TaxTMI 
TaxTMI 
2022 (6) TMI 986
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....I, Exhibit B) (hereinafter referred as Financial Creditors) praying for initiation of CIRP against the Burnpur Cement Limited, having its registered office at village Palashdiha, Panchgachia Road, Kanyapur, Asansol, West Bengal-713341 (hereinafter referred as Corporate Debtor). 3. It is submitted that Financial Creditors had granted a loan of Rs. 4,25,00,000/- to the Corporate Debtor out of which an amount of Rs. 2,15,00,000 has been received from the Corporate Debtor and the balance amount of 2,10,00,000 is due and payable by the Corporate Debtor. The Financial Creditors have submitted that the total amount claimed to be in default is Rs. 2,97,82,697, which is inclusive of Rs. 87,82,687/- @ 10% per annum till 31.07.2020. In support of its claim, the Financial Creditors have annexed three loan agreements between Prarthana and Corporate Debtor dated 14.04.2014, between Active Commercial Pvt. Ltd. and Corporate Debtor dated 15.12.2014 and between Nikita Vyapar Pvt. Ltd. and Corporate Debtor dated 13.11.2014. It is submitted that under three agreements Rs. 2,70,00,000/-, Rs. 50,00,000/- and Rs. 1,05,00,000/- respectively were to be provided to the Corporate Debtor as Inter Corporat....
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....idence indicated that there had been disbursement of funds from their account to the Corporate Debtor. It was also stated that there was no reason as to why the Corporate Debtor must not discharge its obligation of re-paying back the loan. It is further submitted that despite the reminders, the Financial Creditors did not receive any repayment of its loan and thus the Financial Creditors were constrained to initiate Corporate Insolvency Resolution Process against the Corporate Debtor. 9. During these proceedings, the Corporate Debtor filed its reply affidavit of Mr. Pawan Pareek, Director of the Corporate Debtor, and submitted therein that it had availed loan facility from a consortium of lenders comprising of the State Bank of India, Central Bank of India and the United Bank of India (which subsequently merged with Punjab National Bank). It is submitted that by two separate agreements dated 29.03.2019 and 17.05.2019 executed by the Central Bank of India and State Bank of India, the outstanding loans of these banks were assigned in favour of UV Asset Reconstruction Company Limited. Pursuant to Section 9 of the SARFAESI Act, 2002 on or about 01.09.2019, the assignee took over the....
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....on which is illegal. 13. In the reply affidavit, the Corporate Debtor further alleged that the Financial Creditors are not registered as Non-Banking Financial Corporations. In addition to this for the purpose of being engaged in the business of advancing loan, companies are required to obtain license under the Bengal Money Lenders Act, 1940. These requisites having not been met by the Financial Creditors, loan could not have been granted by them. It is further submitted that since the primary objective of neither of the Financial Creditors is to advance loans or providing financial assistance, the said transaction of the Financial Creditors of advancing loan to the Corporate Debtor is beyond the Memorandum of Association of the Financial Creditors and hence void ab initio making the loans not legally enforceable. It can be seen that the forensic audit report in respect of the Corporate Debtor was prepared by one M/s. Hary Kurup and Associates (Chartered Accountants) and it has been filed by Corporate Debtor along with its reply to the petition. The said report covered the period 01.04.2011 to 30.09.2019. Thereafter, the Corporate Debtor sought leave of this Adjudicating Authorit....
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....value of money i.e., at an interest rate of 10% per annum payable on quarterly basis, the present Petition is fully maintainable. 17. The Financial Creditors have further submitted, while refuting allegations of the loan transaction being sham or invalid, that when a party knowingly accepts the benefits of a contract, it is estopped to deny the validity and binding effect of the contract. As regards the Forensic Audit Report, it stated in the Rejoinder as well as reply to the supplementary affidavit, that it has been prepared by the new management of the Corporate Debtor in regard to the alleged mis-deeds and mala fide conduct of the erstwhile management and cannot be relied upon. It stated that there is nothing in the audit report, which would have any bearing on the loan transactions. 18. The Financial Creditors have finally submitted that a single loan to the Corporate Debtor cannot be the basis to conclude that the Financial Creditors are carrying on the business of money lending or need to register as an NBFC or stand in violation of any other provisions of law since the same does not have any bearing on the proceedings under IBC. 19. We have given a patient hearing t....
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....te Limited and Spade Financial Services Private Limited from the CoC on the ground that they were not financial creditors. The Adjudicating Authority after analysis of the underlying facts held that the transaction pertaining to giving of inter corporate deposits by Spade and AAA to Corporate Debtor appeared to be collusive and did not qualify as financial debt for the purposes of IBC. Having held so, the Adjudicating Authority did not venture to consider if they were related parties. In appeal, the NCLAT proceeded on the basis that it was an "admitted position that AAA and Spade were Financial Creditors", however it went on to hold that they are related parties and must be excluded from the CoC. Against the said decision of the NCLAT, both parties appealed to the Hon'ble Supreme Court. 24. The Hon'ble Supreme Court, at the outset, found error in the finding of the NCLAT that it was an admitted position that AAA and Spade are Financial Creditors. After holding as above, the Hon'ble Supreme Court examined the underlying facts and accepted the findings of the Adjudicating Authority that the transactions in question between the corporate debtor and financial creditors w....
