TaxTMI 
TaxTMI 
TaxTMI 
2021 (8) TMI 171
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....tion under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) and initiated Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. 2. Brief facts of this case are that the business of the Financial Creditor is that of Non-Banking Finance company and having the Certificate of Registration issued by the RBI. The Financial Creditor had granted financial assistance to the Corporate Debtor for a total of Rs. 6.10 Cr in between 16.02.2017 to 22.02.2017 through Bank Account. The Corporate Debtor has paid interest Rs. 6,05,718, once on 14.02.2018 after deduction of TDS. Thereafter corporate debtor failed to pay interest. Therefore, the Financial Creditor vide notice dated 27.04.2019 has recalled the loan. The Corporate Debtor has not liquidated the outstanding liabilities. Hence, the Financial Creditor has filed the Application under Section 7 of the IBC. 3. The Corporate Debtor has filed the Reply and resisted the Application on various grounds inter alia lack of any contractual agreement, an undefined period of loan, absence of any agreement for payment of interest at any specific rate and the said transaction does not fall within the definition of Financ....
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.... submitted that this Appellate Tribunal in the case of Sanjay Kewalramani Vs. Sunil Parman and Kewalramani & Ors. 2018 SCC Online NCLAT 310 held that the mere facts that the Company paid interest and deducted TDS, itself cannot be sufficient to impose liability on the Corporate Debtor. 9. Ld. Counsel for the Appellant lastly submitted that the demand notice shows that there was regular transaction in business between the parties, therefore, such transaction cannot be termed as Financial Debt. There was no loan granted by the Financial Creditor (R1) to the Corporate Debtor and the transaction in question is in normal course of business for other purposes. Hence, the Financial Creditor failed to prove that the amount disbursed against the consideration for the time value of money. Ld. Adjudicating Authority has erroneously admitted the Application under Section 7 of the IBC, which is liable to be set aside. 10. Per contra, Ld. Counsel for the Respondent No. 1(Financial Creditor) submitted that the Financial Creditor is a Non-Banking Financial company and in normal course of business, they had advanced the loan to the Corporate Debtor. As per section 10 of the Contract Act oral agre....
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....ies filed by the Financial Creditor and the Corporate Debtor has not denied that the Corporate Debtor has not received such amount. Thus, we hold that aforesaid amount has been disbursed by the Financial Creditor to the Corporate Debtor. However, there is no written agreement between the parties to show that the disbursement of such amount is a loan transaction. 15. Now, we have considered whether such amount is disbursed for a consideration for time value of money? 16. According to the Financial Creditor the Corporate Debtor has paid interest Rs. 6,05, 718 on 14.02.2018 after deduction of TDS and this fact is undisputed. Therefore, it is proved that such disbursal has been made for a consideration for time value of money. However, as per the Corporate Debtor, on the basis of deduction of TDS such inference cannot be drawn. 17. We have considered the submissions in the identical facts Coordinate Bench of this Appellate Tribunal in the Case of Prayag Polytech Pvt. Ltd. Vs. Gem Batteries Pvt. Ltd. CA (AT) (Ins) No. 713 of 2019 held that: "Merely pointing out that TDS was deducted would not be sufficient to conclude that there was a Financial Debt. TDS can be deducted for various....
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..... In the absence of such Financial Contract, the Financial Creditor has failed to satisfy that when the debt and interest become due and payable. 23. Now, we have considered, whether the Corporate Debtor failed to pay (Whole or any part or instalment of the debt) when the debt become due and payable? 24. As we have already discussed that the Financial Creditor has not filed any writing to show that when the debt become due and payable. As per the Financial Creditor the debt in question is payable on demand. From the notice and the Application, it is not clear that on which date the demand was made and the loan and interest become due and payable. In Para 7 of the notice there is vague allegation that: "Despite repeated request and reminders, no payments either towards the loan or outstanding/overdue interest has been paid by the borrower. Thus, coerciving our client to issue the present demand notice recalling the loan and the overdue interest accruing till 31.03.2019." 25. The Section 7 (3) (a) of the IBC, provides that the Financial Creditor shall along with the Application is a required to furnish, a record of default recorded with the information utility or such other reco....
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....event any person from taking undue benefit of its provisions to the detriment of the rights of legitimate creditors." 29. With the aforesaid preposition of law, it is clear that the IBC recognizes that for the success of Insolvency regime the real nature of transaction has to be unearthed in order to prevent any person from taking undue benefit of its provisions to the detriment of the rights of legitimate creditors. It means, while admitting the Application under Section 7 of the IBC, it is the duty of the Adjudicating Authority to investigate the real nature of the transaction in order to prevent any person from taking undue benefit of its provisions to the detriment of the rights of legitimate creditors. 30. Now we would like to refer another pronouncement of Hon'ble Supreme Court in the case of Swiss ribbons (P) Ltd v Union of India, (2019) 4 SCC 17 held; Para55.................................................................................. ............................................................................................. "A conjoint reading of all these Rules makes it clear that at the stage of the adjudicating authority's satisfaction under Section 7(5)....