TaxTMI 
TaxTMI 
2021 (12) TMI 739
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....rder dated 19th January, 2021 passed by the National Company Law Tribunal, New Delhi, Bench - III in the matter of Mr. Amit Goel Vs. CMYK Printech Limited in IB-1018/ND/2020. Mr. Kushan Mitra, Suspended Shareholder of the 2nd Respondent Company-CMYK Printech Limited (Hereinafter referred as ''Corporate Debtor'') preferred this Appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred as the 'Code'). By the Impugned Order, the Adjudicating Authority has admitted the Application by Mr. Amit Goel (hereinafter referred as 'the first Respondent'), filed under Section 7 of the Code, observing as follows: "5. The contention of the Applicant/Financial Creditor is also supported by the report of the Independent Auditor as is recorded under para 7 & 8 of the Reply filed by the 'Corporate Debtor' i.e., Clause XIV of Annexure-I of the Independent Auditor's Report provides that during the year 2018 the 'Corporate Debtor' has made preferential allotment of 26,00,566 Shares to its Director, Mr. Amit Goel/Financial Creditor. Further, it is stated that the 'Corporate Debtor' has allotted those shares in lieu of the outstanding loan of Rs. 79.68 lakhs and aft....
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....Applicant/Financial Creditor, as claimed by the Counsel for the CD. 9. It is worthwhile to note that the Board Resolution that came to be passed on 11.09.2018 by which the allotment of shares was revoked, is still in existence and has not been superseded by any of the Board Resolutions. Therefore, the submissions of the Ld. Counsel for the 'Corporate Debtor' are contrary to the record maintained by the 'Corporate Debtor' and cannot be relied upon. However, the documents placed on record by the applicant clearly demonstrate that an amount of Rs. 79.35 Lakhs is outstanding as loan against the CD, which the 'Corporate Debtor' failed to pay. In the circumstances, the defence that has been projected by the Ld. Counsel for the 'Corporate Debtor' is noting but moonshine and a mere bluster. Therefore, the arguments of the CD stand rejected." 2. Submissions of the Learned Sr. Counsel appearing on behalf of the Appellant: Learned Sr. Counsel appearing for the Appellant submitted that the Adjudicating Authority has wrongly admitted the Section 7 Petition despite recording its satisfaction only to the extent of Rs. 79.35 Lakhs as the claim amount due to the first Responden....
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....he General Meeting of the 'Corporate Debtor'. Hence the Petition under Section 7 is premature as the first Respondent continues to be the shareholder of the 'Corporate Debtor', holding 26,00566/- shares in the Balance Sheet and the Auditors Report relied on by the first Respondent before the Adjudicating Authority. Admittedly, the first Respondent did not disburse the said amount for time value of money and hence does not fall within the definition of 'Financial Debt' under Section 5(8) of the Code. For a debt to become 'Financial Debt', the basic elements are that it ought to be disbursed against 'consideration for time value of money'. Admittedly, the first Respondent made a Private Placement dated 08.09.2018 for the allotment of 26,00,566 equity shares with the 2nd Respondent when the shares were allotted to him vide Board Resolutions dated 01.08.2018, 25.08.2018 and 11.09.2018. The first Respondent pledged the entire shareholding with one M/s. Vipin Malik Associates even before the same could be resolved. Hence the shareholder of the Company does not fall within the meaning of 'Financial Creditor' as the amount invested for purchasing shares does not amount to....
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....ngs. The Hon'ble Supreme Court of India vide Order dated 02.09.2021 directed "We see no reason to interfere with the Order dated 03.10.2021 which is interlocutory in nature. However, we direct NCLAT to decide the Appeal i.e. Company Appeal (AT) Ins. No. 128 of 2021 finally on 05.10.2021 when the matter is listed for hearing". The Adjudicating Authority has not addressed or returned any finding on the disputes which were raised prior to the filing of Section 7 Petition. The forensic report relied on by the Interveners established that the alleged amount due was fraudulent one. Learned Counsel for the Appellant placed reliance on the following Judgments to support his case: "Radha Exports India Private Limited Vs. K.P. Jayaram, 2020 10 SCC 538". "Sesa Goa Limited and Ors. Vs. State of Maharashtra & Ors., [2009] 151 Comp Cas 358 (Bom)". 3. Submissions of Learned Sr. Counsel appearing on behalf of the first Respondent: Learned Sr. Counsel appearing for the first Respondent submitted that as per Section 42(6) of the Companies Act, 2013, and the Companies Acceptance of Deposit Rules, 2014 (Rule 2 and Rule 17), share money pending a....
