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TMI Blog2024 (9) TMI 328X X X X Extracts X X X X X X X X Extracts X X X X ..... aj were running various Companies which were family Companies between the Parties. ii. Corporate Debtor as well as the Financial Creditor were family run Companies between the Parties. According to the family dispute, the Parties entered into Memorandum of Understanding (`MoU') on 07.02.2021 under which 12 Family Companies were evenly distributed between Sushil Kumar Bajaj, the Appellant, the Elder Brother and Ajay Kumar Bajaj, the Younger Brother. iii. The Corporate Debtor came into the share of Appellant, Sushil Kumar Bajaj, whereas Financial Creditor came into share of Younger Brother, Ajay Kumar Bajaj. iv. Before the partition between the family Companies run by families were helped each other by financially. Corporate Debtor took assistance from the Financial Creditor. v. An amount of Rs.9,13,00,000/- was availed by Corporate Debtor from the Respondent Company between September 2010 and April 2017. vi. Corporate Debtor has paid the amount from time to time and by 2021 principal amount of Rs.1,22,50,000/- was due. There was no Agreement of payment of any interest by the Corporate Debtor. vii. A Letter dated 17.08.2022 was sent by the Respondent to the Corporate Debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch this Appeal has been filed. 3. By Interim Order passed by this Tribunal on 04.12.2023, it was directed that CoC shall not issue `Form-G'. 4. We have heard Mr. Santosh Kumar, Learned Counsel appearing for the Appellant and Mr. Krishnendu Dutta Learned Sr. Counsel appearing for Respondent No. 1. 5. Learned Counsel for the Appellant challenging the Order submits that the transaction between the Parties was not a financial transaction. Both the Companies being run by same family where financial transaction were not of any kind of loan or of any interest payment. Amount transferred were to help the family Company and the amount transferred were repaid from time to time. Letter dated 20.09.2010, which according to the Respondent is the terms and conditions in writing of the loan is a fabricated Letter and has been created only for the purposes of case. Ajay Kumar Bajaj, who has signed the Letter on 20.09.2010 was not even Director of the Corporate Debtor since he was Director of the Corporate Debtor only from 12.05.2014 to 26.02.2021. There was no financial transaction nor there was any Financial Debt. The mention of interest at 12% in the Letter dated 20.09.2010 is with intent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicating Authority in Section 7 Application has only to see whether there is a debt and default and when the debt and default is proved, Adjudicating Authority has no option but to admit Section 7 Application. Learned Counsel for the Respondent has referred to the Order of the Adjudicating Authority where Adjudicating Authority has noted the willingness of the Corporate Debtor to make payment of debt of Rs.1,22,50,000/-. It is submitted that Respondent has filed the documentary proof of disbursement of fund, there was admission in form of Reply filed before the Adjudicating Authority as well as admission by way of oral submission. In the above facts, Adjudicating Authority did not commit any error. 7. Learned Counsel for the Appellant in its Rejoinder submitted that the Balance Sheet which was relied by the Financial Creditor in Section 7 Application is now being sought to discredited in its Reply filed in the Appeal where the Respondent No. 1 pleads that explanation in the Balance Sheet was purposely with the malicious and a mala fide intent to not pay the interest which is legally due. It is submitted by the Appellant that Respondent himself being challenging the Balance Sheet w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulted thereby committing a default which was admitted and accepted in the form of affidavits, financial statements and oral submissions recorded in the form of orders. Now to digress from the main issue in question, the Appellant is trying to divert into baseless facts which are irrelevant to the adjudication and/or appeal currently. It is submitted that this Hon'ble Tribunal lacks jurisdiction to adjudicate and/or investigate over new facts or documents being brought for the first time. Furthermore, the additional concocted facts do not bear any relevance at all with respect to the question of law before this Appellate Jurisdiction. Furthermore, it is pertinent to note that the documents as annexed by the appellant in the present paragraph is an additional document and not the part of the records and is in the nature of civil issues, the appellant is intentionally not averred the true facts of the matters rather the appellant are trying to give the colour of family disputes and an impression has been sought to be given that such documents are necessary to prove the IBC case. Therefore, the answering respondent submits that the documents as annexed by the Appellant cannot be taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2005 when the two companies shared a very cordial relationship with each other. On or about 2009, the Corporate Debtor company approached the Financial Creditor to fund its working capital. 5. Accordingly, in 2010, the Financial Creditor agreed to provide financial assistance to the Corporate Debtor company. The director of the Corporate Debtor company issued a letter on 20 September 2010 to the Financial Creditor wherein the conditions of the loan were set out in writing. A copy of the said letter is annexed herewith and marked as Annexure F." 13. The facts as given in Part IV by the Financial Creditor relies on the Letter dated 20.09.2010, which is claimed to be written by Director of the Corporate Debtor which according to the Financial Creditor contains conditions of loan were set out in the writing. Letter dated 20.09.2010 is thus relevant for the present case i.e., the only written document which according to the Financial Creditor contains the terms and conditions of the loan. Letter dated 20.09.2010 has been filed by Financial Creditor itself along with the Section 7 Application as Annexure-F. The said Letter has been brought on record at Page 70 of the Appeal wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and have committed the offence with sole intent of defrauding the Corporate Debtor by wrongly initiating Insolvency proceedings against an otherwise going concern. As such, the petitioners are liable for penal provisions u/s 65 of the code as well as Section 340 of Code of Criminal Procedure, 1973." 