TaxTMI 
TaxTMI 
TaxTMI 
2024 (7) TMI 386
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....rity allowed the Section 7 application filed by M/s Alka Prakash Agarwal and admitted the Bazargaon Paper & Pulp Mills Pvt. Ltd.-Corporate Debtor into the rigours of Corporate Insolvency Resolution Process ('CIRP' in short). Aggrieved by this impugned order, the suspended director of the Corporate Debtor has preferred this appeal. 2. Making his submissions, the Learned Counsel for the Appellant submitted that Bazargaon Paper & Pulp Mills Pvt. Ltd.-Corporate Debtor had taken an unsecured loan from Ms. Alka Prakash Agarwal-Respondent No.1 of Rs.70 lakhs based on an oral agreement which loan was repayable on demand. The entire amount of Rs.70 lakhs was disbursed to the Corporate Debtor in four tranches based on an oral understanding on varying rates of interest from 15% to 18% p.a. of simple interest. It is further submitted that during F.Y. 2010 to 2017, the Corporate Debtor had repaid a total amount of Rs.1.16 cr to the Respondent No.1 which included Rs. 70 lakhs towards principal amount and Rs.46 lakhs towards interest. In support of their contention, it is submitted that the financial statements of Respondent No.1 as well as their Form-26AS shows that payment of Rs.46,04,548/- wa....
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....e Learned Counsel for the Appellant further submitted that the Respondent No.1 placed a forged statement of reconciliation before the Adjudicating Authority and obtained an ex-parte order from the Adjudicating Authority bringing Corporate Debtor into the folds of CIRP. Reiterating that the Respondent No.1 had never made any demand or sent any notice to the Corporate Debtor seeking the outstanding amount before the passing of the ex-parte order by the Adjudicating Authority, it was vehemently contended that impugned order has been passed ex parte violating the principles of natural justice in a summary manner without the essential element of the proof of debt and default having been established. Despite there being a genuine reason for non-appearance on behalf of the Appellant before the Adjudicating Authority due to demise of an immediate family member leading to the closure of the office of the Corporate Debtor, this factum was overlooked by the Adjudicating Authority while passing the impugned order. 7. Rebutting the contentions raised by the Appellant, it was submitted by the Learned Counsel for the Respondent No.1 that the ground of violation of natural justice raised by the A....
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.... including sale of non-agricultural land and sale of plant and machinery of the Corporate Debtor. It has also been submitted that by another agreement, the Appellant has transferred to its sister-concern Rs.98.34 lakhs which amounts to siphoning of the said amount. The RP has submitted that this illegal transfer has been noticed and recorded in the first meeting of the CoC. 10. We have duly considered the arguments advanced by the Learned Counsel for both the parties and perused the records carefully. The short point for our consideration was whether there was a debt and default by the Corporate Debtor qua the Respondent No.1 and whether the default amount crossed the prescribed threshold limit of Rs. 1 cr under Section 4 of IBC. 11. At the outset, it may be useful to examine the tenability of the contention of the Appellant that the impugned order was set ex-parte against them in violation of the principles of natural justice thereby causing great prejudice to their interests. It goes without saying that real and effective opportunity to hear is one of the critical quotients of the tenets of natural justice. When we see the material on record, we find that the Appellant did not ....
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....e period the Appellant was aggressively pursuing the Criminal Applications nos. 585 of 2022 and 181 of 2023, in which applications, the Appellant had contemporaneously acknowledged that Section 7 application is pending before the Adjudicating Authority. In spite of having full knowledge of the Section 7 application and yet not appearing before the Adjudicating Authority cannot be lost sight of casually. This recurrent absence clearly demonstrates that the Appellant was intentionally not participating in the proceedings before the Adjudicating Authority. Under such circumstances, it is difficult to grant any indulgence to the Appellant in entertaining their complaint that there has been miscarriage of natural justice. When the Appellant failed to participate in the proceedings before the Adjudicating Authority despite reasonable opportunity having been afforded to the Appellant, the impugned order cannot be said to have been vitiated on grounds of violation of the principles of natural justice. 13. This brings us to the basic question of debt and default and at the outset we would like to refer to the guiding principles propounded by the Hon'ble Apex Court in the case of Innoventiv....
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....debt and default. The relevant para is extracted below as under :- "3. The Petitioner has attached the following documents to demonstrate the existence of Debt: i. The Ledger Statement of the Corporate Debtor for the period beginning from 1st April 2010 to 30th November 2020. ii. Form 26AS which is Tax Statement under Section 203AA of the Income Tax Act, 1961 for the Financial Years 2008- 09 to 2019- 20 reflecting payments made by the Corporate Debtor towards the payment of the TDS amount on interest payment under section 194A of the Income Tax Act, 1961. iii. Form 26AS for the Financial Year 2015-16 reflecting payments made by the Corporate Debtor towards the TDS amount deducted on interest payment. iv. Copy of Bank Statement of the Petitioner for the period of 01st April 2011 to 30th November 2020. v. Copy of Audited Financial Statement of Corporate Debtor for the Financial Year 2010-11, 2011-12, 2012-13, 2013- 14, 2014-15 and 2015-16. vi. Copy of the Working for Debt Default. vii. Copy of Ledger for loan, Unpaid TDS Ledger & the ledger account reflecting Interest Payment." 16. It is the case of the Appellant that in the absence of any financial contract ....
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....e basis of the ledger statement as on 31.03.2017, as emailed to the Appellant by the Respondent No.1 on 16.08.2017, which showed that the closing balance was Rs.51.81 lakhs as placed at page 449 of APB. There is no material placed on record by the Appellant which shows that this ledger statement was controverted at any stage. That the Appellant was required to make payments to the Respondent No.1 has also not been denied as is clearly borne out from the contents of the criminal applications as well as the statement given by them to the Economic Crime Branch on 12.06.2021. 20. It has been disputed by the Appellant that there was no reconciliation of an accounts between the two parties post 2017 and that the document dated 31.03.2018 put forth by the Respondent no.1 is a forged document on which a police complaint was lodged and therefore cannot be relied upon. Be that as it may, we cannot side-step the plea raised by the Appellant that the police complaint was lodged by the Appellant with regard to forged and fabricated balance confirmation as late as on 28.02.2023 which was one day prior to the filing of Section 7 application by the Respondent No.1. This gives a semblance of crede....
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....n financial contract is not a pre-condition or an exclusive requirement for proving existence of debt. It has been further amplified that the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 and CIRP Regulations makes it is clear that financial debt can be proved from other relevant documents and it is not mandatory that written financial contract can be the only basis for proving the financial debt. If disbursement of loan was with interest and repayment was on demand, the two essential conditions of financial debt stand established with regard to the time value of money. Since the loan had been given on the basis of an oral agreement and was admittedly repayable on demand, there was no need to issue any written notice on the Corporate Debtor seeking repayment. 23. It is trite law that under the IBC once a debt which becomes due or payable, in law and in fact, and if there is incidence of non-payment of the said debt in full or even part thereof, CIRP may be triggered by the financial creditor as long as the amount in default is above the threshold limit. Once the Adjudicating Authority is subjectively satisfied that there is a debt and a default has ....