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....by Mr. Chandan Mitra Vs. Amit Goel and Anr., Company Appeal (AT) (Ins.) No. 262 of 2021, goes to show that the Appellant herein had accepted the Order of the Adjudicating Authority. The Learned Counsel in support of this argument that no interest bearing loan could also be treated as 'Financial Debt' under Section 5(8) of the Code relied on ratio of the Judgement of the Hon'ble Supreme Court of India in "M/s. Orator Marketing Pvt. Ltd. Vs. M/s. Samtex Disinz Pvt. Ltd., Civil Appeal No. 2231/2021". The Resolution Professional-2nd Respondent filed a status report that Committee of Creditors was constituted on 22.02.2021 and the IRP has verified the claims received from the Creditors of the 'Corporate Debtor' and is ensuring that the 'Corporate Debtor' remains a Going Concern as per Order of this Tribunal dated 22.02.2021. 4. I.A. No. 2413 of 2021: Mr. Narendra Kumar Printer and Publisher of the 'Corporate Debtor' Company preferred this Application. Learned Counsel appearing for the Applicant submitted that the Applicant came to know about the forensic audit report and then filed this instant Application to bring to the notice of this Tribunal that there ....
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....spaper. Another Director (Respondent No.1) filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) on account of alleged default of 'financial debt' which was admitted by the NCLT. Aggrieved thereby, the appellant filed an appeal before the NCLAT. On 22.02.2021, after recording the submission made on behalf of the Interim Resolution Professional that the Committee of Creditors ('CoC') has not been constituted, the NCLAT kept the constitution of CoC on hold. The interim order was vacated on 03.08.2021, when the NCLAT came to know that the CoC was already constituted. Mr. P.S. Patwalia, learned senior counsel submitted that the appeal is listed on 05.10.2021 under the heading "After Notice". He submitted that the proceedings before the CoC require to be stayed as the Corporate Debtor is a renowned newspaper in business for a long period of time. We see no reason to interfere with the order dated 03.08.2021, which is interlocutory in nature. However, we direct the NCLAT to decide the appeal, i.e. Company Appeal (AT) (Insolvency) No.128 of 2021 finally on 05.10.2021 when the matter is listed for hearing. The appeal is disposed of ac....
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....ote purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument; (d) the amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital lease under the Indian Accounting Standards or such other accounting standards as may be prescribed; (e) receivables sold or discounted other than any receivables sold on non-recourse basis; (f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing; [Explanation----For the purposes of this sub-clause,-- (i) any amount raised from an allottee under a real estate project shall be deemed to be an amount having the commercial effect of a borrowing; and (ii) the expressions, allottee and real estate project shall have the meanings respectively assigned to them in clauses (d) and (zn) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016); (g) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price and for calculating the ....
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....nd would also include interest thereon, if any interest were payable thereon. If there is no interest payable on the loan, only the outstanding principal would qualify as a 'Financial Debt'. Both NCLAT and NCLT have failed to notice clause(f) of Section 5(8), in terms whereof ''Financial Debt'' includes any amount raised under any other transaction, having the commercial effect of borrowing. 23. Furthermore, sub-clauses (a) to (i) of Sub-section 8 of Section 5 of the IBC are apparently illustrative and not exhaustive. Legislature has the power to define a word in a statute. Such definition may either be restrictive or be extensive. Where the word is defined to include something, the definition is prima facie extensive." 'Financial Debt' means outstanding principal due in respect of Loan and would also include interest thereon, if any interest were payable thereon. If there is no interest payable on the loan, only outstanding principal would qualify as 'Financial Debt'. Furthermore, sub-clause (a) (i) of sub-Section 8 of Section 5 of the IBC are apparently illustrative and not exhaustive. 10. Share Application Money is the amount of advance received from a prospective....
