesh Chakkarwar resigned as the CMD of the Appellant company. It was also resolved that the registered office of the Appellant company be shifted to the Hospital premises, i.e. away from the personal office of Mr. Ganesh Chakkarwar. vii) These unsecured loans, advanced by way of aforesaid Cheques have still not been repaid by the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red that a forensic audit be conducted into the affairs of the Appellant company since the latter had also willingly agreed to such audit in order to demonstrate its bona-fides. Sometime in May, 2020, the forensic auditor filed its report before the Tribunal giving damning conclusions against Dr. Paltewar, the present CMD of the Appellant company. The Appellant company is in the process of filing its objections against the said report, as the conclusions were based on inadmissible and fabricated documentary evidence, not part of the books of accounts. However, one important aspect to consider is that even the forensic audit report, despite its partisan approach towards attacking Dr. Paltewar, has recognized that the amount of INR 25,00,000/- was disbursed by the Appellant company to the Respondent company herein as an unsecured loan. This further crystallises the stance of the Appellant company since the forensic report also recognizes that the amounts disbursed via Cheques dated 21.07.2017 and 05.08.2017 were in the nature of a commercial borrowing. x) Aggrieved by the non-payment of monies by the Respondent company, the Appellant company vide Board Resolution dated 24.06.2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the credit entry of Mr. Muttemwar. In response, the Respondent feebly submits that All the balance sheets have been signed by Dr. Paltewar and Mr. Chakkarwar - not Mr. Gitesh Muttemwar (para 29 of Reply) . In any case, the Respondent admits that its common Director, Mr. Chakkarwar was the CMD of the Appellant company till 17.11.2017. Even otherwise, Mr. Muttemwar cannot disclaim knowledge of the balance sheets as he was present during the Board Resolutions which have passed the balance sheets from FY 2010-11 to FY 2015-16. He had the right of inspection of books of accounts under Section 128 of the Companies Act, 2013; the right to peruse the financial statements during the annual general meeting under Section 129; the ability to review the auditors' report under Section 134; and also, the ability to apply for voluntary revision of these financial statements under Section 131 if these statements did not present a true and fair view of the state of affairs of the company. Mr. Muttemwar failed to exercise any of these rights and is therefore deemed to have been aware of the entry of INR 25,00,000/- against his ledger. Mr. Muttemwar was also involved in the financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eer Urban v/ Union of India, (2019) 8 SCC 416 , the Hon'ble Supreme Court has held that Section 5(8)(f) of the IBC is a catch all provision which is really residuary in nature and which would subsume within it, transactions which do not, in fact, fall under any of the other sub-clauses or main definition clause of Section 5(8). Pioneer Urban (supra) also observed that Section 5(8) comprises of a main definition which commences with means , and clauses (a) to (i) which are prefixed with and includes cover subject matters which may not necessarily be reflected in the main part of the definition. As a result, it held that the ingredient of disbursed against the consideration for the time value of money would not be a necessary ingredient for qualifying the same as a 'financial debt'. What would be important to consider is whether the 'financial debt' had the commercial effect of a borrowing. In any case, Shailesh Sangani (supra) accepts the proposition that a consideration where money advanced by a promoter, director or a shareholder of a corporate debtor to improve the financial health of the company and to boost its economic prospects would have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RG Infrastructure Private Limited, the Respondent. A Certificate dated 07.01.2020 (at page 250 of the Reply to the Appeal) of the Statutory Auditor of the Respondent certifying that Rs. 25 Lac paid by the Respondent to the Appellant during 2010-2011. The Appellant admits it has received Rs. 25 Lac from Respondent (at page 273 of Appeal). The Appellant does not deny having received Rs. 25 Lac but alleges that Rs. 25 Lac had come from Mr. Gitesh Muttemwar, Director of the Respondent company contrary to its own Bank Statement where it is clearly shown that amount had come from Respondent. The Appellant neither has any authorization from the Respondent to treat this amount as loan by Mr. Muttemwar nor any authorization was produced by Mr. Muttemwar to credit of amount of Rs. 25 Lac in his favour in the Books of Accounts of Appellant though admittedly, Rs. 25 Lac had come from the Respondent. 9. It is further submitted that for the first time in its Rejoinder before the NCLT, Appellant took a complete 'U' turn and falsely alleged that both are not Group Companies but operates under the common name VRG, signifying common interest of identical promoters/shareholders/directors/i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 60 of the Appeal). Further, these loans were granted to the Appellant in Financial Year 2011. Therefore, in an attempt to mislead the Bench, the Appellant is categorising the repayment of loan to the Respondent in the year 2017, as a financial debt. (ii) No consideration for time value of money:- The Respondent submitted that Section 5(8) of the IBC defines financial debt as a debt along with interest, if any, which is disbursed against the consideration for the time value of money . . Therefore, there are to essential ingredients within the definition of financial debt that need to be satisfied (i) there must be a disbursement; and (ii) the disbursement must be against consideration for time value of money. 12. Further, the Appellant has submitted that both companies are not group companies. Therefore, the Respondent submitted that a loan given by an unrelated company to another without any (i) written agreement; (ii) loan term; (iii) repayment date and (iv) without getting any consideration in return, does not qualify as financial debt that had been disbursed for time value of money. In the impugned order at para 15 has categorically held that the debt in question do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sbursal against consideration for the time value of money. 13. It is further submitted that not a single document has been produced to show that the said amount was to be repaid after a particular period. Additionally, no default date has been specified in the Section 7 application. Therefore, without prejudice, it cannot be said that the alleged amount became due and payable by the Respondent. In the light of the Hon ble Supreme Court decision in the case of Innoventive Industries case at para 30 and in Swiss Ribbons case at para 50 , it is stated that the trigger of a financial creditors application is non-payment of dues. In the legal notice dated 10.01.2019, the Appellant has not claimed that the alleged loan was given for any particular period and to be repaid at a particular date by the Respondent. 14. It is further submitted that the Hon ble Supreme Court judgment in Orator Marketing Pvt. Ltd. v. Samtex Desinz Pvt. Ltd., (2021) SCC Online SC 513 , relied by the Appellant during argument, does not and cannot overrule the decision of the Hon ble Supreme Court in Anuj Jain. In Orator Marketing case, the Hon ble Supreme Court does not deal with consideration for ti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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