2021 (9) TMI 831 - SC - Insolvency and Bankruptcy

Appeal Dismissed in Insolvency Case Due to Non-Compliance with Loan Agreement

AAJ Legal and Management Consultancy LLP (Formerly AAJ Finance and Credit Ltd.) Versus Keltech Infrastructures Ltd.

The appeal against the NCLAT's dismissal of Company Appeal (AT) (INS.) No. 1248 of 2019 under the Insolvency and Bankruptcy Code 2016 was based on a loan ... Maintainability of application - initiation of CIRP - Financial Creditors or home buyers - possession of flats were offered by the Corporate Debtor - NCLT rejected the application - existence of debt and default or not - HELD THAT:- The NCLT found that on 1st October 2016 the Financial Creditor had entered into an agreement with the Corporate Debtor, for purchase of a flat in a complex which the Corporate Debtor was developing. In terms of the said agreement the outstanding dues of the Corporate Debtor were to be appropriated towards consideration for the flat - The NCLT held that the Financial Creditor had chosen to enter into an Agreement with the Corporate Debtor for purchase of a flat in the “Kumar Golf Vista”. The Financial Creditor could, in case of default on the part of the Corporate Debtor, to maintain a petition as home buyer. The NCLAT found that the admitted document executed between the parties which was the latest in point of time, was the agreement dated 1st October 2016. Considering the contents of the said agreement, the NCLAT found no reason to disagree with the adjudicating authority - The records showed that the Corporate Debtor had in terms of the said agreement dated 1st October 2016, which was the latest arrangement between the parties, offered possession of the flat to the Financial Creditor on 7th March, 2018. As such, there was no default in compliance of the terms and conditions of the said agreement. Appeal dismissed. Issues:1. Appeal against NCLAT's order dismissing Company Appeal (AT) (INS.) No. 1248 of 2019 under Section 62 of the Insolvency and Bankruptcy Code 2016.2. Dispute regarding loan agreement between Financial Creditor and Corporate Debtor.3. Interpretation of subsequent agreements between the parties.4. Default in repayment leading to invocation of IBC Section 7 petition.5. NCLT's dismissal of the Section 7 petition.6. NCLAT's analysis of the latest agreement dated 1st October 2016.7. Compliance with terms of possession as per the agreement.8. Grounds for interference with NCLAT's judgment.Analysis:The case involved an appeal against the NCLAT's dismissal of Company Appeal (AT) (INS.) No. 1248 of 2019 under Section 62 of the Insolvency and Bankruptcy Code 2016. The dispute stemmed from a loan agreement between the Financial Creditor and the Corporate Debtor, where the former agreed to lend a sum to the latter secured by mortgaging two flats. Subsequent agreements and disputes arose between the parties, leading to the Financial Creditor invoking IBC Section 7 petition for default in repayment, which was initially dismissed by the NCLT on 13th September 2019.The NCLT's decision was based on the agreement dated 1st October 2016, where it was found that the Financial Creditor had entered into an agreement with the Corporate Debtor for the purchase of a flat, indicating a fresh arrangement superseding previous agreements. The NCLT noted that the possession of the flat was offered to the Financial Creditor within the agreed timeline, thereby finding no default in compliance with the terms of the said agreement.Upon appeal, the NCLAT concurred with the NCLT's findings, emphasizing the importance of the latest agreement dated 1st October 2016 as the governing document between the parties. The NCLAT upheld the NCLT's decision, stating that there were no grounds to interfere with the judgment and order dated 5th March 2020, resulting in the dismissal of the Civil Appeal. However, the dismissal did not preclude the Appellant from seeking further legal remedies available to them.In conclusion, the judgment highlighted the significance of the latest agreement in determining the rights and obligations of the parties involved, ultimately leading to the dismissal of the appeal against the NCLAT's decision. The case underscored the importance of contractual agreements and compliance with their terms in resolving disputes within the framework of insolvency and bankruptcy laws.