TaxTMI 
TaxTMI 
2022 (6) TMI 1289
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....ur Lakh Ninety Four Thousand only). 2. It is stated that on 19.03.2012 the Financial Creditor and M/s. Lepakshi Science and Technology Park Private Limited (Corporate Debtor) executed an Inter Corporate Deposit ("ICD") agreement by which an amount of Rs. 5,00,00,000/- (Rupees Five Crores) was forwarded by the Financial Creditor to the Corporate Debtor. The ICD was executed in furtherance of Memorandum of Understanding dated 07.01.2012 entered by the Financial Creditor with Lepakshi Knowledge Hub Private Limited (Project Proponent). Under the MOU the Financial Creditor was investing in the project undertaken by the Project Proponent. The Project Proponent had entered into a Memorandum of Agreement with the Government of Andhra Pradesh on 22.12.2008 (MOA) for the purpose of setting up global knowledge hub. By way of this MOA the Government of Andhra Pradesh agreed to allot and transfer required land to the Project Proponent. Further the Project Proponent incorporated two entities i.e., the Corporate Debtor and Lepakshi Heritage Wellness Village Private Limited ('Guarantor'). 3. It was the understanding between the Financial Creditor and the Project Proponent in terms of....
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....roject Proponent, Corporate Debtor and Guarantor denying liability on unsustainable ground. Further, it is stated the Corporate Debtor in its Balance Sheet filed with Ministry of Corporate Affairs from the financial year 2011-12 to 2018-19 admitted to the liability towards the Financial Creditor. 7. The Petitioner/Financial Creditor in support of the C.P. averments has enclosed the following documents among other documents, to the C.P.: i. Memorandum of Agreement dated 22.12.2008 between the Government of Andhra Pradesh and Lepakshi Knowledge Hub Private Limited ii. Memorandum of Understanding dated 07.01.2012 between Financial Creditor and Lepakshi Knowledge Hub Private Limited the Project Proponent. iii. Inter Corporate Deposit dated 19.03.2012 executed by the Financial creditor and Corporate Debtor iv. Escrow Agreement dated 16.04.2012 between the Financial Creditor, Lepakshi Knowledge Hub Private Limited the Project Proponent and Induslnd Bank Limited v. Balance Sheet of Corporate Debtor from the Financial years 2011-12 to 2018-19 vi. Recall let....
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.... in Anantapur district, Andhra Pradesh. Thereafter, LKH paid the necessary sale consideration after which the APIIC executed several registered sale deeds conveying the total land to LKH. iv. It is stated that in 2011, negotiations ensued between the Petitioner and LKH to enable the Petitioner to participate in part of the project. It was agreed that 2650 acres out of total land proposed to be developed by the Claimant (subject land) would be transferred to the Respondent and M/s. Lepakshi Heritage Wellness Private limited, after which the Petitioner will fully acquire the equity of the LST and LHW for a total consideration of Rs. 238,50,00,000/-. Towards this purpose, LKH and Petitioner had executed a Memorandum of Understanding dated 07.01.2012. Further, the MOU categorically stipulated an order of performance to take forward the transaction. A conjoint reading of Clause 4, more specifically Clause 4.1, 4.2 and 4.3 demonstrate the following order of performance. a) Within a period of 5 days from the execution of the MOU, Petitioner should transfer an amount of Rs. 5 crores to LST towards the cost of land transfer....
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....ransfer but only towards the cost of land transfer from LKH to LST and LHW. If not for the specific promise of the Petitioner to invest in LST and LHW and implement the project, the very need for the transfer of land from LKH to LST and LHW contemporaneously would not have arisen in the first place. The terms of the agreement make it very clear that the amount of Rs. 5 crores were transferred to LST as cost of Land transfer. Moreover, even as per admitted stand of the Petitioner, the said 5 crore was to be adjusted in the sale consideration to be immediately paid by the Petitioner to Lepakshi group. Therefore, it is apparent that the parties considered Rs. 5 crore to be part of expenses to be incurred towards the transaction, obviously subject to the payment of MOU consideration by Petitioner to LKH. vii. M/s. Lepakshi were contemporaneously hopeful that the MOU will be implemented as it was part of the larger scheme to implement the project, towards which the land was allotted by the Government. However, for reasons only known to Petitioner, possibly to disassociate from the limelight after the criminal allegations arose qua the subject project-the Petitioner....
