2017 (4) TMI 1272 - Tri - Companies Law

NCLT ruling: Importance of proper documentation in debt recovery process

The National Company Law Tribunal, New Delhi, ruled in a case involving financial creditors' claim for initiation of the Insolvency Resolution Process ... Initiation of the Insolvency Resolution Process - Held that:- The Financial Statements filed the Corporate Debtor with the ROC also do not reflect the loans given by the petitioners so as to accept them as acknowledgment of a debt for enhancing the period of limitation. The said documents are therefore of no help to the Petitioners for the purpose of extending limitation. We therefore do not find that the amounts specified in Para no.8 of the petition are legally recoverable debts. With respect to the liability of ₹ 10 lacs, specified in para no.9 of the petition given by Dr. Shilpa Gupta (Petitioner no. 1) on 25.02.2015, the petitioners have been able to satisfy that the same is a legally recoverably financial debt. The Bank records corroborate that the amount for the Demand Draft in favour of GNIDA had been prepared from the account of the Petitioner no. I and tendered on behalf of the Corporate Debtor, thereby creating a financial liability on the Corporate Debtor to repay the same to petitioner no. 1 . Corporate Debtor has tried to raise the issue of filing of FIRS and criminal action against the petitioner, contemplated but other than a vague denial of the liability, no cogent repudiation has been shown to this Bench in respect of the payment made by Petitioner no. 1 towards the demand made by GNIDA in respect of the immovable asset of the Corporate Debtor. The petitioner on the other hand has satisfied us on the basis of her bank statement and other documents. As the Corporate Debtor has failed to repay this amount, the financial creditor is entitled to initiate Insolvency Resolution Process. Issues:- Claim of financial creditors for initiation of Insolvency Resolution Process under section 7 of the Insolvency & Bankruptcy Code, 2016.- Dispute over outstanding debt repayment by the Corporate Debtor.- Allegations of manipulation of records and time-barred claims by the Respondent/Corporate Debtor.- Legal recoverability of debts claimed by the petitioners.- Verification of liabilities and financial debts by the Tribunal.Analysis:The judgment by the National Company Law Tribunal, New Delhi, involved a petition filed by financial creditors claiming loans given to the Corporate Debtor, seeking initiation of the Insolvency Resolution Process under section 7 of the Insolvency & Bankruptcy Code, 2016. The petition detailed the loans given by the petitioners directly to the Greater Noida Authority on behalf of the Corporate Debtor to salvage it from financial crisis. The Corporate Debtor, in response, denied the liability, alleging manipulation of records and time-barred claims due to criminal proceedings initiated against the petitioners or their relatives.The Tribunal analyzed the claims made by the financial creditors, focusing on the recoverability of the debts. It found that the amounts specified in one part of the petition were not legally recoverable debts as they were not adequately supported by documentation, such as Income Tax Returns or Financial Statements filed by the Corporate Debtor. However, in another part of the petition, a specific liability of Rs. 10 lakhs was deemed a legally recoverable financial debt based on bank records and documents provided by the petitioners, leading to a decision in favor of initiating the Insolvency Resolution Process for this amount.Furthermore, the Tribunal addressed the Respondent/Corporate Debtor's willingness to liquidate the Rs. 10 lakhs liability and the submission of a demand draft in court for the same. This action by the Respondent led the Tribunal to conclude that no further orders were necessary, resulting in the petition being disposed of accordingly. The judgment highlighted the importance of proper documentation and verification of liabilities to determine the legal recoverability of debts claimed by financial creditors, ultimately leading to a resolution in this particular case.