2023 (6) TMI 153

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....he 1st Respondent / Financial Creditor / Shree Aashraya Souhard Credit Society Limited. 2. The facts in brief as arrayed in the Company Petition are that the Petitioner / First Respondent is a Co-operative Society registered under the 'Karnataka Co-operative Societies Act, 1959' and subsequently got registered under 'Karnataka Souharda Sahakari Act, 1977' and changed its name to 'Shree Aashraya Souhard Credit Society Limited'. The Corporate Debtor is a Company which is engaged in the business of Real Estate and Construction, having few Common Directors with the Petitioner's Society based on which the Petitioner (hereinafter referred to as the 'Financial Creditor') had provided Secured Cash Credit Facility to the tune of Rs. 14 Crores, prior to 1997 and thereafter extended Cash Credit Facilities on 08/05/2000, 24/01/2008, 29/08/2009 and 02/04/2010 respectively. It was averred that loan amount was disbursed in several tranches and since the management of the Financial Creditor and the Corporate Debtor is the same, the Corporate Debtor was able to pool in huge investment from large number of small investors. The Corporate Debtor did not create a charge on the assets of the Corporat....

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....nterest thereon. * It is submitted that the Adjudicating Authority has not adjudicated the amount in default nor has taken note of the fact that the Statutory Authority under the 'KSS Act' is the Competent Authority to determine if any amount is payable. * A perusal of Section 44 and Section 42 of the 'KSS Act' show that there is a bar on Jurisdiction of Courts and that the disputes may be decided by the Registrar of Co-operative Societies or referred to an Arbitrator. Whether a particular issue constitutes a dispute under the Act, cannot be called in question in any Court. It is strenuously argued by the Learned Company Secretary that unless the amount in default is determined by the Court of Deputy Registrar of Co-operative Societies under the Law of Co-operative Societies which is a special Law, the Adjudicating Authority cannot decide or determine the disputed amount. * It is argued that the sum Rs. 12.09 Crores shown as amount in default in the Application, is erroneous as the sum of Rs.1.92 Crores towards reversal of Interest waiver and interest thereon was not considered. * The Financial Creditor issued a last Legal Notice on 01/03/2018, w....

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....hat there is no default, is erroneous. * The Demand Notice was issued on 01/03/2018 calling upon the Corporate Debtor to pay the amount, but there was no response. * The Application is not barred by Limitation as till December 2017, Respondent No. 1 and 2 were under common control and management. As such, the Notices and Reply Notice exchanged between common Management during year 2016-17 is not of much consequence. The last Payment was made on 04/12/2017 by transferring Rs. 8,32,413/-, to the loan amount of the Corporate Debtor and the acts of the Corporate Debtor by selectively disclaiming the transfer of Mr. Roshan Raikar's payment to manage the Limitation, is totally uncalled for. * It is apparent that there is natural fraud in the Society and the Report of Mr. Thoppanavar, makes it pertinently clear that the Society was not following any rules or regulations and a Special Officer was appointed on 28/12/2017. This Officer discovered the wrongful rebate i.e. the reversal of interest debit and sent the 'Notice' claiming back the rebate along with interest and therefore the claim is well within the Limitation. * As the quantum of Default is more....

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....f the pendency of the instant Appeal. Assessment : 6. The brief point that falls for consideration in this 'Appeal' is whether the Adjudicating Authority was justified in admitting the Section 7 Application, filed by the Financial Creditor / Shree Aashraya Souhard Credit Society Limited. It is not in dispute that the 1st Respondent's Society was formed by the same set of Directors, who are in control of the Corporate Debtor. It is seen from the 'Investigation Report' that the Society was used as a channel to pool in funds from large number of small investors to fund the financial requirement of the Corporate Debtor. The Corporate Debtor is in the business of Real Estate and Construction and has secured the funds from the general Public through the 1st Respondent / Financial Creditor. The Balance Sheet on 31/03/2011 of the Corporate Debtor Company shows that a major chunk of the deposited amount of the 1st Respondent has been taken by the Corporate Debtor by way of Cash Credit Facility. As per the Books of Account, the loan received by the Corporate Debtor at that point of time was Rs.11,03,82,823/-. The limit of Cash Credit Facility was decided as Rs. 14 Crores without follow....

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....der the Code. The actual amount of 'Claim' is to be ascertained by the Resolution Professional after collating the 'Claims' and their verification which comes at a later stage...." [Emphasis Supplied] 10. It was decided that once the 'threshold' is crossed, it is not for the Adjudicating Authority to decide the exact 'Quantum of Debt', but what has to be examined is whether there is a 'Debt' and 'Default'. The grounds raised by the Company Secretary appearing on behalf of the Appellant that the Company was 'not in Default', is not supported by any documentary evidence. The Balance Sheet for the year ending 31/03/2018 clearly includes the amount due and payable. The total Debt as on 31/03/2020 stood at Rs. 12,09,45,192/- which includes the rebate amount drawn by the Corporate Debtor and the Corporate Debtor was not in any position to pay. The Liquidator had since proceeded with the filing of the Application under Section 7 of the Code. The Argument of the Appellant that the Application is barred by Limitation, is unsustainable, keeping in view that the material on record, evidences the amount payable by the Corporate Debtor and it is also recorded in the Balance Sheet. T....