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....including during the CBI's proceedings or the ED's proceedings, the Petitioner ever asserted its rights resulting from the MOU or other ancillary agreements. Infact one of the allegations in the CBI charge sheet relate to the transfer of land from LKH to LST and LHW. The Petitioner never addressed a single correspondence to CBI or ED claiming any proprietorial rights or shareholding or managerial rights in LST or LHW. xi. As LST's business has been in a stand-still all along without any regular operations, an entry made contemporaneous to the MoU in 2012, subsisted in the books. Any reference to the ICD qua the Rs. 5 cr. was also removed after FY 2016-17 and the Rs. 5 cr. subsisted as an 'other liability' as a balancing entry towards the cost of land transfer which was incurred as capital expenditure (occurring on the assets side of the Respondent No. 2's Balance Sheets). The Asset's side entry is not reversible as the Stamp Duty and Registration Charges once paid will not be returned if the transaction is cancelled. As LST incurred this expenditure purely on account of Claimant's promise to pay the initial tranche, which was ad....
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.... to the Petitioner's executives. xv. In fact, a mere perusal of the email correspondence in the early and mid 2019 would now make it evident that it is an oblique correspondence with a malicious aim to foist false litigation. It is stated that the Petitioner never asserted any rights from the MOU in these emails, because the executives of Indus Ind Bank specifically informed the Petitioner that their request for the provision of documents is not being honoured because "there has been no communication between account bank and the respective parties to the escrow for a long time (more than 6 years)". The bank's executives also asked for "reason for not signing the definitive agreements Despite objection on aforementioned grounds, Petitioner's executives never asserted anything with respect to the validity of the MOU. The whole correspondence was deliberately conducted clandestinely to later spin a false narrative. xvi. It is stated that in December 2019, for the very first time, the Petitioner started addressing emails and letters to the IPL's RP claiming that the Petitioner is 100% equity shareholders of LST and LHW. The me....
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....se proceedings. Similarly, there has been a catena of litigious correspondence between the Petitioner and M/s. Lepakshi in the year 2020 and 2021. The Respondent craves leave to read and rely on the documents filed to demonstrate the respective parties stand in these proceedings. xix. As a part of its mala fide litigation, the Petitioner first filed a petition u/s. 9 of the Arbitration Act before the Hon'ble Delhi High Court. M/s. Lepakshi filed their reply to the Section 9 petition in due course, to which the Petitioner also filed a rejoinder. The Petitioner invoked arbitration on 02.12.2020 and the Respondent issued their reply on 28.12.2020. Ultimately this was followed by the constitution of the Arbitration Tribunal. Thereafter, the Section 9 petition was converted into an application u/s. 17. After elaborate hearing on the Section 17 application, the Hon'ble Arbitration Tribunal granted interim relief qua limited to the shares held in escrow. The true copy of the order dated 30.03.2021 passed by the Ld. Arbitration Tribunal is annexed as Annexure 18 of the reply. xx. It is stated that the Petitioner then preferred an appeal u....
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.... a frivolous application purportedly u/s. 14 of the IBC to seek stay/termination of its own arbitration proceedings. Quite shockingly, while the Petitioner claim is evidently baseless, also contested - tooth and nail - in a catena of litigation proceedings, the Petitioner maliciously invoked this Hon'ble Tribunal's jurisdiction under I & B Code, 2016 purporting to be a Financial Creditor u/s. 7 of the IBC. If the Petitioner's litigation above elaborated is appreciated, it is abundantly clear that Petitioner's actions, at all points of time, are only intended towards arm twisting tactics. The instant proceedings are also filed with the same malicious intent. xxiii. The instant petition is also liable to be dismissed in limine as the Rs. 5 crore which forms the basis of instant proceedings is neither a financial debt in the first place as contemplated u/s. 7 of IBC nor the Petitioner is financial creditor as contemplated under IBC. No amount is owed to the Petitioner and as such these proceedings are fundamentally mendacious. The Petitioner, on its own default backed out from the MOU and the order of performance contemplated in the transaction wa....
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....situations. Courts have consistently deprecated invocation of insolvency jurisdiction as arm twisting measures, even under old regime. The Respondent humbly prays that the harshest of penalty should be imposed on the Petitioner u/s. 65 so that unscrupulous litigants like the Petitioner do not abuse the Insolvency jurisdiction under IBC. 9. The Petitioner has filed the rejoinder to the reply filed by the Respondent stating as follows: i. The Petitioner denies all the statements, contentions and allegations raised in the Respondent's reply. Nothing contained in the reply shall be deemed to be admitted unless such an admission is specifically made hereunder, ii. The Respondent/Corporate Debtor has at no place in its reply denied the execution of the ICD Agreement dated 19.03.2012 between the parties or denied having received the ICD amount of Rs. 5,00,00,000 (Rupees Five Crores only) from the Petitioner. Infact the Respondent in seeking the present arguments on why the debt should not be repaid, admits the debt. Therefore, there is no question that a financial debt actionable u/s. 7 IBC 2016 exists. The only substantial objections tak....
