TaxTMI 
TaxTMI 
2023 (3) TMI 1017
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent herein - "VRG Infrastructure Private Limited (Corporate Debtor)" was dismissed holding that the claim of the Petitioner is not a Financial Debt within the meaning of Section 5(8) of IBC. 2. The facts giving rise to the instant Appeal are as follows: i) The Appellant was incorporated on 19.12.2006. The Appellant started a Hospital in the name and style of 'Meditrina Institute of Medical Sciences' which was run by the Appellant since the year 2012. The Appellant and the Respondent have had common promoter directors viz. Mr. Ganesh Chakkarwar and Mr. Gitesh Muttemwar. Both the aforementioned persons were Directors of the Appellant company since its inception and were also promoters and shareholders of the Appellant company. While Mr. Chakkarwar continues to be a 33% shareholder and Director of the Appellant company till date, Mr. Gitesh Muttemwar resigned from the Board of Directors on 03.08.2016. Presently, the Appellant company has three Directors viz. Dr. Sameer Paltewar, Mrs. Sonali Paltewar and Mr. Ganesh Chakkarwar. Furthermore, Mr. Chakkarwar and Mr. Muttemwar have also been Directors and shareholders of the Respondent company since its inception on 04.11.2004. ii) The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1.03.2017, also indicates that the monies payable to Mr. Gitesh Muttemwar were fully paid off and settled. The said fact can also be corroborated from the Balance Sheets of the Appellant company, on which Mr. Chakkarwar was co-signing. The said fact is extremely pertinent because both Mr. Muttemwar and Mr. Chakkarwar were promoters, shareholders and Directors of the Respondent company. At no point of time did the Balance Sheets of the Appellant company ever record any amount of INR 25,00,000/- as payable to the Respondent Company. Furthermore, the Respondent Company was never shown as a Financial Creditor. iv) It is evident that the Amount of INR 25,00,000/- advanced by the Respondent company to the Appellant company vide Cheque No. 490804 on 12.02.2011 was evidently marked as against the credit entry of Mr. Gitesh Muttemwar. It is equally evident that Mr. Muttemwar was a common promoter, as well as shareholder and Director of both the Appellant and Respondent companies. Therefore, it cannot be gainsaid that the amount of INR 25,00,000/- advanced by the Respondent company on 12.02.2011 was treated as monies payable to Mr. Gitesh Muttemwar, since he had an overwhelming influence o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al office of Mr. Ganesh Chakkarwar. vii) These unsecured loans, advanced by way of aforesaid Cheques have still not been repaid by the Respondent company. It is imperative to note that the balance sheet of the Respondent company continued to show the Appellant company as a debtor till Financial Year 2017-18, despite the fact that Mr. Gitesh Muttemwar had prevailed upon Appellant company to mark the said entry as against the credit entry of Mr. Muttemwar and was subsequently paid off and settled. This is also in complete contrast to the averments made by the Respondent before the Adjudicating Authority where it has averred that the amount of INR 25,00,000/-, which was given through aforesaid Cheques was received as a repayment of the pre-existing loan disbursed on 12.02.2011. Admittedly, the said amounts were received by the Respondent company. Therefore, whether or not there was an interest and whether or not there was a written agreement was immaterial, as long as it was clear that an amount was due as financial debt which was in the nature of commercial borrowing. viii) In light of the fact that the loan of 12.02.2011 was settle and paid off in May 2016 and having admitted th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g. x) Aggrieved by the non-payment of monies by the Respondent company, the Appellant company vide Board Resolution dated 24.06.2019 resolved that the company will take steps to initiate corporate insolvency resolution process under Section 7 of the IBC against the Respondent company for failure to furnish the outstanding payment of INR 25,00,000/- exclusive of the interest chargeable thereon. Thus, the application was filed before the Adjudicating Authority on 20.07.2019. Thereafter, after hearing the parties, the Adjudicating Authority dismissed the aforesaid Section 7 Application holding that the claim of the Petitioner is not a Financial Debt within the meaning of Section 5(8) of IBC. Hence this Appeal. 3. The Ld. Counsel for the Appellant during the course of argument and grounds taken in the memo of appeal along with written submissions submitted that the monies transferred on 12.02.2011 to the Appellant were repayable to Mr. Muttemwar and the Respondent is stopped from claiming otherwise. Mr. Muttemwar was aware that the amount transferred on 12.02.2011 to the Appellant, was credited against his ledger account, due to the following reasons: * The Appellant was incorpora....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eemed to have been aware of the entry of INR 25,00,000/- against his ledger. * Mr. Muttemwar was also involved in the financial affairs. The Board Resolution dated 03.08.2012 authorizes him to enter into, and sign agreements, on behalf of the Appellant. 