TaxTMI 
TaxTMI 
2017 (8) TMI 1646
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.... for the Respondent requesting time to file, their objections/reply if any well before the next date of hearing and Counsel for the Respondent should also submit his Vakalat and the case is posted 12-09-2017. On 11-07-2017 heard both the Counsels. The Learned Counsel for the Respondent filed objection to the Petition and Learned Counsel for the Petitioner requested time to file a Rejoinder and the case was posted on 21-07-2017. The case was heard at length from both the parties on 21-07-2017 and the Learned Counsel for the Respondent requested time to produce legal opinion obtained in this case and the case is posted on 01-08-2017. 0n 01-08-2017 heard both the sides and parties were directed to submit their written submission within a week and orders reserved. Submissions of the Petitioner / Financial Creditor: 2. The Company Petition (IB) No.97/7/HDB/2017 has been filed by the Financial Creditor viz Quinn Logistics India Private Limited (Petitioner/Financial Creditor), against Mack Soft Tech Private Limited (Respondent/Corporate Debtor), under Section 7 of Insolvency and Bankruptcy Code 2016, read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Auth....
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....orate Debtor (held 99.9% of shareholding of the Corporate Debtor). The shareholding of the Financial Creditor has been diluted by issue of shares to MECON FZE on 22-06-2011 for consideration of only Rs. 40,71,579/-. 8. However the 9,990 shares held by the Financial Creditor have been transferred to UCA LOGVAS AG on 27-08-2011 for a consideration only Rs. 9,90,000/-. The share issue and share transfer are subject matter of the Civil suits in O.S.No.21 of 2012 and O.S. No.1303 of 2013 pending before the Learned District Judge, Ranga Reddy Court, Hyderabad. 9. On 15.06.2017, the Financial Creditor issued notice of demand on the Corporate Debtor recalling the loan and calling upon the Corporate Debtor to make repayment thereof immediately and no later than 30.06.2017. 10. The Corporate Debtor, despite receipt of the notice dated 15.06.2017, has not repaid the admitted outstanding loan amount due to the Financial Creditor. Instead, vide reply dated 29.6.2017, the Corporate Debtor has stated that it will have to verify the claims made by the Financial Creditor from its records and has sought two-three weeks' time for the same. The reply of the Corporate Debtor is vague and a....
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.... The Corporate Debtor submitted that the Petitioner has no locus to file the above petition and contended various preliminary submissions and objections. I. The Petitioner does not exist as a Company and or as a Legal Entity. Name of the Petitioner has been struck off a. That the Respondent Company has checked up with the website of the MCA (www.mca.gov.in) and it has revealed that the name of the Applicant / Petitioner Company has already been struck off by Registrar of the Companies. In fact a public notice was issued by the Ministry of Corporate Affairs on 05.05.2017 giving 30 days notice prior to striking off and which notice period ended on 05.06.2017. b. That the effect of the strike off of the name of the Applicant / Petition Company is that it ceases to be a legal entity recognized by law and the certificate of incorporation issues, it is deemed to have been cancelled. The authorized signatory/director of the Applicant/Petitioner Company does not have any authority to present and / or to continue proceeding with the above Application/Petition. c. That therefore, the Applicant / Petitioner could not have presented the above Application / Petiti....
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.... 2008-09 from this Hon'ble Tribunal, while it has filed various balance sheets of the Respondent company. It is pertinent to mention here that the question of looking at the balance sheets of the Respondent Company only arise if the Petitioner is able to demonstrate ex-facie that It is a Financial Creditor of the Respondent Company. The above Petition deserves to be dismissed on grounds of concealment alone. d. That the reliance by the Petitioner on the balance sheet of the Respondent Company for claiming the purported Loan is highly erroneous, the Respondent Company has already Written Off the purported debt from the books of the Respondent Company in the Financial Year 2016-2017. e. Mere reflection of an amount as an unsecured loan in balance sheet of the Respondent Company does not cover the case of the petitioner within (4) four corners of IBC Code. f. In the Board Meeting held on 23-03-2016 the unsecured loans in the books of accounts of the company amounting to Rs. 62,94,18,214/- which are shown and reflected in the books of accounts of the company as an amount due and payable in the books of accounts and has not been claimed asunsecured loan by....
