9911796707
TMI Blog2023 (7) TMI 1242X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribed threshold limit. Default in the IBC framework means the incidence of non-payment of debt in whole or in part when the debt has become due and payable, in law and in fact. Debt means a liability or obligation in respect of a claim which is due from any person and claim means a right to payment even if it is disputed. From a bare reading of Section 7 of IBC, it is amply clear that insolvency process under IBC can be triggered only by a Financial Creditor either singularly or jointly. The primary and fundamental basis for a creditor to be treated as a financial creditor for the purpose of Section 7 in Part II of the IBC requires that a financial debt is owed to that person in terms of Section 5(7) of IBC. Such a financial debt could cover any of the transactions outlined in Section 5(8) (a) to (i) of the IBC. That being so, the basic requirement of existence of financial debt being owed by the Corporate Debtor to the Financial Creditor has to be first satisfied and cannot be overlooked. Whether the Appellant had made any disbursement to the Corporate Debtor against the consideration for the time value of money? - HELD THAT:- In the present facts of the case, it is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal ( AT ) ( Insolvency ) No. 655 of 2020 & I. A No. 3714 , 4538 of 2022 - - - Dated:- 27-7-2023 - [ Justice Ashok Bhushan ] Chairperson And [ Barun Mitra ] Member ( Technical ) For the Appellant : Gp. Capt. Atul Jain ( Retd ) , in person For the Respondent : Mr. Ashok Kumar Singh , Sr. Advocate , Mr. Vikram Singh Baid , Mr. Adarsh Tripathi , Ms. Meghna , Mr. Kunal, Advocates for R - 9 . Ms. Ekta Choudhary , Mr. Dinyank Dutt Dwivedi , Advocates JUDGMENT [ Per : Barun Mitra , Member ( Technical ) ] The present appeal filed under Section 61 of Insolvency and Bankruptcy Code, 2016 ( IBC in short) by the Appellant arises out of the Order dated 25.06.2020 (hereinafter referred to as Impugned Order ) passed by the Adjudicating Authority (National Company Law Tribunal, Allahabad Bench) in CP (IB) No. 457/ALD/2019. By the impugned order, the Adjudicating Authority has dismissed the application filed under Section 7 of the IBC by the Appellant to initiate Corporate Insolvency Resolution Process ( CIRP in short) against the Corporate Debtor/Respondent No.1. Aggrieved by this impugned order, the present appeal has been preferred by the Appellant. 2. Making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that analysis of such communications including emails exchanged between the Appellant and Respondents No.2 and 3 clearly show that there was a financial debt owed by the Corporate Debtor. Further it was pointed out that BKT had twice paid to the Appellant an interest amount of Rs.2.5 lakh each which lends credence to the fact that the Appellant had disbursed certain sum of monies against the consideration for time value of money and which had the commercial effect of borrowing thus establishing financial debt. It was also submitted that two legal notices were also served on the Respondent No.2 and 3 for recovery of financial debt including interest and damages. In addition, a joint criminal complaint had been filed against BKT and NT and the matter is still pending before the district court. These Respondents have not paid the outstanding due even after accepting their liability before the Hon ble Allahabad High Court and hence it was erroneous on the part of Adjudicating Authority not to have admitted the Section 7 application. 4. It was asserted that BKT and NT were alter-egos of each other and the Corporate Debtor. Adding further it was mentioned that the postal and email ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and BKT-NT and hence cannot be treated as a sum given to the Corporate Debtor. In view of the above, it was submitted that the Adjudicating Authority had not committed any error in not treating the same as financial debt in terms of Section 5(8)(a) to (i) of the IBC and for not treating the Appellant as Financial Creditor in terms of Section 5(7) of IBC. Hence, as money was never transferred by the Appellant to the Corporate Debtor, the Section 7 application for initiation of CIRP of Corporate Debtor was not tenable. 7. It is further contended that the submission made by the Appellant that money had been transferred to DKC is false and misleading since only an amount of Rs.6,00,056/- had been transferred to the account of DKC while the rest of the monies as per bank statements had actually been transferred to one Mr. R.N. Chaturvedi (Rs.9 lakhs), M/s Srijan Developers Pvt. Ltd (Rs.6 lakhs) M/s JDS Design Execution (Rs.3 lakhs) and M/s Sthapana Architect and Engineers (Rs.1 lakh). Moreover, the money transfers were not even made from the account of the Appellant but done from other account holders. 8. It was further contended that even if for argument s sake it is accepted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case the application under Section 7 of IBC filed by the Appellant was maintainable against the Corporate Debtor. 12. Before we proceed to answer the above question, a quick glance at certain provisions of the IBC would be relevant and constructive: - Sections 3(6) claim means (a) a right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured or unsecured; (b) right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured or unsecured; 3(7) corporate person means a company as defined in clause (20) of section 2 of the Companies Act, 2013 (18 of 2013), a limited liability partnership, as defined in clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009), or any other person incorporated with limited liability under any law for the time being in force but shall not include any financial service provider; 3(8) corporate debtor means a corporate person who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in any rate or price and for calculating the value of any derivative transaction, only the market value of such transaction shall be taken into account; (h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution; (i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause; Section 7 : Initiation of corporate insolvency resolution process by financial creditor. 