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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 ..... has the feature which could be traced to such element in the principal Clause. 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. The sequence of the event and transaction between the Parties clearly proves that transfer of the amount by Financial Creditor to the Appellant were transferred by one Family Company to another Family Company and was not by way of loan nor any disbursal for any time value of money has been proved from any material on the record. Essential elements i.e., disbursal for time value of money having not been proved, in the facts of the present case, we are satisfied that Adjudicating Authority committed an error in admitting Section 7 Application without adverting to the real nature of trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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 ₹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 Debtor demanding an amount of ₹18,06,20,352/- being principal amount of ₹1,22,50,000/- along with interest till 31.07.2022. Interest amount claimed in the Letter was ₹16,83,70,352/-. viii. Again Demand Notice was issued on 10.09.2022 by the Respondent to the Corporate Debtor, claiming an amount of ₹18,06,20,352/- till 31.07.2022. ix. An Application under Section 7 was filed by the Respondent in December 2022, claiming an amount of ₹18,37,51,400/- which included principal amount of ₹1,22,50,000/- and the interest of ₹17,15,01,400/- till 31.07.2022. Date of default was mentioned as 02.08.2021. x. In the Section 7 Application, Appellant claimed that conditions of loans were set out in writing in Letter dated 20.09.2010 written by Director of the Corporate Debtor Company to the Fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 create a document for a loan which transaction was never a loan transaction. Apart from Letter dated 20.09.2010, no other materials have been placed by the Respondent to prove that interest was paid at any time by the Corporate Debtor. Corporate Debtor has categorically admitted receiving of the amount from Respondent in its Reply and has also honestly admitted that amount of ₹1,22,50,000/- are still due to be paid. It is submitted that Adjudicating Authority itself directed the Respondent to produce the receipt of the Letter but without averting to the Letter dated 20.09.2010 admitted the Application on admission of the Corporate Debtor on amount of ₹1,22,50,000/-. It is submitted that admission of debt by the Corporate Debtor towards Respondent No. 1 was not an admission of any Financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 which is not open for Respondent to rely on the Balance Sheet for any acknowledgement of the debt. 8. We have considered the submissions of the Counsel for the Parties and perused the record. 9. In Paragraph VII (2) of the Appeal, Appellant has clearly pleaded that both the Companies i.e., Corporate Debtor and Financial Creditor were run by same family and, however, due to some family dispute, the Parties entered into MoU on 17.02.2021 and out of 12 Companies run by family, 6 Companies came in the share of Sushil Bajaj, the Appellant and 6 Companies came in the share of Younger Brother, Ajay Bajaj. Pleading in Paragraph VII (2) of the Appeal is as follows: 2. That both of these companies herein were run by the same family. However, due to some family disputes, the parties entered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 on the record as has no connection with the present Appeal. 11. When we look into the aforesaid Reply within the Financial Creditor it is clear that there is no specific denial of MoU/family partition on 17.02.2021, in which the Corporate Debtor Company came in the share of the family of the Appellant and the Financial Creditor Company came in the share of Ajay Bajaj, the Younger Brother. There being no specific denial to the said fact can be treated as proved by the Appellant. 12. The Financial Creditor has filed Section 7 Application claiming an amount of ₹1,22,50,000/- as principal amount and interest of 17,15,01,400/-. Date of default was mentioned as 02.08.2021. In Part IV at Column 2 details of the amount due principal and interest Part IV at Column 2 up to Paragraph 5 in secon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riting. 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 which is to the following effect: Date-20-09-2010 To Shashi Bajaj, Director, Madhyati Dealcomm Private Limited I Ajay Kumar Bajaj, Director of Kanika Buildcon Private Limited, do hereby confirm our oral understanding of availing loan facilities of Rs. 10,00,00,000/- (Rupees Ten Crores Only) for working capital requirements in such tranches as may be require by my Company. I state that my Company shall be liable to pay interest to you @ 12% per annum simple interest being compounded annually on the amount being calculated and accrued from the date of disbursements and repayable upon demand. I further state that the Company shall endeavour to make full and final payment of the entire loan alongwith interest quantum to Mandhyati Dealcomm Private Limited. I issue this letter as the director of the Company being du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 an affidavit. 