4. It is further submitted that as a result, the Respondent is stopped from claiming otherwise since it is bound by the actions of its agents and through its agents, is deemed to have consented to the credit entries in the ledger account as well as balance sheets of the Appellant on account of the following reasons: * Mr. Muttemwar exercised his influence in order to credit the loan of 12.02.2011 as against his ledger account. Both Mr. Muttemwar and Mr. Chakkarwar were common Directors and therefore were also agents of the Respondent. As a result, the Respondent acquiesced to the fact that the amount transferred to the Appellant on 12.02.2011 was a loan payable to Mr. Muttemwar and not the Respondent. * The Appellant clearly acted to its detriment by paying out the outstanding amount of INR 25,00,000/- towards Mr. Muttemwar. The Respondent failed to provide any justification as to why its own agents, i.e., Mr. Muttemwar and M....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of a corporate debtor to improve the financial health of the company and to boost its economic prospects would have the commercial effect of a borrowing, notwithstanding the fact that interest is not payable". * Even otherwise, in its Legal Notice dated 10.01.2019 (at page 242 of the Appeal), the Appellant had claimed interest of 18% p.a. up to the filing of the application. Furthermore, since this was a loan payable on demand, the Legal Notice had demanded repayment of the same within 7 days. Thus, all the ingredients of a 'financial debt' under Section 5(8) were satisfied. 6. The Ld. Counsel for the Respondent during the course of argument and in his Reply Affidavit along with written submissions and additional written submissions submitted that Appellant challenged the order dated 20.03.2020 (Impugned Order) on the ground that the alleged and purported amount was not a financial debt within the meaning of Section 5(8) of the IBC in view of the glaring but admitted facts as hereunder: * There was no written agreement between the Appellant and the Respondent; * There is no promissory note signed by the Respondent in favour of the Appellant; * There is no agreement....
X X X X Extracts X X X X
X X X X Extracts X X X X
....under the common name VRG, signifying common interest of identical promoters/shareholders/directors/influence in both the companies i.e. Appellant and the Respondent. Neither such plea was taken by Appellant in its company petition nor in its legal notice prior to filing CP before NCLT. The Appellant company was incorporate in December, 2006 by Mr. Gitesh Muttemwar of Respondent, Dr. Sameer Paltewar of Appellant company. Appellant company was promoted by three persons, their name and respective shareholdings are shown against each: i) Mr. Ganesh Chakkarwar - Third Party, 50% paid-up capital ii) Dr. Sameer Paltewar, of the Appellant Company, 25% paid-up capital iii) Mr. Gitesh Muttemwar, Respondent Company, 25% paid-up capital 10. Further, Mr. Gitesh Muttemwar of Respondent Company also invested Rs. 28.60 Lac in the paid-up share capital of Appellant company pto 03.08.2016. Mr. Gitesh Muttemwar also made an investment in the form of loan, financial assistance and investments in Appellant company which stood at Rs. 1.08 crores as on 31.03.2015. During 2015-16, one Mr. Arun Amidwar joined the Appellant company and the shareholding of the four groups of Appellant company was as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ey. In the impugned order at para 15 has categorically held that the debt in question does not qualify as a financial debt. In this regard, the Hon'ble Supreme Court, in its judgment dated 26.02.2020, in "Anuj Jain v. Axis Bank, Civil Appeal Nos. 8512-8527 of 2019", has held time value of money to be a necessary prerequisite to classify a debt as a financial debt. The relevant para 43 is hereunder: "43. Applying the aforementioned fundamental principles to the definition occurring in Section 5(8) of the Code, we have not an iota of doubt that for a debt to become 'financial debt' for the purpose of Part II of the Code, the basic elements are that it ought to be a disbursal against the consideration for time value of money. It may include any of the methods for raising money or incurring liability by the modes prescribed in sub-clauses (a) to (f) of Section 5(8); it may also include any derivative transaction or counter-indemnity obligation as per sub-clauses (g) and (h) of Section 5(8); and it may also be the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h). The requirement of existence of a debt, w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arketing' case, the Hon'ble Supreme Court does not deal with consideration for time value of money. 'Orator Marketing' case simply deals with the issue of interest. Further, the facts of 'Orator Marketing' case are significantly different from the fact of the matter at hand, whereby, there was a grant of term loan based on a written agreement between the parties agreeing to NIL interest. In the instant case, no such agreement or document has been brought forward by the Appellant. Further, the 'Orator Marketing' case, the amount disbursed met the requirements of amount being disbursed in consideration of time value of money. In the instant case, the amounts disbursed do not meet such a threshold, particularly without any underlying agreement or other record to substantiate the claim. 15. This Appellate Tribunal in the case of "Starlog Enterprises Ltd. v. Avil Menezes, IRP for AMW Motors Ltd., at para 7, (2021 SCC Online NCLAT 2307), has distinguished the facts of 'Orator Marketing' to reaffirm that consideration for time value of money is an essential ingredient in classification of Financial Debt. 16. The Impugned Order has clearly stated that there has been no disbursement, in t....