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TMI Blog2023 (7) TMI 314X X X X Extracts X X X X X X X X Extracts X X X X ..... admitted the application filed under Section 7 of the IBC and thereby Corporate Insolvency Resolution Process (CIRP) has been initiated against MP Promoters Pvt Ltd-Corporate Debtor. 2. The short fact of the case as is evident from the materials available on record is that the financial creditor which is a private limited company registered under the provisions of the Companies Act, 1956 filed an application under Section 7 of the IBC against the Corporate Debtor in the year 2019. In the month of April, 2017 the Corporate Debtor approached the Financial Creditor through its Directly namely Mr. Mukesh Kumar, appellant herein, for obtaining financial assistance for a short span of time. On the request of the appellant herein the Board of Directors of financial creditor on 20th May, 2017 resolved to grant a loan of Rs.1,01,00,000/- (Rupees One crore one lakh only) to the Corporate Debtor alongwith interest @ 9% per annum to be compounded on 31st March, 2018 which was to be disbursed in one or more tranches. As per Board Resolution the loan was to be repaid alongwith interest on or before 31st March, 2018. As per case of the financial creditor on 26th May, 2017 first tranche of the lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges 62 & 67 are relevant for showing the amount and the dates of disbursement to the CD. It is submitted that the CD is liable to pay to FC a total sum of Rs. 1,21,95,953/- (Rupees One Crore Twenty One Lakhs Ninety Five Thousand Nine Hundred Fifty Three Only) which includes interest calculated till 31.07.2019. In addition, the interest @ 9 per annum calculated from 01.08.2019 till the actual date of realization of the outstanding amount is to be charged from the CD. The FC has enclosed a copy of the Board Resolution passed on 20.05.2017 vide which the Board of Directors of the FC have accorded consent to grant a loan not exceeding Rs. 1,01,00,000/- (Rupees One Crore One Lakhs Only) to MP Promoters Pvt. Ltd. along with interest @ 9% per annum to be compounded on 31.03.2018 which shall be disbursed in one or more tranches. The loan is to be repaid on or before 31.03.2018 along with interest thereon (Annexure-5; Page No. 54). Further, there is no specific agreement between the parties specifying the date of payment of the debt. 4. The CD has placed on record the balance sheet ending 31.03.2018 of M/s. MP Promoters Pvt. Ltd. in which an amount of Rs. 1,01,00,000/- (Rupees One Crore O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 6 (1) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. 10. As a consequence of the application being admitted in terms of Section 7 of IBC, 2016, moratorium as envisaged under the provisions of Section 14(1) of IBC shall follow in relation to the Corporate Guarantor as per proviso (a) to (d) of section 14(1) of the IBC. However, during the pendency of the moratorium period, terms of Section 14(2) to 14(3) of the IBC shall come in force. 11. We direct the Applicant to deposit a sum of Rs. 2,00,000, with the Interim Resolution Professional Mr. Durga Das Agrawal, to meet out the expenses to perform the functions assigned to him in accordance with Regulation 6 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Person) Regulations, 2016. The needful shall be done my Law within three days from the date of receipt of this order by the Applicant. The amount however, will be subject to adjustment by the Committee of Creditors as accounted for by Interim Resolution Professional and shall be paid back to the Applicant. 12. The registry is directed to communicate a copy of the Order to the Applicant, the Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n behalf of the 1st Respondent by its Learned Counsel that the first meeting of CoC had taken place on 16th May, 2022, the CoC shall proceed with the matter. However, it is open to the Appellant side to bring it to the notice of CoC that the instant Appeal is pending on the file of this Tribunal." Thereafter reply and rejoinder were filed. 7. However, it appears that IA application i.e. IA No.1807/2022 filed for condonation of delay went un-noticed and even without condonation of delay we heard the matter and finally on 28.04.2023 Judgement was reserved. At the time of dictating judgement we noticed that IA application for condonation of delay and perused the application and after satisfying with the grounds stated in the said IA we condoned the delay. 8. Since 10 days delay had occurred in filing the appeal from the date of the impugned order an IA No.1807/2022 was filed for condonation of delay in filing the filed. Reasons for delay has been explained and we are satisfied with the same. Accordingly delay in filing the appeal is condoned and IA No.1807/2022 is allowed. 9. Mr. Abhishek Anand, learned counsel for the appellant has mainly assailed the impugned order on the plea t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to certificate issued by National E-Governance Services Ltd (hereinafter referred to as NeSL) and he has referred to certificate and submits that this certificate also shows that the debt is not a financial debt but rather an operational debt. He has also taken us to running page 106 of Volume 1 of Memo of Appeal to show that in the application filed by the financial creditor date of default has been mentioned as 1st April, 2018. However, prior to legal notice dated 06.08.2019 no document has been brought on record by the financial creditor to show that corporate debtor was intimated regarding the default. He has emphatically argued that there was no loan transaction and in absence of loan agreement and also no reliable document, it is a specific case that there was financial debt and in absence of financial debt the learned Adjudicating Authority was not entitled to admit the application filed under Section 7 of the IBC. Learned counsel for the appellant has placed heavy reliance on a judgement of this Appellate Tribunal reported in 2022 SCC OnLine NCLAT 316 in the matter of S. Chandriah Vs Sunil Kumar Agarwal. He has specifically relied on para 17 to 20 which are quoted hereinbel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39; to such a person." 19. Essential condition for accepting a debt to be financial debt being absent, we are of the view that Adjudicating Authority has not committed any error in rejecting the claim of the Appellant as Financial Creditor. The claim of the Appellant of Earnest Money of Rs. 7 Crores has been admitted by the Resolution Professional as under the category of other creditors. We thus do not find any error in the Order passed by the Adjudicating Authority dated 07.02.2020 and the Company Appeal (AT) Ins. No. 22 of 2022 deserves to be dismissed. 