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2020 (8) TMI 386
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....ws: The Appellant/Petitioner Monotrone Leasing Private Limited filed an Application under Section 7 of the I&B Code against PM Cold Storage Private Limited for initiation of Corporate Insolvency Resolution Process on the ground that the Corporate Debtor committed default in paying the financial debt of Rs. 27,19,110/- (Rupees Twenty Seven Lakh Nineteen Thousand One Hundred Ten Only). Petitioner contends that it has lent a sum of Rs. 25,00,000/- (Rupees Twenty Five Lakh Only) to the Corporate Debtor for 90 days, which interest to be charged @ 15% per annum. The above amount was transferred through RTGS. 3. After receiving the demand from the Financial Creditor, the Corporate Debtor handed over the post-dated cheque of Rs. 25,00,000/- (Rupees Twenty Five Lakh Only) dated 09th October 2018, which was subsequently dishonoured. Thereafter notice under Section 138 of Negotiable Instrument Act, 1881 was served upon Corporate Debtor on 01st November 2018. 4. The Corporate Debtor has recorded its contentions as follows: It contends that no debt is due and payable to the Financial Creditor; the Corporate Debtor did not commit any default as alleged by the Financial Creditor; that the amo....
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....loan, balance confirmation letters, TDS certificate, documents about interest payment for the relevant periods has been filed along with the paper book. Appellant has submitted a copy of the bank transaction statement dated 14th June 2017, which is at page no.78 of the paper book. Scanned copy of the bank transaction statement submitted by the Appellant is as under: The above statement shows that on 14th June 2017 (15:46:57 pm) Rs. 25,00,000/- (Rupees Twenty Five Lakh Only) was transferred through RTGS to the account of the Corporate Debtor "PM Cold Storage Private Limited". It is a transaction statement with HDFC Bank, containing details of different transactions made on 14th June 2017. In the said statement, there is another entry of transaction at 15:43:03 hours, which relates to Agrotech Private Limited. However, the Learned Adjudicating Authority has noted in the order that: "The Financial Creditor has produced a bank statement to show transfer of amount by RTGS. But we have every doubt in our mind, whether that accounts stands in the Name of the financial Creditor or not because the title name appears as Agrotech Private Limited. That statement does not indicate Name of th....
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....ack of the Corporate Debtor? We require answers of this query because the Corporate Debtor has come out with the clear defense that they have paid the entire amount and nothing is due and payable. In such situation, it was expected from the financial creditor to explain as to what happened to earlier cheque of the Corporate Debtor. It is not in dispute that cheque no. 24229 dated 09.04.2018 issued by the corporate debtor was dishonoured and the financial creditor sent a notice under Section 138 of Negotiable Instrument Act etc. But that certainly does not mean that the Corporate Debtor admitted that it was a cheque issued by them towards repayment of the loan or inter-corporate advance as alleged by the financial creditor. At the most, it can be presumed that the Corporate Debtor has drawn this cheque for some consideration but it cannot be said with certainty that it was towards repayment of the financial debt as alleged." 13. It is pertinent to mention that the Corporate Debtor is not claiming that the alleged amount was repaid to the Financial Creditor vide cheque no 24228 DT. 12.9.2017. In fact, the cheque issued at the time of disbursement of loan was never presented for enca....
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....nly) on 20th January, 2019. It is also stated that the TDS amount @ 10% had been deducted from the interest amount. The Appellant further annexed the balance confirmation letter signed by the Corporate Debtor, which is at page No.110 of the paper book. Photostat copy of this balance confirmation is as under: Basis the balance confirmation letter, it is evident that the Corporate Debtor has acknowledged the loan amount of Rs. 25,00,000/- (Rupees Twenty Five Lakh Only), with details of the interest paid and TDS deducted from the interest amount. It also contains the PAN Number of the Financial Creditor as well as that of the Corporate Debtor. 15. The Appellant / Financial Creditor has also filed Form 26 issued by the Income Tax Department which is at page no.111 of the paper book. This statement shows that the Financial Creditor "Monotrone Leasing Private Limited" was paid Rs. 72,945/- as interest amount during the Financial Year 2018-19 by the Corporate Debtor "PM Cold Storage Private Limited" and TDS of Rs. 7,295/- was deducted in the Financial Year 2018-19. 16. Based on the above document, there is not an iota of doubt that the Financial Creditor gave Rs. 25,00,000/- (Rupees Tw....
