TaxTMI 
TaxTMI 
2024 (9) TMI 1421
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.... "Issue notice. Counsel for the Liquidator and Counsel for the IRP accepts notice. Respondents may file reply within three weeks. 2. Learned Counsel for the IRP submits that the publication has been issued, claim has been received and CoC has already been constituted. 3. Let CoC may proceed but no decision shall be taken with regard to any resolution plan. 4. List the appeal on 16.05.2024." 3. Reply has been filed by Respondent No. 1. Both the Parties were heard on 05.09.2024. Both the Parties have also filed their Written Submissions. 4. Brief facts necessary to be noticed for deciding the Appeal are: i. M/s. Kalibre Associates Pvt. Ltd., advanced an amount of Rs.1,00,00,000/- to the Corporate Debtor, M/s. West Star Constructions Pvt. Ltd. on 20.11.2010. ii. The Corporate Debtor was engaged in business operation relating to providing consultancy services in real estate business. iii. Insolvency Proceedings, commenced against M/s. Kalibre Associates Pvt. Ltd. by Order dated 18.01.2019. iv. Mr. Mohan Lal Jain was Resolution Professional (`RP') of M/s. Kalibre Associates Pvt. Ltd. v. Resolution Professi....
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....portunity to place its defence. It is submitted that the Corporate Debtor is engaged in business operation of providing consultancy services in real estate business. The Respondent No. 1 Company approached the Corporate Debtor seeking the services of the Corporate Debtor in October 2010. Respondent No. 1 Company, agreed to pay Rs.1,00,00,000/- of the security amount for research in market. In result amount of Rs.1,00,00,000/- was paid by Respondent Company to the Corporate Debtor on 20.11.2010. The Corporate Debtor issued a Performa Invoice dated 15.12.2012 of Rs.1,20,00,000/-. Tax invoices were not issued subsequently an amount of Rs.1,00,00,000/- was shown as security in the books of the Corporate Debtor. It is submitted that no loan was extended by Respondent Company to the Corporate Debtor nor there was any Loan Agreement or any other document to prove a financial transaction. The Liquidator of the Respondent No. 1 Company without any basis proceeded to file Section 7 Application against the Corporate Debtor. It is submitted that leave was taken by Liquidator from the Adjudicating Authority to take steps for recovery of the amount of M/s. Kalibre Associates Pvt. Ltd., which did....
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....t. It is submitted that NeSL record filed by the Financial Creditor, fully proved the debt and default and the Adjudicating Authority did not commit any error in relying on the NeSL Certificate in holding the debt and default. The Corporate Debtor has not shown to have render any kind of services to the Corporate Debtor for payment of amount of Rs.1,00,00,000/- which was paid by the Financial Creditor to the Corporate Debtor on 20.11.2012. It is submitted that in the Balance Sheet of the Corporate Debtor, also the amount of Rs.1,00,00,000/- is reflected as "other long-term liabilities" which also clearly proves existence of the Financial Debt. 8. We have considered the submissions of the Counsel for the Parties and perused the record. 9. There is no dispute between the Parties that amount of Rs.1,00,00,000/- was transferred by M/s. Kalibre Associates Pvt. Ltd. to the Corporate Debtor on 20.11.2010. Part IV of Section 7 Application contains the particulars of debt in following words : "Part - IV PARTICULARS OF FINANCIAL DEBT 1. TOTAL AMOUNT OF DEBT GRANTED DATE(S) OF DISBURSEMENT That as per the records of the Corporate Debtor available with the Liquidator an amoun....
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....-Parte Order, since the Corporate Debtor could not appear before the Adjudicating Authority. It is the case of the Appellant that Notices were not served. However, it is not necessary to enter into issue as to whether Notices were served on the Appellant or not? Fact remains that Order passed by the Adjudicating Authority was an Ex-Parte Order. 12. First submission which has been pressed by the Counsel for the Appellant is that Liquidator of M/s. Kalibre Associates Pvt. Ltd. has no jurisdiction to file Section 7 Application against the Corporate Debtor. He had taken leave from the Adjudicating Authority to recover the dues of the Company in Liquidation i.e., M/s. Kalibre Associates Pvt. Ltd. It ought to have taken steps for recovery and not to file Application under Section 7. 13. The above submissions have been refuted by the Counsel for the Liquidator and submitted that in the Application filed by Liquidator, a specific prayer was made seeking prior approval to institute suits/legal proceedings on behalf of the Corporate Debtor, including filing of the Section 7 of the Code. The Appellant has brought on the record copy of the Order dated 21.02.2022 passed in the Liquidation....
