TaxTMI 
TaxTMI 
2024 (9) TMI 328
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...., Sushil Kumar Bajaj and his brother Ajay Kumar Bajaj were running various Companies which were family Companies between the Parties. ii. Corporate Debtor as well as the Financial Creditor were family run Companies between the Parties. According to the family dispute, the Parties entered into Memorandum of Understanding (`MoU') on 07.02.2021 under which 12 Family Companies were evenly distributed between Sushil Kumar Bajaj, the Appellant, the Elder Brother and Ajay Kumar Bajaj, the Younger Brother. iii. The Corporate Debtor came into the share of Appellant, Sushil Kumar Bajaj, whereas Financial Creditor came into share of Younger Brother, Ajay Kumar Bajaj. iv. Before the partition between the family Companies run by families were helped each other by financially. Corporate Debtor took assistance from the Financial Creditor. v. An amount of Rs.9,13,00,000/- was availed by Corporate Debtor from the Respondent Company between September 2010 and April 2017. vi. Corporate Debtor has paid the amount from time to time and by 2021 principal amount of Rs.1,22,50,000/- was due. There was no Agreement of payment of any interest by the Corporate Deb....
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....earing for the Respondent. xvi. Relying on the admission of the Corporate Debtor, Adjudicating Authority admitted Section 7 Application against which this Appeal has been filed. 3. By Interim Order passed by this Tribunal on 04.12.2023, it was directed that CoC shall not issue `Form-G'. 4. We have heard Mr. Santosh Kumar, Learned Counsel appearing for the Appellant and Mr. Krishnendu Dutta Learned Sr. Counsel appearing for Respondent No. 1. 5. Learned Counsel for the Appellant challenging the Order submits that the transaction between the Parties was not a financial transaction. Both the Companies being run by same family where financial transaction were not of any kind of loan or of any interest payment. Amount transferred were to help the family Company and the amount transferred were repaid from time to time. Letter dated 20.09.2010, which according to the Respondent is the terms and conditions in writing of the loan is a fabricated Letter and has been created only for the purposes of case. Ajay Kumar Bajaj, who has signed the Letter on 20.09.2010 was not even Director of the Corporate Debtor since he was Director of the Corporate Debtor only from 12.05.2014 to....
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....cured loan to Financial Creditor was mentioned. Corporate Debtor having admitted the debt and offered to repay the same is the clear proof of debt and default. Adjudicating Authority in Section 7 Application has only to see whether there is a debt and default and when the debt and default is proved, Adjudicating Authority has no option but to admit Section 7 Application. Learned Counsel for the Respondent has referred to the Order of the Adjudicating Authority where Adjudicating Authority has noted the willingness of the Corporate Debtor to make payment of debt of Rs.1,22,50,000/-. It is submitted that Respondent has filed the documentary proof of disbursement of fund, there was admission in form of Reply filed before the Adjudicating Authority as well as admission by way of oral submission. In the above facts, Adjudicating Authority did not commit any error. 7. Learned Counsel for the Appellant in its Rejoinder submitted that the Balance Sheet which was relied by the Financial Creditor in Section 7 Application is now being sought to discredited in its Reply filed in the Appeal where the Respondent No. 1 pleads that explanation in the Balance Sheet was purposely with the malicio....
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....y diverting the view of the Tribunal to non-consequential issues which do not merit any link to the matter at hand. The fact is that a debt was owed by the Corporate Debtor which it defaulted thereby committing a default which was admitted and accepted in the form of affidavits, financial statements and oral submissions recorded in the form of orders. Now to digress from the main issue in question, the Appellant is trying to divert into baseless facts which are irrelevant to the adjudication and/or appeal currently. It is submitted that this Hon'ble Tribunal lacks jurisdiction to adjudicate and/or investigate over new facts or documents being brought for the first time. Furthermore, the additional concocted facts do not bear any relevance at all with respect to the question of law before this Appellate Jurisdiction. Furthermore, it is pertinent to note that the documents as annexed by the appellant in the present paragraph is an additional document and not the part of the records and is in the nature of civil issues, the appellant is intentionally not averred the true facts of the matters rather the appellant are trying to give the colour of family disputes and an impression has be....
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....ding 2019-2020 and 2020-2021 which is also a part of public records. 4. The association of the Corporate Debtor with the Financial Creditor starts right after the incorporation of the Corporate Debtor in 2005 when the two companies shared a very cordial relationship with each other. On or about 2009, the Corporate Debtor company approached the Financial Creditor to fund its working capital. 5. Accordingly, in 2010, the Financial Creditor agreed to provide financial assistance to the Corporate Debtor company. The director of the Corporate Debtor company issued a letter on 20 September 2010 to the Financial Creditor wherein the conditions of the loan were set out in writing. A copy of the said letter is annexed herewith and marked as Annexure F." 13. The facts as given in Part IV by the Financial Creditor relies on the Letter dated 20.09.2010, which is claimed to be written by Director of the Corporate Debtor which according to the Financial Creditor contains conditions of loan were set out in the writing. Letter dated 20.09.2010 is thus relevant for the present case i.e., the only written document which according to the Financial Creditor contains the terms and co....