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.... basis of parameters laid down under Sections 7, 9 or Sec 10 of IBC. 19. It is relevant to note that Hon'ble the Supreme Court of India in case of Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407, has laid down the guiding principles to admit or reject an application filed under Section 7 of the IBC. In the above case, Hon'ble the Supreme Court has held that; "27. The scheme of the Code is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the insolvency resolution process begins. Default is defined in Section 3(12) in very wide terms as meaning non-payment of a debt once it becomes due and payable, which includes non-payment of even part thereof or an instalment amount. For the meaning of "debt", we have to go to Section 3(11), which in turn tells us that a debt means a liability of obligation in respect of a "claim" and for the meaning of "claim", we have to go back to Section 3(6) which defines "claim" to mean a right to payment even if it is disputed. The Code gets triggered the moment default is of rupees one lakh or more (Section 4). The corporate insolvency resolution process may be triggered by the corporate debto....
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....g authority is satisfied that a default has occurred, the Application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under sub-section (7), the adjudicating authority shall then communicate the order passed to the financial Creditor and corporate debtor within 7 days of admission or rejection of such Application, as the case may be. 30. On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial Creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is "due" i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise." In the above case, Hon'ble the Supreme Court of India has held ....
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....to the debt is accurate. This is done by giving notice to the corporate debtor who then has an opportunity to correct such information. 55. Apart from the record maintained by such utility, Form I appended to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, makes it clear that the following are other sources which evidence a financial debt: (a) Particulars of security held, if any, the date of its creation, its estimated value as per the Creditor; (b) Certificate of registration of charge issued by the Registrar of Companies (if the corporate debtor is a company); (c) Order of a court, tribunal or arbitral panel adjudicating on the default; (d) Record of default with the information utility; (e) Details of succession certificate, or probate of a will, or letter of administration, or court decree (as may be applicable), under the Indian Succession Act, 1925; (f) The latest and complete copy of the financial contract reflecting all amendments and waivers to date; (g) A record of default as available with any credit information company; (h) Copies of entries in a bankers book in accordance with the Bankers Books Evidence Act,....
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....y the debtor. It is for this reason that a financial creditor has to prove "default" as opposed to an operational creditor who merely "claims" a right to payment of a liability or obligation in respect of a debt which may be due. When this aspect is borne in mind, the differentiation in the triggering of insolvency resolution process by financial creditors under Section 7 and by operational creditors under Sections 8 and 9 of the Code becomes clear. 24. Given the law laid down in Swiss Ribbon case (supra), it becomes clear that rather than the "inability to pay debts", it is the "determination of default" that is relevant for allowing or disallowing an Application filed under Section 7, 9 or 10 of IBC. The said shift enables the Financial Creditor to prove by solid documentary evidence, that there was an obligation to pay the debt and that the debtor has failed to fulfill its obligation. Therefore, to allow the application under Section 7, it is not relevant to see the inability of the Corporate Debtor to pay the debt. 26. The Adjudicating Authority has also rejected the Application on the ground of pendency of Civil Suit between the parties. In this regard, the Adjudicating Auth....
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....had balance more than Rs. 25 lakh lying in the Bank (page no.68 and 75 of supplementary affidavit). It appears to us that Corporate Debtor is a solvent company. Generally, solvent company will not take a risk to go into CIRP for non-payment of Rs. 25 Lakh. From evidence on record, we hold that Financial Creditor may not owe financial debt as claimed by them in their application. Hence, there is no question of any default by the Corporate Debtor." [Verbatim copy] 28 On perusal of the above order, it is apparent that the Adjudicating Authority has rejected the Application filed under Section 7 of the Code on the ground that CIRP cannot be initiated for recovery of dues as the Tribunal is not a recovery forum. It is contended by the Respondent that Section 65 of the IBC prohibits initiation of CIRP if the purpose of proceeding is other than resolution for insolvency. Section 65 of the Code is given as under: "Section 65. Fraudulent or malicious initiation of proceedings 65. Fraudulent or malicious initiation of proceedings.- (1) If, any person initiates the insolvency resolution process or liquidation proceedings fraudulently or with malicious intent for any purpose other than f....