TaxTMI 
TaxTMI 
2022 (8) TMI 235
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....lication preferred by the second Respondent/Mr. Vinay Yadav. By the impugned order the Adjudicating Authority, while admitting the Section 7 Application observed as follows:- "10. Section 7(5)(a) of the Code is as follows: 5) Where the Adjudicating Authority is satisfied that - (a) a default has occurred and the application under sub-section (2) is complete, and there is no disciplinary proceedings pending against the proposed resolution professional, it may by order, admit such application." 11. In the present case, the concurrence of default is evidenced by the details furnished by the petitioner including cheque bearing No.000221 dated 01.09.2016 amounting to Rs. 57,00,000 and cheque bearing No.000222 dated 01.09.2016 amounting to Rs. 30,50,000 (Annexure-C (Colly)). It can be seen that aforesaid cheques were dishonoured due to "Insufficient Balance" as evident from cheque Return Memo dated 05.12.2016, 21.11.2016 and 30.11.2016 attached as Annexures D, E & F respectively. The financial creditor has also issued a Legal notice dated 19.10.2018 (Annexure-G) through its counsel demanding full payment of pending amount. Original postal receipts and ....
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....ing out of two cheques of Rs. 57,00,000 and Rs. 30,50,000/- issued by the Corporate Debtor in favour of the second Respondent, which had returned on account of insufficient funds. * It is submitted that in the ongoing proceedings under Section 138 of the NI Act, the Corporate Debtor had already paid an amount of Rs. 67,90,000/- vide a Demand Draft dated 09.09.2019. As per the directions of the Trial Court, the Corporate Debtor paid interest @ 6% p.a and the second Respondent did not oppose the plea of the Corporate Debtor for closure of the proceedings before the JMIC, Gurgaon. Furthermore, the second Respondent has accepted the amount and did not challenge the orders of the Trial Court. Therefore, any claim including interest thereupon arising out of the said cheque amounting to Rs. 57,00,000/- is wholly mis-conceived. Even assuming the claim of the second Respondent is correct, the present amount due is only Rs. 30,50,000/-. * It is submitted that in order to put an end to the dispute, without prejudice to its contentions, the Appellant had annexed a Demand Draft of Rs. 30,50,000/-, but the Respondent, with an intention to extract more money is now demanding interest at exo....
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....n 25.10.2018, who reiterated the mutually agreed terms for advancement of the aforesaid loan being based on assurances of assured return along with interest @ 18 % p.a thereon. Pursuant to the order dated 07.08.2019 under the NI Act, the Corporate Debtor paid a total sum of Rs.67,90,000/- out of which Rs. 57,00,000/- towards the discharge of the principal sum Rs. 10,88,000/- towards the interest component on the said amount and Rs. 2,000/- towards cost. * It was never the case of the Appellant before the Adjudicating Authority that the second Respondent was not a Financial Creditor and the debt due was not a financial debt. Legal Notice dated 19.10.2018 reiterating the terms of loan including interest @ 18% p.a was never replied to, disputed or objected to by the Corporate Debtor. Hence, adverse inference ought to be drawn against the Corporate Debtor. In the reply dated 06.08.2019, the Corporate Debtor had not challenged the maintainability of the Section 7 Application nor disputed the financial debt. Hence, the Adjudicating Authority has rightly held that there is a 'debt' and 'default' in payment of the financial debt and is more than Rs. 1,00,000/-, as admitted the applicati....
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....indal Buildsys Limited is already facing insolvency proceedings before the Adjudicating Authority for several defaults and hence the Adjudicating Authority has rightly admitted the Section 7 Application. Assessment : 4. After hearing the submissions of both the parties at length, we are of the considered view that the main issue which arises for consideration in this Appeal is whether the Section 7 Application admitted against a Solvent Company, in the background where the Company has issued two cheques as security for the amount lent, and one cheque amount has been paid, (pursuant to the Order of the Trial Court under Section 138 of the NI Act, 1881, to compound one of the cases), and for the balance second cheque amount, does the initiation of Insolvency Proceedings fall within the ambit of the scope, objective and spirit of the Code which is 'Resolution' and not 'Recovery'? Whether the Adjudicating Authority while admitting a Section 7 Application, as in this case, examine only if there is a 'Debt' and 'Default' but also assess if the intent of the Applicant is primarily only 'Recovery of the dues'? 5. For better understanding of the case on hand, a few dates are import....
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....tification dated 24.03.2020 issued by the Central Government increasing the threshold to Rs.1Crore/- is retrospective in nature and is applicable to this case, is untenable as we are of the view that the amounts claimed pertain to the period prior to the date of Notification. We also do not wish to delve into the other submissions of the Appellant regarding the nature of transactions, absence of Financial Contract, non-registration of debt with the information utility whether interest at 18% per annum was ever concluded between the parties except for reference in the legal Notice issued by the second Respondent. This Tribunal is of the earnest view that taking into consideration the facts and circumstances of the attendant case on hand, the issue with respect to Admission of Section 7 Petition is required to be decided on the touchstone of the ratio of the Hon'ble Supreme Court in 'Vidarbha Industries Power Limited' Vs. 'Axis Bank Limited', 2022 SCC OnLine SC 841, wherein the Hon'ble Apex Court has observed as follows: "55. When an application is filed under Section 7(2) of the IBC, the Adjudicating Authority (NCLT) is required to ascertain the existence of a default from ....