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....is as below. Loan given by Prarthana to the Corporate Debtor i. In the application u/s. 7 filed by the Financial Creditors, under the caption "facts of the case" it has been alleged that a loan to the tune of Rs. 55,00,000 was provided to the Corporate Debtor by Prarthana. ii. In part IV of the application where particular of the financial debt has to be provided, it is stated that amount of loan granted by the Financial Creditor is 4,25,00,000 out of which an amount of Rs. 2,50,00,000 has been received from the Corporate Debtor and the balance amount of Rs. 2,10,00,00 is due and payable by the Corporate Debtor. These figures of 4,25,00,000, Rs. 2,15,00,000 and Rs. 2,10,00,000 have been given jointly for both Financial Creditors. iii. The Loan Agreement dated 14.04.2014 provides that Prarthna has agreed to grant a loan of Rs. 2,17,00,000 to the Corporate Debtor through net banking channel. The Loan Agreement provides that the amount borrowed by the Corporate Debtor shall be construed as Inter Corporate deposit. It further provides that the same shall be repaid on demand of Prarthna. The Interest Rate is 10% per annum payable quarterly. The Loan A....
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....onstrued as Inter Corporate deposit. It further provides that the same shall be repaid on demand of Active. The interest rate is 10% per annum payable quarterly. The Loan Agreement except the specific particulars, in material terms, is identical with the loan agreement of Prarthana and Nikita. (iv) The bank statement of Active for its account maintained with HDFC Bank discloses that an amount of Rs. 50,00,000 was transferred to the Corporate Debtor on 18.12.2014. Since the complete bank statement has not been filed, we are unable to see, if there are any further transactions between the parties thereafter. (v) In Annexure D, which is titled as "amount claimed to be in default and the date on which the default occurred", while the name of Active is not specifically mentioned, it states that an amount of Rs. 50,00,000 was disbursed on 18.12.2015. The statement also shows that the last date of receipt of interest was 13.01.2015. Loan given by Nikita to the Corporate Debtor (i) In the application u/s. 7 filed by the Financial Creditors, under the caption "facts of the case" no particulars of the loan provided by Nikita have been specifically provided....
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....0.2014 till 22.01.2015 only has been placed on record. This discloses that an amount of Rs. 1,05,00,000 was remitted to the Corporate Debtor. Perhaps this was done on behalf of Nikita since there is no loan agreement between Narsingh and Corporate Debtor. Since the complete bank statement has not been filed, we are unable to see, if there are any further transactions between the parties thereafter. (vii) In Annexure C, which is titled as "amount claimed to be in default and the date on which the default occurred", discloses that Narsingh remitted Rs. 1,05,00,000 on three different dates and the interest has been received from 2014-15, 2015-16 and 2016-17. 26. The above analysis takes us to the Assessment Order dated 31.12.2018 passed by the Income Tax department against the Corporate Debtor. As detailed above, the income tax department had carried out a raid in the premises of Corporate Debtor which led to seizure of material which showed the assessee i.e., Corporate Debtor had inter alia received an unsecured loan of Rs. 2,70,00,000 from Prarthna. The assessment order further records that the assessee was asked to produce all details of the loan taken from Prarthana ho....
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...., the amounts claimed to be received by the assessee are not in any way genuine unsecured loans. They are nothing but arranged affairs being pre-ordained series of transactions and tax evasion device where money laundering transactions have been camouflaged as unsecured loan. 7.b The agreement about real transactions takes place in secret and direct evidence about such discreet transaction/agreement would be not available to the department in the normal circumstances during assessment proceedings. The result of these transactions was designed in such a way that in this transaction unaccounted money was to be brought in the business by the assessee. The Legislature cannot take care of every device and scheme misused to evade taxation. It is for the implementing authorities to investigate the nature of the sophisticated legal devices adopted by the taxpayer to evade or avoid tax and consider whether the situation created by the devices could be related to the avoidance of the payment of taxes. The modus operandi adopted by the assessee has been found to be a method of evading taxes being non-genuine transactions without being verifiable. 7.c These are, by nature mak....
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....both the Financial Creditors have a common registered address i.e., 16, Strand Road 7th Floor, Room No-709A, Kolkata WB 700001. The Corporate Debtor has also placed on record the Forensic Audit report dated 14.01.2021 which mentions in paragraph 16.1.1.1 that the analysis of financial statements of the Corporate Debtor reveals that it had repaid/adjusted unsecured loans/operational debts during FY 2015-16 and 2016-17 amounting to preferential transactions as below. S. No. Party Name Amount Repaid 1. Nikita Vyapaar Private Ltd. 1.12 Crore 2. Narsingh Mercentile Pvt Ltd. 0.07 Crore 3. Prarthana Sales Pvt Ltd. 0.05 Crore 4. Active Commercial Pvt Ltd 0.53 Crore 31. In addition to the above, there are other circumstances which prompt and compel us to conclude that there is something more than what meets the eye. These circumstances are:- (i) All loan agreements are of the year 2014. They are almost identically worded except with respect to details of the lenders and the quantum of amounts to be disbursed. (ii) All loan agreements postulate giving of unsecured loans. It is also unusual that there is no tenure for repayment....