TaxTMI 
TaxTMI 
2017 (10) TMI 517
X X X X Extracts X X X X
X X X X Extracts X X X X
....s Act, 1956 and it is a "Financial Creditor" within the meaning of Sec. 7 of the Code, which reads as "Financial Creditor means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to". (2) The Financial Creditor is engaged in the business of acting as financial advisors and consultants on all matters relating to assets, finance, investments, insurance, money markets, capital markets, fund arrangements etc., per its main object in the Memorandum of Association and Articles of Association. (3) M/s. V.S.S. Projects Pvt Ltd., (herein after referred to as Respondent/Corporate Debtor) is a private limited Company incorporated under the provisions of the Companies Act, 1956, and it is a Corporate Debtor as defined in sub-section (8) of Section 3 of the code which reads as "Corporate Debtor" means a corporate person who owes a debt to any person". The Corporate Debtor is a having its registered office at Plot No. 74, Street No. 6, Umanagar, Begumpet, Hyderabad TG 500016 IN and is a "corporate person" within the meaning of sub-section (7) of section 3 of the code. (4) The Financial Creditor h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eating and other offences against the Corporate Debtor for entering into such sale deed in utter violation of the understanding with the CCS, Hyderabad and the same was registered as Crime No. 259/2016. (9) In the above circumstances, in order to restrain the Corporate Debtor from illegally alienating the properties secured under the above arrangement, the Financial Creditor had approached the Hon'ble XIII Addl. District and Sessions Judge, R.R. District, Hyderabad by filing CO.S. No. 1 of 2017, and also obtained status quo order in respect of schedule A to X properties vide order dated 6th January, 2017 in IA No. 48 of 2017. (10) As on 30-04-2017, the amount in default works out to Rs. 2,95,00,000/- (Rupees Two Crore Ninety Five Lakhs Only). (11) It is stated that there is a "Financial Debt" in existence within the meaning of Sec. 8(a) of the Code; M/s. Asset Advisory Services Pvt Ltd., is a "Financial Creditor" within the meaning of Sec. 7 of the Code; M/s. V.S.S. Projects Pvt Ltd., is a "Corporate Debtor" within in the meaning of Sec. 8; The "Corporate Debtor" had committed default as per Sec. 3, Sub-Section 12 of the Code for non-payment of "finan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....quent to adjudication of criminal proceedings. (6) It is stated that Financial Creditor has volunteered to issue D.D for an amount of Rs. 2.5 Crores, in favour of Deewan Housing and Finance Corporation Limited (D.H.F.L) towards OTS Payable by Corporate Debtor to DHFL; after receiving: - (i) 5 undated cheques of Rs. 50 lakhs each, from Corporate Debtor on 31/03/2016. (ii) Stamped receipt for Rs. 2.5 Crores from Corporate Debtor, on 30/03/2016. (iii) Demand promissory note for an amount of Rs. 2.5 Crores, in favour of Financial Creditor on 31/03/2016, and with (iv) An express condition and understanding between parties herein that the amount of Rs. 2.5 Crores shall be paid by Corporate Debtor to Financial Creditor, by selling some Flats out of 18 flats that were got released from mortgage with DHFL. (7) DHFL returned Original Documents of properties mortgaged with DHFL on 12/04/2016 and later, executed release deed on 27/04/2016 in favour of Corporate Debtor. After receiving original documents on 12/4/2016, same were handed over to Financial Creditor for verification on 12/4/216 itself. Whereas, Financial Creditor did not return o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed with avarice of Financial Creditor's Director whose conduct and functioning alone resulted in the present sad state of affairs and speculative litigation resorted to by Financial Creditor, with ulterior Motives. (13) It is stated that Since there is a dispute between parties herein and there are claims and rival claims pending adjudication before the competent civil court, it is not open for Financial Creditor to project M/S VSS PROJECTS (PVT) LTD., either as insolvent or bankrupt; more particularly, when the proposed Corporate Debtor is capable of paying OTS amount by selling some of the 17 flats and also ready to sell 6 flats in favour of Financial Creditor, as submitted above and also as pleaded in WS-cum-Counter Claim. (14) It is stated that the petitioner has initiated criminal case vide FIR No. 259/2016 in CCS by fabricating false evidence, i.e. letter dated 1/11/2016, against Corporate Debtor, 3 flat owners who purchased 3 flats and also SBH that extended loan facility, apart from initiating proceedings U/S 138 NI Act and filing Commercial suit COS: 1/2017 before the commercial court; disentitled Financial Creditor for any relief from this Hon'bl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r is relying upon section 8(a) of the code. It is further contended that the Corporate Debtor has not committed any default as per section 3(12) of the code as is evident from the above submission. M/s. VSS Projects Pvt. Ltd. is not a Corporate Debtor within the meaning of section 8. Even today, Corporate Debtor is prepared to deposit an amount of 2.5 crores before Competent civil court, where the case COS: 1/2017 is pending, in the event of allowing Corporate Debtor to sell some of the 17 unsold flats; which could not be sold due to the Status Quo Order. The said LA. is pending adjudication before the Hon'ble XIII Addl. District Judge, R.R. District Court. The Corporate Debtor had also clearly pleaded about the mode of payment of principle loan and also the counter- claim against Financial Creditor by paying court fee and the same is pending adjudication in COS No. 1 of 2017 before XIII Addl. Judge, R.R. District. (19) It is stated that the prayer of Financial Creditor is not only devoid of any merits whatsoever but it is also riddled with several illegal acts of commission and omission by Financial Creditor to grab the properties of Corporate Debtor by preventing him....