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....in the way of expeditiously deciding a petition under Section 7 or under Section 9 of the IBC. 60. There can be no doubt that a Corporate Debtor who is in the red should be resolved expeditiously, following the timelines in the IBC. No extraneous matter should come in the way. However, the viability and overall financial health of the Corporate Debtor are not extraneous matters. 61. The Adjudicating Authority (NCLT) found the dispute of the Corporate Debtor with the Electricity Regulator or the recipient of electricity would be extraneous to the matters involved in the petition. Disputes with the Electricity Regulator or the Recipient of Electricity may not be of much relevance. The question is whether an award of the APTEL in favour of the Corporate Debtor, can completely be disregarded by the Adjudicating Authority (NCLT), when it is claimed that, in terms of the Award, a sum of Rs. 1,730 crores, that is, an amount far exceeding the claim of the Financial Creditor, is realisable by the Corporate Debtor. The answer, in our view, is necessarily in the negative. 62. In our view, the Appellate Authority (NCLAT) erred in holding that the Adjudicating Authori....
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....ority (NCLT) failed to appreciate that the question of time bound initiation and completion of CIRP could only arise if the companies were bankrupt or insolvent and not otherwise. Moreover the timeline starts ticking only from the date of admission of the application for initiation of CIRP and not from the date of filing the same. 84. In Swiss Ribbons (supra) this Court considering the vires of the IBC observed as follows:- "43. A financial creditor may trigger the Code either by itself or jointly with other financial creditors or such persons as may be notified by the Central Government when a "default" occurs. The Explanation to Section 7(1) also makes it clear that the Code may be triggered by such persons in respect of a default made to any other financial creditor of the corporate debtor, making it clear that once triggered, the resolution process under the Code is a collective proceeding in rem which seeks, in the first instance, to rehabilitate the corporate debtor. Under Section 7(4), the adjudicating authority shall, within the prescribed period, ascertain the existence of a default on the basis of evidence furnished by the financial creditor; and under S....
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....12. Learned Sr. Counsel appearing for the second Respondent submitted that the total debt including interest due @18% p.a. is Rs.87,76,100/- till 26.03.2021, which is the date of initiation of the CIRP. Learned Sr. Counsel for second Respondent strenuously argued that the amount lent is a 'Financial Debt' and that the second Respondent is a 'Financial Creditor' and the debt is acknowledged in the books of accounts and hence the Adjudicating Authority was right in admitting the Section 7 Application, keeping in view the admitted 'debt' & 'default'. Reliance was placed on the Judgements of the Hon'ble Supreme Court in 'Innoventive Industries Ltd.' (Supra) and 'Orator Marketing Pvt. Ltd.' (Supra). While, we find force in the submissions of the Ld. Sr. Counsel that there is 'debt' and a 'default' what should also be examined is whether the intent for initiation of CIRP is 'Recovery' or 'Resolution.' 13. It is pertinent to mention that the second Respondent in para 14 of their Reply and in para 40 of their objections have never refuted the submission of the Appellant that 'the 'Corporate Debtor' 'is a going concern' and a viable unit and has great commercial prospects... and that the....
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....also in 'Praveen Kumar Mundra' Vs. 'CIL Securities Ltd.', 2019 SCC OnLine NCLAT 334, has noted that CIRP cannot be initiated with fraudulent and malicious intent 'for any purpose other than the Resolution of Insolvency or Liquidation' and therefore it is clearly covered under Section 65 of the Code. 15. Section 65(1) of the Code reads as hereunder: "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 for the resolution of insolvency, or liquidation, as the case may be, the Adjudicating Authority may impose upon such person a penalty which shall not be less than one lakh rupees, but may extend to one crore rupees." (Emphasis Supplied) 16. Though the aforesaid Section does not expressly mention 'Debt Recovery Action' under 'for any purpose other than resolution of insolvency..', keeping in view the factual occurrence of the events of this particular matter, we hold that the 'intent' may not be a 'malafide intent', but is nevertheless a fundamental attempt to obtain an edge/ advantage / an upper hand in 'r....
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....AR FORM AS and 21.11.2016 ANNEXURE-B PART V PARTICULARS OF FINANCIAL DEBT [DOCUMENTS, RECORDS AND 1. EVIDENCE OF DEFAULT] PARTICULARS OF SECURITY HELD, IF ANY, THE DATE OF ITS CREATION, ITS ESTIMATED VALUE AS PER THE CREDITOR. List of Securities held: CHEQUE DATE NAME OF AMOUNT NO. ACCOUNT 000221 01.09.2016 M/s Jindal Builtech- Rs. 57,00,000/- Private Limited (Rupees Fifty Seven Lakhs only). 000222 01.09.2016 M/s Jindal Builtech Private Limited Rs. 30,50,000/- (Rupees Thirty Lakhs Fifty عا Thousand only). The copies of cheques are annexed herewith as Annexure C (Colly). The original cheques are being submitted in the Court of Ms. Neekita Document 2 Bhardwaj, Judicial Magistrate First Class, Gurugram, Haryana. 2. PARTICULARS OF AN ORDER OF A COURT, TRIBUNAL OR 3. 4. ARBITRAL PANEL ADJUDICATING ON THE DEFAULT, IF ANY: Not applicable. RECORD OF DEFAULT WITH THE INFORMATION UTILITY, IF ANY: Not applicable. DETAILS OF SUCCESSION CERTIFICATE, OR PROBATE OF A WILL, OR LETTER OF ADMINISTRATION, OR COURT DECREE (AS MAY BE APPLICABLE), UNDER THE....