16. It is further relevant to notice that Corporate Debtor in its Reply has also admitted the amount of Rs.1,22,50,000/-, in Paragraph 13 which is as follows: "13. That it is undisputed fact that Corporate Debtor owes a sum of Rs 1,22,50,000/- to Operational Creditor and the same is duly noted in the audited financial statements of the Corporate Debtor." 17. With respect to the Letter dated 20.09.2010, Adjudicating Authority passed an Order on 28.12.2022 directing the Financial Creditor to produce original record of receipt of the Letter dated 20.09.2010. The Order dated 28.12.2022 is as follows: "1. Ld. Counsel for the Financial Creditor present. 2. Before issuance of notice, we ask the Financial Creditor to produce original record of receipt of letter dated 20th of September, 2010 mentioned in paragraph 5 of this petition. 3. Let the needful be done within 10 days by way of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' Vs. `Axis Bank & Ors.', (2020) 8 SCC 401, has held that transaction stated in Clauses (a) to (i) of Section 5(8) would be falling within the ambit of Financial Debt only carrying the essential element stated in the principal Clause or at least has the feature which could be traced to such element in the principal Clause. In Paragraph 46 of the Judgment following has been held: "46. Applying the aforementioned fundamental principles to the definition occurring in Section 5(8) of the Code, we have not an iota of doubt that for a debt to become "financial debt" for the purpose of Part II of the Code, the basic elements are that it ought to be a disbursal against the consideration for time value of money. It may include any of the methods for raising money or incurring liability by the modes prescribed in clauses (a) to (f) of Section 5(8); it may also include any derivative transaction or counter-indemnity obligation as per clauses (g) and (h) of Section 5(8); and it may also be the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in clauses (a) to (h). The requirement of existence of a debt, which is disbursed against the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a transaction covered by an agreement or arrangement in writing, it is necessary to ascertain what is the real nature of the transaction reflected in the writing; and d. Where one party owes a debt to another and when the creditor is claiming under a written agreement/ arrangement providing for rendering 'service', the debt is an operational debt only if the claim subject matter of the debt has some connection or corelation with the 'service' subject matter of the transaction." 22. The element of disbursal for time value of money is one essential condition which need to be proved for proving the debt as a Financial Debt. In the present case, the Financial Creditor came up with the case that Letter dated 20.09.2010 contains terms and conditions of the loan which letter was relied and filed along with Section 7 Application. The letter was impeached by Corporate Debtor before the Adjudicating Authority. Adjudicating Authority has also directed Financial Creditor to bring the proof of service of letter. 23. Learned Counsel for the Appellant has filed the details of Companies in which Ajay Kumar Bajaj has been the Director which is filed as Page 71 of the Appeal, which fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation on the ground that debt has been accepted. 25. The Corporate Debtor in its Reply has not denied the debt of Rs.1,22,50,000/- but there was no admission that the debt was the Financial Debt. Corporate Debtor having impeached the very basis of the claim of Financial Debt by pleading that Letter was forged and fabricated. Learned Counsel for the Appellant is also right in his submission that right from 2010 to 2021 during which period, the Appellant, Corporate Debtor has been making the repayment of the amount received from Financial Creditor time to time there was at no point of time any Letter or demand by Financial Creditor of any interest payment and in Year 2022, the interest claim as per the Financial Creditor has accumulated to Rs.17,15,01,400/-. 26. We fail to see that why at no point of time the Financial Creditor demanded any amount towards interest for more than decade. The fact that at no point of time any demand of interest was made from Corporate Debtor by the Financial Creditor fully supports the case of the Corporate Debtor that transaction between the two Companies were out to help each other, which were the family Companies and amounts were given as help to o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s liability at a belated stage as an after-thought to frustrate the entire purpose of the money having been lent. It is submitted that the Corporate Debtor had expressly admitted in its own balance sheet that the same was received as a loan/advance. It is submitted that the Respondent is in the business of lending money and it's main business and main source of revenue/income is from earning interest from the money lent. It is preposterous to suggest that no interest is payable and the loan was interest free. The Respondent disputes the contents of the explanation in the balance sheet and it is expressly stated that such an explanation was purposely inserted with a malicious and mala fide motive to not pay the interest which is legally due, both by way of statute and contractually." 29. Above Balance Sheet was signed both by Sushil Bajaj and Ajay Kumar Bajaj as Directors of the Corporate Debtor. As observed above, when the very basis of the financial transaction between the Parties i.e., Letter dated 20.09.2010 which was claimed by the Financial Creditor in its Section 7 Application could not be proved by the Financial Creditor and Letter becoming unauthorised since Ajay Bajaj was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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