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....ule for the unsecured loans taken by the respondent company. The Corporate Debtor further submitted that even if it assume that a loan to be paid by the Corporate Debtor, the said loan cannot be recalled unilaterally by any director of a company by sending a letter without any board resolution recalling the purported loan. d. The Corporate Debtor vide its subsequent letter 06-07-2017 replied to Financial Creditor that on verification of our records, we have not found any such amount due and payable by our company to so called Financial Creditor Quinn Logistics India Pvt. Ltd. or any other company or any person. We therefore, state that, no amount at all is due and payable to your company as claimed by you. Your claim is wrong and denied in toto. V. The Petition is incomplete in terms of the Section 7(2) of the IBC Code and is liable to be rejected in terms of the Section 7(5) (B) of the IBC Code That the Application of the Petitioner is incomplete since the documents annexed in support of the amount of the debt and the default due, do not reflect the existence of the amount of debt or the amount of default of the date of filing the application etc. VI. The P....
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....rite off an amount of Rs. 62,94,18,214/- with immediate effect and hence there will be no such sum payable to any person or company and the same may be considered as deemed income in the hands of the company for the Financial Year 31-03-2017. 22. The Respondents also relied upon the following judgements of Hon'ble NCLAT & Hon'ble Supreme Court: 1. Definition of Financial Creditor and Financial debt as upheld by NCLAT in para 17 in Nikhil Mehta & Sons Vs AMR Infra Ltd in Company Appeal No.07/2017. 2. Starlog Enterprises Ltd Vs ICICI Bank Ltd, NCLAT in Company Appeal No.05/2017, dated 24-05-2017 para 20 & 21. 3. CIT Vs Chip Soft Technology Pvt. Ltd. before the Hon'ble High Court of Delhi decided on 20-07-2012 para 9. 4. Innoventive Industries Ltd. Vs. ICICI Bank & Another, Company Appeal No.1&2 of 2017 para 82, 83 & 85 decided on 15-05-2017. 23. The Corporate Debtor also raised the issue that the Director who was authorized to initiate Corporate Insolvency against the Corporate Debtor is also legally not eligible that admittedly the Petitioner Company has not filed its Annual Returns to the Registrar of the Companies for more than....
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....he IBC nowhere provides that the disbursement of loan by a holding company to a subsidiary is excluded from the definition of Financial debt. The petitioner further submitted that in the present case, the applicant is no longer a holding company of the respondent and reiterated that the applicant is a Financial Creditor. v) In the present case the amount of Rs. 62,90,45,905/- is acknowledged as an Intercorporate Loan under the loans in the balance sheet of the respondent company. It is denied that there is any concealment of any material fact as alleged or otherwise. It is denied that the applicant is not a Financial Creditor. vi) The contents of para 8 are incorrect and denied. The question of applicability of the Foreign Exchange Management Act, 1999 (FEMA) to the transaction of loan between the Applicant and the Respondent does not arise as the Applicant and the Respondent are both companies registered in India and the transaction is in Indian Rupees. The Financial Collaboration Approval relied upon by the Respondent is granted to Quinn Logistics Sweden AB. The loan given by the Applicant to the Respondent does not require any permission from the Government of ....
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....loan. Such a loan amounts to financial debt and the receipt of such a loan implies a promise to repay upon receipt of the loan and upon demand. x) The Applicant has relied on the latest audited balance sheet up to 31.03.2016. since the debt has been continuously admitted and acknowledged in the balance sheet up to 31.03.2016, there is no question of it being written off without even a single communication, prior to or after write off with the Applicant. Further, and without prejudice, the subsequent write off, as alleged, does not extinguish the legal liability of the respondent as the bilateral obligation cannot be extinguished unilaterally. For a liability to be derecognized or for an obligation to be extinguished by means other than payment, it would require the lender to legally waive or forfeit its rights. xi) The contents of para 14 and 15 are incorrect and denied. The Respondent has failed to appreciate that the receipt of sums as loan from a party creates a legal obligation to repay immediately and a default occurs if the amount is not repaid despite demand. A written contract is not a necessary pre requisite to establish relationship of lender and credito....
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....unsecured loan. It is abundantly clear that the Respondent is falsely stating that the amount is not reflected as claimed by any person. On the contrary, the purported Board Resolution dated 20.06.2017 itself reflects that the amount of Rs. 62,90,45,905/- is payable to the Applicant. When the balance sheet of the Respondent is itself acknowledging that the amount is due and payable, the Applicant has no reason to address any correspondence till such time as it desires the repayment of the amount. In the present case, the latest audited balance sheet for year ending 31.03.2016 signed on 02.09.2016 and uploaded with the ROC on 10.03.2017, reflects the debt and within less than a year of such acknowledgement the Applicant has sought repayment of the loan and immediately upon the refusal to do so has filed the present petition. xiv) The contents of para 18, any writing off of the debt does not impact the liability of the company to repay the amount due. The Hon'ble Tribunal may take note of the fact that the letter dated 29.06.2017 written by the Director of the Respondent o the Applicant states that the claims of the Applicant will be "verified from our records". If indee....