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....sed for any purpose other than- (a) for adjustment against allotment of securities; or (b) for the repayment of monies where the company is unable to allot securities." (Emphasis Supplied) 13. Rule 13 of the Companies (Share Capital and Debentures) Rules, 2014 reads as follows: "For the purposes of clause (c) of sub-section (1) of section 62, if authorized by a special resolution passed in a general meeting, shares may be issued by any company in any manner whatsoever including by way of a preferential offer, to any persons whether or not those persons include the persons referred to in clause (a) or clause (b) of sub-section (1) of section 62 and such issue on preferential basis should also comply with conditions laid down in section 42 of the Act:" Rule 13 makes it clear that all provisions of Section 42 (Private Placement) are also applicable to issue of shares under Section 62(1)(c) (Preferential Allotment). 14. Rule 2(1)(c) of Companies (Acceptance of Deposit) Rules 2014 reads as follows: (c) "deposit" includes any receipt of money by way of deposit or loan or in any other form, by a company, but does not include (vii) a....
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....its very frame, cannot be read so expansive, rather infinitely wide, that the root requirements of 'disbursement' against 'the consideration for the time value of money' could be forsaken in the manner that any transaction could stand alone to become a financial debt. In other words, any of the transactions stated in the said sub-clauses (a) to (i) of Section 5(8) would be falling within the ambit of 'financial debt' only if it carries the essential elements stated in the principal clause or at least has the features which could be traced to such essential elements in the principal clause. In yet other words, the essential element of disbursal, and that too against the consideration for time value of money, needs to be found in the genesis of any debt before it may be treated as 'financial debt' within the meaning of Section 5(8) of the Code. This debt may be of any nature but a part of it is always required to be carrying, or corresponding to, or at least having some traces of disbursal against consideration for the time value of money 50. A conjoint reading of the statutory provisions with the enunciation of this Court in Swiss Ribbons (supra), leaves nothing to doubt th....
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.... time value of money is an essential element for the amount to fall within the ambit of Financial Debt. The debt may be of any nature but a part of it is always required to be carrying, or corresponding to, or at least having some traces for disbursal against consideration for time value of money. 16. The Key Feature of a Financial Transaction as contemplated under Section 5(8) is 'consideration for time value of money'. In other words, the legislature has included such financial transactions in the definition of 'Financial Debt' which are usually for sum of money received today to be paid over a period of time in a single or series of payments in the future. In Black's Law Dictionary the expression 'Time Value' has been defined 'as the price associated with the length of time that an investor must wait until an investment matures or the related income is earned'. 17. In the instant case, allotment of equity shares on preferential basis by Private Placement Offer was done and subsequently revoked. The allotment of shares is evident under Form PAS-5, Form PAS-4, the Board Resolution dated 01.08.2018, the Special Resolution dated 25.08.2018 and the Board Resolution dated 11.09.....
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....rther, a three Judge Bench of this Tribunal in Uniexcel Developers Pvt. Ltd. Vs. Uniexcel Ltd., Company Appeal (AT) Ins. No. 962 of 2019 has concurred with the finding of the Adjudicating Authority and held that in case of non-refund of Share Application Money within 60 days of receipt of the money, the money will be treated as Deposit and would change its character to fall within the definition of 'Financial Debt'. 19. The contention of the Learned Counsel for the Appellant that the Criminal Complaint dated 29.08.2020, Complaint to the RoC dated 29.04.2019 and clarification given to the Economic Offences Wing (EOW) dated 04.09.2020 is much prior to filing of the Section 7 Application which the Adjudicating Authority has erroneously not addressed to these issues, is untenable, especially keeping in view the ratio of the Hon'ble Supreme Court of India in 'M/s. Innoventive Industries Ltd.' Vs. 'ICICI Bank & Anr.', reported in 2018(1) SCC 407 wherein the Hon'ble Supreme Court of India has observed as follows:- "28. When it comes to a financial creditor triggering the process, Section 7 becomes relevant. Under the explanation to Section 7(1), a default is in respect of a fi....