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tely withheld and suppressed material facts and documents, particularly e-mails. He, therefore, prayed that the petition is not only liable to be dismissed but it liable to be prosecuted for the offences of Cheating, Extortion, and Breach of trust and Fabrication of false evidence. 4. I have heard Shri T. Surya Satish, learned Counsel for the Petitioner, and Shri S. Agasthya Sharma, Learned Counsel for Respondent, and also perused the pleadings of both the parties along with material papers filed in their support. 5. Both the learned counsels for parties, at the time of hearing of the case, have further reiterated their contentions raised in their respective pleadings. 6. Shri T. Surya Satish, the Learned Counsel for the Petitioner has further submitted that it is not in dispute that the Financial Creditor had made available to the Corporate Debtor a short term loan of Rs. 2.50 crores for the repayment of OTS (One Time settlement) amount outstanding with M/s DHFL. Accordingly, the Corporate Debtor has also executed a Promissory Note and issued a duly signed receipt acknowledging the receipt of the said amount and promising to repay the same on or before 30.06.2016 together....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted proceedings for recovery of the debt in question; 2. Whether the Petitioner fulfils the eligibility criteria to file the present CP; 3. If so, what is the relief petitioner entitled for. 9. It is not in dispute that the Financial Creditor extended short loan of Rs. 2.5 crores to the Corporate Debtor, and in pursuant to that, a promissory note also was issued by the Corporate Debtor to repay on or before 30.06.2016 together with @ 24% p.a. payable in advance monthly instalments. However, so far as mortgage of 20/17 flats in question, respondent is disputing the mortgage but only say they have furnished title deeds of those flats to petitioner for verification and to return back to them after verification. However, it is alleged the petitioner kept them illegally so as to prevent the respondent to deal with flats and to repay loan amount. The contention of petitioner that mere furnishing of title deeds amounts to duly registered mortgage is not tenable and the same is hereby rejected. The petitioner has admitted that documents relating to 17 flats are stated to be with them. When the respondent is resorting to sell flats in question, the Petitioner has filed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ctly. Strict interpretation, quite obviously, refers to interpretation strictly against the insolvent. 11. In the instant case, it is not the case of petitioner that the respondent become bankrupt/insolvent to repay the debt in question to the petitioner. As stated supra, the object of getting loan in question from the petitioner is to get released mortgaged flats from the previous DHFL by way of one time settlement of paying Rs. 2.50 corers. The business involved is to sell flats in question, and to repay debts, and it is no body's case that the respondent became insolvent. The petitioner, not being satisfied with filing of above cases, has again resorted to invoke provisions of IBC to misuse it further. The petitioner is not interested to resolve the issue in question by extending co-operation as required in disposing of Flats in question, on the contrary, preventing the respondent from selling Flats in question and making baseless allegations against the respondent. Written statement-cum-counter claim filed by the Respondent in the said suit clearly shows as how the petitioner wanted to become a litigant rather than resolving the issue. The respondent have clearly stated ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dation proceedings fraudulently or with malicious intent for any purpose other than for the resolution of insolvency, of liquidation, as the case may be, the adjudicating authority may impose upon such person a penalty which shall not be less than one lakh rupees, but may extend to one crores rupees. 65(2) If, any person initiates voluntary liquidation proceedings with the intent to defraud any person, the adjudicating authority may impose upon such person a penalty which shall not be less than one Lakh rupees but may extend to one crore rupees." The term fraudulent and malicious has been defined in the Black's Law Dictionary, 4th Edition to mean as follows:- 'Fraudulent: Based on fraud; proceeding from or characterized by fraud, tainted by fraud; done made, or effected with a purpose or design to carry out a fraud. Malicious: In la legal sense, any act done wilfully and purposely to the prejudice and injury of another, which is unlawful, is, as against that person, "malicious". Steplien's History of the Criminal Law of England, reads as . . . . . whenever the words "fraud" or "intent to defraud" or "fraudulently" occur in th....