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.... therefore, appear that the so called write off is an after-thought. xx) The contents of para 35 are wrong and denied. It is submitted that the amount of Rs. 62,90,45,905/- is due and payable as admitted and acknowledged in each balance sheet up to 31.03.2016, being the latest audited balance sheet of the Respondent. There can be no time bar on the recovery of the said amount when the debt is acknowledged year on year by the Respondent in public document being its balance sheet. It is denied that the recovery of the debt is time barred as alleged, or otherwise. xxi) The contents of para 36 are wrong and denied. It is submitted that the Respondent is only seeking to mislead the Hon'ble Tribunal by seeking to show that there is a difference in the terminology "inter-company balance" and "inter-corporate loan". In fact the balance sheet of the Applicant and the Respondent both reflect this amount as due and payable under the head loans. Therefore, the allegation of suppression is equally unfounded and baseless. The balance sheet of the Respondent is relied upon as it amounts to conclusive evidence against the Respondent. 25. Financial Creditor submitted that I....
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....e purposes of Section 18 of the Limitation Act. The mere non-mention of name is of no relevance. (see: S.C.Gupta v. Allied Beverages Co. Pvt. Ltd., 2007 SCC Online Del 655, Para 23, 31, 32-TAB-3 of Compilation) 33. The legal position that balance sheet extends limitation has also been accepted and followed under Section 7 of the ICB by coordinate benches of the Hon'ble NCLT in Curloss Opportunities vs. Sharon Bio Medicine Limited (order dated 11.04.2017 of NCLT Mumbai (para 14) - TAB 4 of Compilation. 34. In the present case, therefore, the period of limitation is extended to 02.09.2019 by the balance sheet dated 31.03.2016 signed on 02.09.2016. 35. There is no legal basis for the Respondent to claim that between 20.06.2016, when its own Board Resolution acknowledges the unsecured loan due to the Applicant, and the date of the Petition, the liability of the Respondent to repay the Applicant has vanished. A mere unilateral decision of the Board of the Respondent to so-called write off its own admitted liability , without any basis, does not amount to extinguishing of the liability in law. 36. There is no accounting standard or practice enabling a debtor to unilateral....
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....balance sheets and are hence disqualified. There is no pleading in support of this defense, and hence ought not to be considered as if such a defense had been taken in pleading, the applicant have already been adopted and filed for period ending 31.03.2016 with the Hon'ble High Court of Hyderabad along with above mentioned Writ Petition No.22997 of 2017 that was filed on 11.07.2017 43. Indeed, the defense also has no legs to stand on as the present petition is also directly authorized by share holders in EGM on 04.07.2017. Moreover, the provisions of Section 164(2) of the Companies Act, 2013 relied upon by the Applicant came into force only on 01.04.2014 and under Companies Act, 1956 there was no such provision applicable to private limited companies. The penal disqualification is prospective in nature and hence the period for disqualification will begin only after expiry of time for filing balance sheet for year ended 31.03.2017 which is upto 30.09.2017. Therefore, it would be incorrect to say that the directors are disqualified. In any case, this question need not be decided in the present petition, as the institution of the petition is also authorized by the share holder ....
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....etitioner's name is not struck off from the Register of Companies and no official gazette publication was issued as contemplated under Section 248(5) of the Companies Act, 2013. (b) Further, in the interest of the case, we would like to reproduce the important portion of the order of Hon'ble High Court "having the regard to the above, there shall be interim direction to the Respondents not to proceed of the Gazette Publication as contemplated under Section 248(5) of the Act, in relation the Petitioner company" (c) Also the Learned Senior Advocate for the Corporate Debtor during the hearing held on 01-08-2017 has confirmed that the name of Financial Creditor was not published in the official Gazette (regarding struck off of the name of the Financial Creditor) as per Section 248 (5) of the Companies Act, 2013. 50. We have also taken into account the submissions of Financial Creditor with regard to disqualifications of Directors and authorization given by shareholders by way of Resolution in EGM held on 04.07.2017. 51. The Financial Creditor submitted that share issue and share transfer are subject matter of the Civil Suits in O.S.No.21 of 2012 and O.S.No.....