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....its that the debt has not been paid. v. It is stated that the Respondent primarily relied on the existence of a contractual dispute between the parties in connection with the MOU dated 07.01.2012. The Respondent is not even a party to the MOU and therefore, the Respondent cannot and ought not to be permitted to rely upon alleged violation or termination of a contract to which it is not a party, as a means to refute its liability to a financial creditor. The thrust of the Respondent's argument is that since the transaction contemplated in the MOU has not been completed, monies loaned to it under an independent ICD, at its request and in order to assist it to perform its obligation under the MOU, stand forfeited, and cannot form the basis of a petition to initiate CIRP. Such a contention, besides being factually inaccurate, is also not founded in law. Further the Respondent has in its own books of account, acknowledged the amount paid under the ICD agreement as a liability and such acknowledgement persists till date. vi. It is stated that if credence were to be given to the position taken by the Respondent, almost every incidence of a d....
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....lso became part of criminal investigation by the CBI and the ED. It is stated that the Petitioner cannot be faulted for not asserting its contractual rights to a criminal investigation agency - the criminal proceedings did not pertain to the Petitioner. All through this time period, the Petitioner was in constant contact with the Respondent as well as its parent company. It must be remembered that in consonance with the terms of the MOU dated 07.01.2012, the Petitioner's representative, Mr. Gulshan Jhurani was a Director in the Respondent as well as the Respondent in CP (IB) No. 107/BB/2021. The Petitioner was constantly assured by the Respondent as well as its parent company that all the legal disputes with the Govt. of AP as well as the criminal investigative agencies would be resolved soon, and it is on the basis of such assurances that the Petitioner continued to believe that terms of the MOU would be fulfilled. ix. The Petitioner states that the parties have been in talks till 2019 to find a way forward and only now that the Respondent has taken this belated and utterly dishonest stand that MOU was a purportedly failed transaction. Infact it is the Re....
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....0/-) to the principal pursuant to the ICD Agreement, the Guarantor irrevocably and unconditionally guarantees to the Beneficiary the due and punctual pursuant to the ICD Agreement and agrees to pay to the Beneficiary from time to time on demand all sums of money which the principal is at any time liable to pay to the Beneficiary under or pursuant to the ICD Agreement and which have been become due and payable but have not been paid at the such demand is made." xiii. It is clear from the ICD Agreement dated 19.03.2012 and the Corporate Guarantee dated 29.03.2012, that Rs. 5,00,00,000/- (Rupees Five crores only) is nothing but a short-term financial assistance taken by Respondent which was guaranteed by Respondent in CP(IB) No. 107/BB/2021. The transactional documents on the basis of which this financial assistance was provided, clearly states that the same was repayable on demand and carried interest. However, the Respondent as well as its parent entity repeatedly assured the Petitioner that the MOU would indeed be fructified, despite the delays occasioned due legal proceedings to which the Petitioner was not a party. The Petitioner did not seek repayment of th....
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....terest is also reflected in the record of the information utility pertaining to L2 and L3. Further, it is stated that the present petition is not barred by time, the law point is settled where the existence of a financial liability is acknowledged in a party's financial statement, the period of limitation begins a fresh from each such date of acknowledgement. ii. It is stated that in the present case, at no place the Respondent made any note or comment in its financial statement that though the ICD amount is being acknowledged as a liability due to reasons of legal compliance, the said amount does not amount to a debt. It is submitted that the Respondent's contention that the present petition is barred by time holds no water. Further, as far as the existence of the larger arbitral dispute between the Petitioner L1, L2, L3 and other parties is concerned, it submitted that the same has no bearing whatsoever on the present proceedings. As stated in the Petitioner's rejoinder, and in line with the decisions of the Hon'ble Supreme Court on Section 7 of the IBC, it is reiterated that the existence of any suit or proceeding between the parties is no b....
