Appellate Tribunal Upholds Dismissal of Application Under Insolvency Code

The Appellate Tribunal upheld the Adjudicating Authority's decision to dismiss the Application under Section 7 of the Insolvency and Bankruptcy Code, 2016. The appeal, filed by a Financial Creditor, was based on a loan agreement with the Respondent, but the Adjudicating Authority determined it to be a Builder Buyer arrangement instead. The Tribunal found no charge created on the security flats and emphasized the need for Corporate Debtor resolution. Despite claims of a settlement agreement, the Tribunal dismissed the appeal, concluding that the existing agreements and transactions did not support the Application under Section 7.

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Issues:
1. Dismissal of Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 by the Adjudicating Authority.
2. Dispute regarding the nature of the transaction between the Appellant and the Respondent.
3. Allegations of suppression of material facts in the Application under Section 7 by the Appellant.
4. Claim of settlement agreement entered into by the Director of the Respondent during the pendency of the proceeding under Section 7.

Analysis:

Issue 1: Dismissal of Application under Section 7
The Appellant, a Financial Creditor, filed an appeal against the Impugned Order dated 13.09.2019 passed by the Adjudicating Authority, National Company Law Tribunal, New Delhi, which dismissed the Application under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Appellant claimed that a loan was given to the Respondent, and various agreements and post-dated cheques were executed as security. However, the Adjudicating Authority found that the latest agreement dated 01.10.2016 indicated a Builder Buyer arrangement, with possession offered within the stipulated time. As the Application was filed prematurely, the Adjudicating Authority dismissed it, and the Appellate Tribunal upheld the decision.

Issue 2: Dispute regarding the nature of the transaction
The Respondent argued that the Appellant suppressed material facts in the Application under Section 7. The Respondent claimed that an agreement dated 01.10.2016 showed a genuine transfer of property transaction, where a flat was allotted as repayment. The Respondent contended that the Appellant acknowledged this agreement but suppressed it in the insolvency application. The Adjudicating Authority considered the contents of the agreement and concluded that it represented a Builder Buyer arrangement, not a loan security.

Issue 3: Allegations of suppression of material facts
The Appellant countered the Respondent's claim, stating that the 01.10.2016 agreement was also for loan repayment security. However, the Tribunal noted that the document did not support this claim, and they could not go beyond its contents. The Adjudicating Authority found that no charge was created on the flats offered as security, and interest payments were made until June 2016. The Tribunal upheld this finding, emphasizing the need for a resolution of the Corporate Debtor rather than mere money recovery.

Issue 4: Claim of settlement agreement
The Appellant mentioned a settlement agreement entered into by the Director of the Respondent during the insolvency proceeding, offering two cheques. However, the Tribunal noted that these documents were not brought to the Adjudicating Authority's notice. Even if considered, the Tribunal found a dispute regarding the settlement and stated that it could not be acknowledged without proper record submission. The Tribunal upheld the dismissal of the Application under Section 7 based on the existing agreements and transactions between the parties.

In conclusion, the Appellate Tribunal found no merit in the appeal and dismissed it without costs, upholding the Adjudicating Authority's decision to dismiss the Application under Section 7 of the Insolvency and Bankruptcy Code, 2016.

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