2018 (7) TMI 1263 - Tri - Insolvency and Bankruptcy

Tribunal initiates insolvency proceedings against Corporate Debtor for default in payment

The Tribunal found that a financial debt was owed by the Respondent Company to the Applicants, and there was a default in payment of this debt. ... Corporate insolvency process - Whether there exists a financial debt owed by the Respondent Company to the Applicants? - Held that:- It is noted that the settlement agreement talks only about the debts due to Naresh Kumar Aneja and is completely silent about the debts owed to Sushant Aneja, Applicant No. 1 or Naresh Kumar Aneja (HUF), Applicant No. 2. Further, there is no explanation or description of the debts to be set off, thus, it cannot be ascertained whether the settlement agreement actually deals with the debts owed to the Applicants by the Respondent Company. Further, nothing has been placed on record to show that the settlement agreement has been actually executed by the parties. For the reasons stated above it is held that a financial debt was owed to the Applicants by the Respondent Company. Whether there has been a default in payment of the financial debt, if any? - Held that:- Taking into consideration all the above, this Tribunal is of the view that a default has been committed in terms of Section 3(12) of the Code of financial debt as defined under Section 5(8) of the Code and that the Applicant has rightly invoked the provisions of the Code. It is also seen from the Application that the above named IRP has given a written consent in Form 2 wherein he has agreed to accept appointments as IRP if Application is admitted. Further, it is also evident from the said Form 2 as filed by the IRP as well as the certificate as enclosed therein signed under his hand that he is not a related party to the Corporate Debtor and that he is eligible to be appointed as an independent director on the Board of the Corporate Debtor. Issues Involved:1. Whether there exists a financial debt owed by the Respondent Company to the ApplicantsRs.2. Whether there has been a default in payment of the financial debt, if anyRs.Issue I: Whether there exists a financial debt owed by the Respondent Company to the ApplicantsRs.The advancement of the amount from the Applicants to the Respondent Company is not in dispute as the Respondent in its reply admits that the Applicants advanced funds to the Respondent Company. However, the nature of the money advanced is disputed.The Applicants have placed on record Customer Account Ledger Reports and audited balance sheets of the Respondent Company for the years ended 31.03.2015 and 31.03.2016, which reflect the amounts under the heading 'Unsecured Loan'. The Applicants have also filed the income tax returns for the A.Y. 2013-2014, showing the payment of TDS by the Respondent Company on behalf of the Applicants.The Respondent Company contends that the funds were infused by the Applicants as promoters/shareholders for running the operations of the Respondent Company and were thus quasi-capital. The Respondent also claims that the loan purportedly extended by the Applicants has been set off under a settlement agreement dated 08.09.2015. Additionally, the Respondent argues that there were no terms and conditions for repayment, and no date was specified for when the amount would become due and payable.The Tribunal noted that the settlement agreement talks only about the debts due to Naresh Kumar Aneja and is silent about the debts owed to Sushant Aneja or Naresh Kumar Aneja (HUF). Further, there is no explanation or description of the debts to be set off, and nothing has been placed on record to show that the settlement agreement has been actually executed by the parties.The Tribunal held that the reflection of the amounts in the balance sheets under the head of 'Unsecured Loan', the payment of TDS on interest by the Respondent Company, and the fact that interest was to be paid by the Respondent Company to the Applicants point towards the fact that the money was taken against the consideration for the time value of money. Therefore, the Tribunal concluded that a financial debt was owed to the Applicants by the Respondent Company.Issue II: Whether there has been a default in payment of the financial debt, if anyRs.The Respondent contends that since there is no written agreement for the extension of the amount and no terms regarding repayment, the amount had not become due and payable, and thus, there is no default.The Applicants argue that since no date for repayment has been fixed, the amount is repayable on demand. They placed on record a judgment of the Hon'ble High Court of Delhi, which held that where no date is fixed for repayment of a loan, it would be a loan repayable on demand.The Tribunal noted that the Applicants sent notices demanding repayment of the amount, but neither replies to the notices nor any proof of payment has been produced. Consequently, the Tribunal concluded that the loan was due and payable when the repayment was demanded, and since there has been no repayment till date, there is a default in repayment of the financial debt.Order:The Tribunal found that a default has been committed in terms of Section 3(12) of the Insolvency and Bankruptcy Code (IBC), 2016, and that the Applicants have rightly invoked the provisions of the Code. The Tribunal admitted the application and initiated the corporate insolvency resolution process against the Corporate Debtor with the following consequences:a. Mr. Madhusudhan Sharma is appointed as the interim resolution professional (IRP).b. The Corporate Debtor shall be under moratorium as per Section 14 of the Code.c. The supply of essential goods or services to the Corporate Debtor shall not be terminated or suspended during the moratorium period.d. The moratorium shall have effect from the date of the order till the completion of the corporate insolvency resolution process or until the approval of the resolution plan or liquidation order.e. The Board of Directors of the Corporate Debtor shall stand suspended.f. The registry is directed to communicate the order to both the Financial Creditor and the Corporate Debtor, and a copy of the order shall also be forwarded to the Insolvency and Bankruptcy Board of India (IBBI).With these directions, the application stands disposed of.