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.... 15. Corporate Debtor had specifically pleaded that letter dated 20.09.2010 is a forged Letter and the Financial Creditor is liable to be prosecuted. In Paragraph 12 of the Reply following was pleaded: "12. That from above, it is abundantly clear that petitioners are of guilty of perjury and have committed the offence with sole intent of defrauding the Corporate Debtor by wrongly initiating Insolvency proceedings against an otherwise going concern. As such, the petitioners are liable for penal provisions u/s 65 of the code as well as Section 340 of Code of Criminal Procedure, 1973." 16. It is further relevant to notice that Corporate Debtor in its Reply has also admitted the amount of Rs.1,22,50,000/-, in Paragraph 13 which is as follows: "13. That it is undisputed fact that Corporate Debtor owes a sum of Rs 1,22,50,000/- to Operational Creditor and the same is duly noted in the audited financial statements of the Corporate Debtor." 17. With respect to the Letter dated 20.09.2010, Adjudicating Authority passed an Order on 28.12.2022 directing the Financial Creditor to produce original record of receipt of the Letter dated 20.09.2010. The Order dated 28.12.....
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.... has categorically denied Letter under which loan is claimed to have been given with 12% interest which we have already noticed above. It is well settled that there has to be a transaction within a meaning of Section 5(8) of the IBC to treat a debt as a Financial Debt. The Hon'ble Supreme Court in `Anup Jain, Interim Resolution Professional for Jaypee Infratech Ltd.' Vs. `Axis Bank & Ors.', (2020) 8 SCC 401, has held that transaction stated in Clauses (a) to (i) of Section 5(8) would be falling within the ambit of Financial Debt only carrying the essential element stated in the principal Clause or at least has the feature which could be traced to such element in the principal Clause. In Paragraph 46 of the Judgment following has been held: "46. 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 clauses ....
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....f section 5 is the existence of a debt along with interest, if any, which is disbursed against the consideration for the time value of money. The cases covered by categories (a) to (i) of sub-section (8) must satisfy the said test laid down by the earlier part of sub-section (8) of section 5; c. While deciding the issue of whether a debt is a financial debt or an operational debt arising out of a transaction covered by an agreement or arrangement in writing, it is necessary to ascertain what is the real nature of the transaction reflected in the writing; and d. Where one party owes a debt to another and when the creditor is claiming under a written agreement/ arrangement providing for rendering 'service', the debt is an operational debt only if the claim subject matter of the debt has some connection or corelation with the 'service' subject matter of the transaction." 22. The element of disbursal for time value of money is one essential condition which need to be proved for proving the debt as a Financial Debt. In the present case, the Financial Creditor came up with the case that Letter dated 20.09.2010 contains terms and conditions of the loan which l....
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....here was interest component of 12% p.a. clearly becomes unauthorised and unreliable. Ajay Kumar Bajaj was not Director on the 20.09.2010 of the Corporate Debtor and could not have written to the Financial Creditor, containing the terms and conditions of the loan whereas no loan was ever extended by Financial Creditor to the Corporate Debtor of the terms and conditions as contained in the Letter dated 20.09.2010. Letter dated 20.09.2010 was impeached and termed as fabricated Letter. Adjudicating Authority committed an error in not adverting to such plea and proceeded to admit Section 7 Application on the ground that debt has been accepted. 25. The Corporate Debtor in its Reply has not denied the debt of Rs.1,22,50,000/- but there was no admission that the debt was the Financial Debt. Corporate Debtor having impeached the very basis of the claim of Financial Debt by pleading that Letter was forged and fabricated. Learned Counsel for the Appellant is also right in his submission that right from 2010 to 2021 during which period, the Appellant, Corporate Debtor has been making the repayment of the amount received from Financial Creditor time to time there was at no point of time any ....
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....e provisions of the new Companies Act, 2013 b) The company does not have any continuing default in repayment of loan and interest on the balance sheet date c) Security Given - NIL" 28. The note further also contains a statement "the Company does not have any continuing default in repayment of loan and interest on the Balance Sheet date". It is further relevant to notice that the Financial Creditor in its Reply himself is describing the Balance Sheet and the explanation given in the Balance Sheets in Para 18 of the Reply of the Financial Creditor in the Appeal states as follows: "18. In the context of interest, it is submitted that the Appellant is trying to deny its liability at a belated stage as an after-thought to frustrate the entire purpose of the money having been lent. It is submitted that the Corporate Debtor had expressly admitted in its own balance sheet that the same was received as a loan/advance. It is submitted that the Respondent is in the business of lending money and it's main business and main source of revenue/income is from earning interest from the money lent. It is preposterous to suggest that no interest is payable and the loan w....