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....iary No. 787 dated 25.02.2022 by producing the following judgments: i. M/s. Innoventive Industries Limited vs. ICICI Bank and another in Civil Appeal No. 8337-8338 of 2017, order passed by Hon'ble Supreme Court of India ii. Karan Goel vs. M/s. Pashupati Jewellers and another in Company Appeal (AT) (Insolvency) No. 1021 of 2019 by Hon'ble NCLAT, New Delhi iii. Indus Biotech Private Limited vs. Kotak India Venture (offshore) Fund in Arbitration Petition (Civil) No. 48/2019 passed by Hon'ble Supreme Court of India; iv. Asset Reconstruction Company (India) Limited vs. Bishal Jaiswal and another in Civil Appeal No. 323 of 2021 passed by Hon'ble Supreme Court of India; v. Commissioner of Income Tax vs. Auto Kashyap India (Private) Limited in IT Appeal No. 418 of 2010 passed by Hon'ble High Court of Delhi; vi. Commissioner of Income Tax vs. Indo Widecom International Limited in IT Appeal No. 715 of 2012 passed by Hon'ble High Court of Allahabad; vii. The Commissioner of Income Tax, Chennai vs. Metropolitan Transpo....
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.... balance sheet three years before the petition which can constitute a written acknowledgement of debt satisfying the requirements of Section 18 of the Limitation Act. The Petitioner relied on several judgments under taxation statutes to contend that alteration of head of entry does not alter or extinguish the liability. The issue is not about the extinguishment of liability but about the acknowledgement of debt. If an earlier entry/head is changed and the new entry does not retain the character of the old entry and the note in the old entry is removed, it constitutes an emphatic denial of any liability. Further, if the Petitioner's contention based on the taxation judgments of the Hon'ble High Courts in Additional Memorandum of Citations is extended to acknowledgement of debt u/s. 18, then it will go directly contrary to the ratio of the Hon'ble Supreme Court's judgment in Bishal Jaiwal. The instant case does not only deserve to be dismissed but also stringiest penalty should be levied u/s. 65 and Section 75 of the IBC. v. The Respondent has also relied on the following judgments: a) Indus Biotech P....
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....er Section 5(21) means a claim in respect of provision of goods or services. 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 financial debt owed to any financial creditor of the corporate debtor-it need not be a debt owed to the applicant financial creditor. Under Section 7(2), an application is to be made under sub-section (1) in such form and manner as is prescribed, which takes us to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Under Rule 4, the application is made by a financial creditor in Form 1 accompanied by documents and records required therein. Form 1 is a detailed form in 5 parts, which requires particulars of the applicant in Part I, particulars of the corporate debtor in Part II, particulars of the proposed interim resolution professional in part III, particulars of the financial debt in part IV and documents, records and evidence of default in part V. Under Rule 4(3), the applicant is to dispatch a copy of the application filed with the adjudicating authority by registered post or speed post to t....
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....unsel, in order to substantiate this submission drawn our attention to various Clauses of the Memorandum of Understanding dated 07.01.2012 executed between M/s. Lepakshi Knowledge Hub Private Limited and Global Emerging Markets India Limited i.e., the Petitioner/Financial Creditor in the instant C.P. Accordingly, it is submitted that the true nature of the transaction was to invest in the Respondent/Corporate Debtor Company, and to purchase the shareholding. Advancing the money through the Inter Corporate Deposit was also part of the said investment scheme. 18. On the other hand, the Learned Senior Counsel appearing for the Petitioner submits that the Inter Corporate Deposit is an independent transaction and cannot be treated as part of any action or document in pursuance of the Memorandum of Understanding dated 07.01.2012 executed between the Petitioner and a third party. 19. We find force in the submissions made by the Learned Senior Counsel appearing for the Petitioner/Financial Creditor. The Memorandum of Understanding dated 07.01.2012, on which the Respondent placed reliance was admittedly executed between the Petitioner and a separate legal entity known as M/s. Lepakshi....
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..... The application filed in the prescribed Form No. 1 is found to be complete. 24. In the circumstances and for the aforesaid reasons and since the C.P. is complete, the same is admitted in terms of Section 7(5) of the IBC and accordingly, moratorium is declared in terms of Section 14 of the Code. As a necessary consequences of the moratorium in terms of Section 14, the following prohibitions are imposed, which must be followed by all and sundry: (a) The institution of suits or continuation of pending suits or proceedings against the Corporate Debtor including execution of any judgment, decree or order in; (b) any court of law, tribunal, arbitration panel or other authority; (c) Transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein; (d) Any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; &nbs....