7(1) A financial creditor either by itself or jointly with [other financial creditors, or any other person on behalf of the financial creditor, as may be notified by the Central Government] may file an application for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred. 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. 13. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation is not liable to be admitted. (Emphasis Supplied) 15. It is the case of the Appellant that for a Section 7 application to be admitted, the Adjudicating Authority is only required to be satisfied whether the Corporate Debtor has defaulted; whether the application filed by the Financial Creditor is complete and whether any disciplinary proceedings is pending against the Insolvency Resolution Professional proposed by the Financial Creditor. It has been vehemently contended that there is no provision in the IBC which necessitates proving that there is duly established financial debt. 16. In support of his argument, the Appellant has adverted attention to the ratio contained in judgment of this Tribunal in M/s Precious Energy Holdings Limited vs. SBI in Company Appeal (AT) (CH) (Ins) 89/2022 and in Vipul Himatlal Shah vs. Teco Industries in Company Appeal (AT) (Ins) 470/2022 wherein it has been held that in the case of a Corporate Debtor who commits a default of a financial debt, the Adjudicating Authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BKT-NT and the Corporate Debtor was never in the picture. It has been argued that even if BKT-NT were Managing Directors of THPL, monies received by them in their personal accounts cannot be treated as money given to THPL as Corporate Debtor. In support of this contention, the Learned Senior Counsel for the Respondent No.9 has relied on the judgment of the Hon ble Supreme Court in the matter of M/s Radha Exports (India) Pvt. Ltd. Vs. K.P. Jayaram Anr. [2020 (10) SCC 538] where it has been categorically held that a personal loan given to a promoter or a director of a company cannot be the basis to trigger corporate resolution process under IBC. 19. From a bare reading of Section 7 of IBC, it is amply clear that insolvency process under IBC can be triggered only by a Financial Creditor either singularly or jointly. The primary and fundamental basis for a creditor to be treated as a financial creditor for the purpose of Section 7 in Part II of the IBC requires that a financial debt is owed to that person in terms of Section 5(7) of IBC. Such a financial debt could cover any of the transactions outlined in Section 5(8) (a) to (i) of the IBC. That being so, the basic requirement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation to Section 7 in isolation instead of reading it harmoniously with the non-negotiable requirement of Section 7(1) of firstly establishing himself as a Financial Creditor qua the Corporate Debtor. 22. It was brought to our notice that the Appellant has also filed criminal proceedings in respect of the said transactions to prove that a financial debt was owed to him by the Corporate Debtor but on close scrutiny we find that the legal notices were sent to Respondents No.2 and 3 in their personal capacity and not to the Corporate Debtor. The claim of the Appellant that the Respondent No.1 had filed reply affidavit in the Criminal Writ Petition before the Hon ble Allahabad High Court and admitted the debt has also been disputed on the ground that the signatory therein was not authorized by Respondent No.1. Even the interest amount defrayed to the Appellant qua the transactions have also not been done by the Corporate Debtor but from the personal accounts of BKT. 23. In our considered view, therefore, we have no hesitation in holding that the Appellant does not meet the specific and distinct connotations required to be treated as a Financial Creditor qua the Corporate De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances whether it would be desirable and justifiable for puncturing of the veil. 26. Before we dwell on the facts of this case, we must note that it is a settled proposition of law that a company is a legal personality entirely distinct from its directors. Once a company is incorporated, it becomes an artificial person and must be treated separately from its members. In the present factual matrix, the Respondent No.1-THPL is a corporate person in terms of Section 3(7) of IBC and therefore enjoys a legal entity separate from that of BKT and NT. From the juristic point of view, therefore, the rights, duties and liabilities of THPL are distinctive from those enjoyed, exercised or discharged by directors in their personal capacity. It is abundantly clear that the Appellant has not entered into any direct transactions with the Corporate Debtor at any stage. The transactions have remained limited to DKC, BKT-NT in their individual capacity or with entities like RN Chaturvedi, Srijan Developers, JDS Design Execution, Sthapana Architect and Engineers as may be seen from pages 58-65 of Appeal Paper Book ( APB in short). These borrowers have either received money from the Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