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....03-2012 stated as follows: b) "As per the information and explanation given to us, the company has taken unsecured loans from two parties covered in the register maintained under Section 301 of the Act. The amount of loan outstanding at the year and maximum amount of loan involved during the year is c) "The above loans do not stipulate any specific repayment schedule." 57. In the independent auditors' report for the year ended 31-03-2013, also had comments mentioned at point (b) above, however, in the subsequent auditors report the same was not mentioned. 58. With regard to the contention/submission of the Respondent, the amount disbursed to Corporate Debtor is not part of the balance sheet of Financial Creditor, while perusing the records submitted by the Corporate Debtor itself, we have observed / found the Audited Reports for year ending 31-12-2009 of Quinn Logistics India Pvt. Ltd (Financial Creditor) under the heading current assets / loans and advances, an amount of Rs. 63,15,88,023/- was shown as loans and advances and also previous year ending 31-12-2008, an amount of Rs. 74,80,26,336/- was also shown as loans and advances. While further analyzin....
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....ditor was not mentioned, however the same outstanding amount of Rs. 62,90,45,905/- was reflected in the subsequent Balance Sheets under the heading unsecured loans in note No.5-lnter Corporate Loans. 62. The Corporate Debtor was enjoying Inter Corporate Loan granted by the Financial Creditor as interest free loan for quite a number of years and they should be happy with the same. It is also unique to observe that the borrower after enjoying the interest free loan for so many years instead of repaying the debt, taken various pleas as discussed supra. The Financial Creditor was a holding company of the Corporate Debtor in the beginning and during the course of period the loans were disbursed free of interest. Section 5(8) of IBC Code also states that the Financial debt means a debt along with interest if any. Issues relating to writing off / limitation: 63. We agree with the submission of the petitioner regarding the limitation period which extends up to 03-09-2016. We would also like to add that the shareholders approved/adopted the balance sheet in the Annual General Meeting held on 30-09-2013. It is also interesting to note that the said Balance Sheet as at 31-03-2013 of ....
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.... Financial results (Profit &Loss Account / Balance Sheet). 70. It is worth to mentioned that profit / loss for the period up to 31-03-2015 was Rs. 2,58,01,926/- whereas for the period 31-03-2016 was only Rs. 32,354/- and Reserves & Surplus for the period as on 31-03-2015, was negative balance ofRs. 38,21,56,388 and as at 31-03-2016 was negative balance of Rs. 34,10,08,087/-. The Corporate Debtor has not submitted the Balance Sheetas on 31-03-2017 either audited / un-audit. As per the information furnished, the basic earnings per equity shares (EPS) before extraordinary items for the year ending 31-03-2015 was Rs. 105.72 and for the year 31-03-2016 was Rs. 0.13. 71. The stand of the Corporate Debtor that the recovery is time barred and therefore, the amount is not due or payable as per law, the same appears to be incorrect. The lender will have a right to recover its money and equally the borrower is under obligation is to repay the loan. If we accept the stand of the borrower then borrower becomes King and the lender is put to disadvantageous position which should not be a normal commercial practice. Borrower/Lender should fulfill their individual obligations so as to ensure ....
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....interest charged etc. However, in the present case, the Financial Creditor and Corporate Debtor had Holding/Subsidiary Company relationship and the Financial Creditor also submitted the bank statements towards disbursement of loan/money to Corporate Debtor and in balance sheet for the year ending 31.12.2009. 78. The Hon'ble NCLAT in the matter of Innoventive Industries Ltd decided on 15-05-2017 held that for initiation of Corporate Insolvency Resolution Process by Financial Creditor under sub Section 4 of the Section 7 of the Code. The adjudicating authority on receipt of application under sub Section(2) is required to ascertain existence of default from the records of information utility or on the basis other evidence furnishedby the Financial Creditor and the sub sec (3). Under sub Section 5 of sec 7, the adjudicating authority is required to satisfy- a. whether a default has occurred, b. whether an application is complete; and c. whether any disciplinary proceeding is against the proposed insolvency resolution professional. Once It satisfied, it is required to admit the case ........... In the instant case, we are of the considered view th....
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.... other accepted modes of publication, immediately and call for submission of claims as per section 15 of the IBC, 2016 read with Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The publication shall also be made in the website of the Corporate Debtor. c. We appoint Mr.Sundaresh Bhatt, (Regn. No.IBBI/IPA-001/ IPP00077/2017, 18-10162) as an Interim Resolution Professional. d. Direct the personnel of Mack Soft Tech Pvt. Ltd. to assist and cooperate with Interim Resolution Professional to provide access to documents and records and management of the affairs of the company. e. We direct the Interim Resolution Professional to constitute a committee of Creditors, after collation of all claims received against the Corporate Debtor and determination of Financial position of Corporate Debtor as per section 21 of IBC. The first meeting of the committee of Creditors, shall be held within 7 days of the constitution of committee of Creditors and their decision has to be communicated to the Tribunal as per section 22 of IBC, 2016. f. We direct the Interim Resolution Profession....