2022 (10) TMI 639 - Tri - Insolvency and Bankruptcy

Application Dismissed: Applicants not Financial Creditors. Recovery Certificate not Trigger for Insolvency.

Agarwal Agencies Private Limited and Ors. Versus Seriatim Land & House Private Limited

The Tribunal dismissed the application, ruling that the Applicants did not qualify as Financial Creditors to the Respondent. The Recovery Certificate, ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - who are Financial Creditors? - it is alleged that the Applicants are not the Financial Creditors to the Respondent - HELD THAT:- Admittedly, the MOU was executed between the Developer M/s. ABW Infrastructure Limited and the Applicants. We find that the Respondent herein was neither a party nor anyway connected to the said MOU, annexed as Annexure A-5, Annexure A-6 and Annexure A-7 to the Application. Further, the Applicants have failed to place or produce any document on record to substantiate that the money in question was paid to Respondent herein. Hon'ble NCLAT in AGARWAL AGENCIES PVT. LTD. & ORS. VERSUS DOVE INFRASTRUCTURE PVT. LTD. [2022 (10) TMI 573 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] has held that M/s. Dove Infrastructure Private Limited is to set up IT Park does not make the disbursement made by Appellant to M/s. ABW Infrastructure Ltd. as a Financial Debt against the Corporate Debtor. The disbursement against time value of money is against M/s. ABW Infrastructure Ltd. and not against the Corporate Debtor. The aforesaid ruling of the Hon'ble NCLAT is squarely applicable on the facts of the present case - the Applicants are not the Financial Creditors to the Respondent and therefore, have failed to make out a prima-facie case for maintainability of the application file under Section 7 of IBC, 2016/issuance of notice - Application dismissed. Issues:- Whether the Applicants are Financial Creditors entitled to file for initiation of Corporate Insolvency Resolution Process under Section 7 of the Insolvency & Bankruptcy Code, 2016.- Whether the Respondent is a Corporate Debtor liable to pay the claimed amount.- Whether the Recovery Certificate issued by the District Magistrate is sufficient to establish a cause of action under Section 7 of the IBC, 2016.Analysis:1. Financial Creditor Status of Applicants:The Applicants, claiming to be Financial Creditors, filed an application seeking initiation of Corporate Insolvency Resolution Process against the Respondent based on a Recovery Certificate issued by the District Magistrate. The Applicants argued that the Recovery Certificate gives rise to a fresh cause of action under Section 7 of the IBC, 2016, relying on legal precedents. However, the Respondent contended that the Recovery Certificate was merely an attachment order and not a judgment or decree for recovery, challenging the maintainability of the application.2. Corporate Debtor's Liability:The Respondent opposed the application, asserting that they were not a party to the Memorandum of Understanding (MOU) between the Applicants and another entity. The Respondent highlighted that no money was transferred to them from the alleged transaction, emphasizing that the Recovery Certificate was an attachment order, not a recovery order. The Respondent cited the Haryana Protection of Interest of Depositors in Financial Establishment Act, 2013, to support their argument that the District Magistrate was empowered to issue only attachment orders, not orders for recovery.3. Judicial Decisions and Precedents:The Tribunal examined the arguments, submissions, and previous judgments related to similar cases. Referring to a previous order, the Tribunal emphasized that the Respondent was not connected to the MOU in question, and no evidence showed that the money in question was paid to the Respondent. The Tribunal also highlighted that the Recovery Certificate was issued as an attachment order, in line with the provisions of the Haryana Act, not for recovery of money. The Tribunal further cited a judgment by the NCLAT, affirming that the Recovery Certificate did not establish a financial debt against the Corporate Debtor.4. Final Decision:After considering all arguments and legal precedents, the Tribunal dismissed the application, finding that the Applicants failed to establish themselves as Financial Creditors to the Respondent. The Tribunal concluded that the Recovery Certificate, being an attachment order, did not provide a basis for initiating insolvency proceedings under Section 7 of the IBC, 2016. The decision aligned with previous rulings and emphasized that the Recovery Certificate did not create a financial debt obligation on the part of the Respondent.