4. Post this matter again on 20/01/2023. 18. The Letter dated 20.09.2010 was neither produced in original before the Adjudicating Authority nor any proof as directed by Adjudicating Authority was produced. The Letter dated 20.09.2010, which was basis of Financial Debt with regard to terms and conditions of the loan being an issue raised before the Adjudicating Authority, Adjudicating Authority, although noted the said submission in Paragraph 14 of the Order, but in the analysis and finding did not advert to the said Letter. In Paragraph 14 of the Order, Adjudicating Authority while noticing the submission of the Corporate Debtor has observed: 14. Hence, the letter dated 20 September 2010 is a fabricated and forged document. 19. Adjudicating Authority, however, without adverting to the said letter which is the basis of the terms and cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 consideration for the time value of money, in our view, remains an essential part even in respect of any of the transactions/dealings stated in clauses (a) to (i) of Section 5(8), even if it is not necessarily stated therein. In any case, the definition, by its very frame, cannot be read so expansive, rather infinitely wide, that the root requirements of disbursement against the consideration for the time value of money could be forsaken in the manner that any transaction could stand alone to become a financial debt. In other words, any of the transactions stated in the said clauses (a) to (i) of Section 5(8) would be falling within the ambit of financial debt only if it carries the essential elements stated in the principal clause or at least has the features which could be traced to such essential elements in the principal clause. In yet other words, the essential element of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority. 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 fact was also pleaded in the Reply filed by the Corporate Debtor before the Adjudicating Authority as noted above. The extract from Ministry of Corporate Affairs filed at Page 71 is as follows: DIN/DPIN : 01675099 Date: 03/05/2013 12:14:21 PM Name: Ajay Kumar Bajaj CIN/LLPIN Name of the Company /LLP Current designation of the Director/Designated Partner Date of appointment at current desigation Original date of appointment Date of cessation Company/LLP Status Defaulting Status U00330BR1999 PTC008916 MOHIT VENTURE S PRIVATE LIMITED Additional Director 23/08 /2008 23/08 /2008 21/07 /2015 Active - U27100BR2009 PTC014469 BAJAJ IRON AND STEEL PRIVATE LIMITED Director 29/04 /2009 29/04 /2009 22/03 /2021 Active - U27101JH1995 PTC006744 JHARKHA ND ALLOYS PRIVATE LIMITED Director 29/09 /2007 29/09 /2007 25/03 /2021 Active - U27106BR1995 PLC006775 BAJAJ ELECTRO STEELS LIMITED Director 04/11 /2003 04/11 /2003 Active - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orts 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 one Family Company by other Family Companies which amount was repaid from time to time. The transaction was never a Financial Debt nor any loan transaction. 27. Learned Counsel for the Respondent has placed much reliance on the financial Balance Sheet of the Corporate Debtor as on 31.03.2020 in which unsecured loans from Financial Creditor has been mentioned. In the Balance Sheet as on 31.03.2020, unsecured loans from Financial Creditor was shown as ₹5,57,00,000/- as on 31.03.2019 and ₹5,38,00,000/- as on 31.03.2020. The Balance Sheet also contains notes, it is useful to extract note 4 of the Balance Sheet as on 31.03.2020, which is as follows : Note 4 NON CURRENT LIABILITIES (a) LONG TERM BORROWINGS I. SECURED LOANS Total (I) : - - II. UNSECURED LOANS a. Loans from Corporate Body KEMS Services Pvt Ltd 35,000,000.00 35,000,000.00 Manokamna 5,000,000.00 5,000,000.00 Enterprises Pvt. Ltd. Mandyati Dealcom Pvt Ltd 53,800,000.00 55,700,000.00 Total (II) : 93,800,000.00 95,700,000.00 b. Loans from Othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditor has to be disbelieved a Party comes before the Court by fabricating a document to take undue benefit is not entitled for relief by the Court. 30. The sequence of the event and transaction between the Parties clearly proves that transfer of the amount by Financial Creditor to the Appellant were transferred by one Family Company to another Family Company and was not by way of loan nor any disbursal for any time value of money has been proved from any material on the record. Essential elements i.e., disbursal for time value of money having not been proved, in the facts of the present case, we are satisfied that Adjudicating Authority committed an error in admitting Section 7 Application without adverting to the real nature of transaction between the Parties and without adverting to the Letter dated 20.09.2010 which was the very basis of the case of the Financial Creditor. It is to be noted that Corporate Debtor has fairly admitted the debt of ₹1,22,50,000/- in his Reply and also has offered before the Adjudicating Authority payment of the said amount which was not accepted by the Financial Creditor. At the time of hearing when this Appeal came for consideration on 04.12.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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