20. Learned Counsel for the Appellant has also relied on Annual Return for the Financial Year 2018-19 and 2019-20, where the earnest money liability of the Corporate Debtor has been classified as a "Financial Liability". Acknowledging the Liability of earnest money as a Financial Liability is not akin to admitting as a "Financial Debt". A debt of "other Creditors" is also a Financial Liability. Thus on the strength of Annul return of Financial Year 2018-19 and 2019-20, it can not be held that payment of earnest money by the Appellant was "Financial Debt". 11. Similarly Mr. Anand, learned counsel for the appellant has referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inancial Creditor agreed to advance unsecured loan for such a huge amount. It is nowhere disclosed that the Corporate Debtor is engaged in which business and the loan and finances was required for which business requirements. The Financial Creditor has not filed copy of their balance sheet for relevant years and also balance sheet of the Corporate Debtor Company." 12. Taking clue from aforesaid judgement the learned counsel for the appellant has argued that the financial creditor though has failed to establish financial debt of any written agreement, learned Adjudicating Authority incorrectly admitted the application and initiated CIRP which is required to be interfered with. 13. Heard. 14. Mr. Ashok Juneja, learned counsel has appeared for Respondent No.1/Financial Creditor. A detailed reply has been filed by the Respondent No.1. Similarly Respondent No.2 who is Resolution Professional (RP) has filed status report dated 06.05.2023. Mr. Ashok Juneja, learned counsel for the Respondent No.1 has emphatically argued that there is no reason for interference with the impugned order particularly in view of the fact that in the present case default has taken in the month of April, 2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed the order of admission for initiation of CIRP. 16. The RP/Respondent No.2 Mr. Durga Das Agarwal had appeared in person and submitted regarding filing of the status report dated 06.05.2023. 17. Besides hearing learned counsel for the parties we have perused the material available on record and after going through the same prima facie we are of the opinion that the learned Adjudicating Authority has rightly passed the impugned order which requires no interference. It is true that on the record there is no written agreement regarding claim of sanctioning loan to the corporate debtor. However, there are number of circumstances which in unequivocal term shows that financial creditor had been approached by the appellant for a loan of Rs.1,01,00,000/- and the loan was given to the corporate debtor in two tranches. 1st tranche was paid through cheque for an amount of Rs.51 lakh on 26.05.2017 and second amount i.e. Rs.50 lakh was given to the corporate debtor by financial creditor through RTGS and through RTGS it was paid on 03.06.2017 which has not been disputed by the either side. However, since there was no written agreement for sanctioning loan with interest the appellant has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs.1,01,00,000/- alongwith interest @ 9% per annum which was to be compounded on 31.03.2018. It was also clarified that loan shall be disbursed in one or more tranches and the loan amount was to be repaid on or before 31.03.2018 alongwith interest thereto. Subsequently it is not in dispute that the aforesaid loan i.e. Rs.1,01,00,000/- was disbursed in two tranches; one by way of payment of Rs.51 lakh through cheque and another Rs.50 lakh through RTGS. The said fact is explicit that it was financial debt. Similarly the said debt was owed to the Respondent No.1. There is no doubt on the credibility of his being a financial creditor. The aforesaid facts meets with the provisions contained in Section 5(vii) and 5(viii) of the IBC. In the Board Resolution referred to aforesaid, specifies that the loan was to be repaid on or before 31.03.2018 with interest. It is not case of the appellant or corporate debtor that the said amount was repaid by the appellant and as such default is not in dispute. Further the ledger of the corporate debtor for the period 1.4.2017 to 28.05.2019 which is at running page 223 Volume I of the Memo of Appeal reflects that on 25.05.2017 Rs.51 lakh was remitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case those judgements have got no relevance in adjudicating the present issue. 23. In S. Chandriah case (Supra) payment was mentioned as earnest money whereas in the present case Board Resolution dated 20.05.2017 of the financial creditor which we have referred hereinabove makes it clear that on being approached by the corporate debtor a full time director of the company was authorised to disburse loan of Rs.1,01,00,000/- with 9% interest and loan amount was to be finally repaid by 31.03.2018. So far as Pawan Kumar case (supra) is concerned in the said case the financial creditor had not filed any evidence of default alongwith application under Section 7 nor financial creditor had filed copy of their balance sheet for the relevant years. However, in the present case the balance sheet of the Corporate Debtor has been brought on record which reflects the loan amount and also interest amount. Accordingly we are of the opinion that the appellant may not get any assistance from aforesaid two judgements on which reliance was placed by learned counsel for the appellant. 24. We have also perused the status report dated 8.05.2023 submitted by the RP/Respondent No.2. The para 5 of the stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first and second provisos and has not been admitted by the Adjudicating Authority before the commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2020, such application shall be modified to comply with the requirements of the first or second provisos within thirty days of the commencement of the said Act, failing which the application shall be deemed to be withdrawn before its amendment. Explanation.-For the purposes of this sub-section, a default includes a default in respect of a financial debt owed not only to the applicant financial creditor but to any other financial creditor of the corporate debtor. (2) The financial creditor shall make an application under sub-section (1) in such form and manner and accompanied with such fee as may be prescribed. (3) The financial creditor shall, along with the application furnish- (a) record of the default recorded with the information utility or such other record or evidence of default as may be specified; (b) the name of the resolution professional proposed to act as an interim resolution professional; and (c) any other information as may be specified by the Board. (4) The Adjudicating Authority shall, withi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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