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....s an amount of Rs.1,00,00,000/- was extended as security, for the payment against the services. Appellant's case is that Performa Invoice of Rs.1,20,00,000/- was also issued by Corporate Debtor, which Performa Invoice has been brought on record as (Annexure A-2) to the Appeal, which Performa Invoice is as follows: 16. Section 7 Application which was filed by the Liquidator claimed debt as a Financial Debt and it was pleaded in Part IV that amount of Rs.1,00,00,000/- was disbursed by the Financial Creditor as loans and advance to the Corporate Debtor on 20.11.2020. The Balance Sheet of the Financial Creditor has been brought on the record in the Balance Sheet of 2017-18 under the heading short terms loans and advances, name of Corporate Debtor is mentioned in the end where an amount of Rs.1,00,00,000/- was mentioned both as on 31.03.2017 as and on 31.03.2018. The same amount of Rs.1,00,00,000/- is further reflected in the provisional Balance Sheet as on 18.01.2019, whereunder Para 2.12 short-term loans and advances amount of Rs.1,00,00,000/- was mentioned against the name of Corporate Debtor as on 18.01.2019. From the Balance Sheet, it is clear that loans and advances are grouped....
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....016 (16 of 2016);] (g) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price and for calculating the value of any derivative transaction, only the market value of such transaction shall be taken into account; (h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution; (i) 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) of this clause." 20. The Notice which was issued by the RP to the Corporate Debtor prior to filing of the Section 7 Application has also been brought on record which was issued by the RP Mohan Lal Jain, who is now working as a Liquidator. In the said Demand Notice, the claim was made of Rs.1,00,00,000/- plus interest and subsequent in Notice dated 20.07.2020 which was issued on behalf of the Liquidator payment of Rs.1,00,00,000/- with 12% interest was claimed. 21. When we look into Part IV of the Section 7 Application, it is clear that in the amount claimed, no i....
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.... Also at SHORT TERM BORROWINGS 31.03.2020 31.03.2019 a) Loans and advances from related parties - - b) Deposits - - Total - - NOTE - 7 Also at Also at Trade Payables 31.03.2020 - 31.03.2019 - - - - - NOTE - 8 OTHER CURRENT LIABILITIES Also at Also at Cheque Issue but Not Present into Bank 31.03.2020 31.03.2019 - - - - NOTE - 9 Also at Also at 31.03.2020 31.03.2019 SHORT TERM PROVISIONS (a) Provision for employee benefits: - - - - (b) Others Audit Fees Payable 227,506.00 199,926.00 227,506.00 199,926.00 ....
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....with the performance of the other conditions of the contract by the first respondent. As there is no clause regarding forfeiture of the security deposit or part thereof, the corporate debtor was liable to refund the security deposit after the period specified therein was over with interest @21% per annum. Since the security deposit payment had no correlation with any other clause under the agreements, as held by the NCLAT, the security deposit amounts represent debts covered by subsection (11) of Section 3 of the IBC. The reason is that the right of the first respondent to seek a refund of the security deposit with interest is a claim within the meaning of subsection (6) of Section 3 of the IBC as the first respondent is seeking a right to payment of the deposit amount with interest. Therefore, there is no manner of doubt that there is a debt in the form of a security deposit mentioned in the said two agreements. 17. To decide whether the second condition had been fulfilled, it is necessary to refer to the factual findings recorded in the impugned judgment. The NCLAT has referred to the letter dated 26th October 2017 addressed by the corporate debtor to the first responden....
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....ounsel for the Respondent that even if the amount is treated as a Security Deposit, it will be a Financial Debt. As held by the Hon'ble Supreme Court in `Global Credit Capital Ltd. & Anr.' (Supra), the real nature of the transaction has to be found out before coming to the conclusion that whether debt is a Financial Debt or not? 28. In the facts of the present case, the Adjudicating Authority in the Impugned Order has relied on record of default by NeSL and held that Report is sufficient evidence to arrive at the conclusion to an amount of debt. There can be no dispute that report of NeSL is an important piece of evidence, but in the facts of the present case where the Corporate Debtor has no opportunity to place its defence, it cannot be said that reliance on NeSL Certificate was conclusive evidence to come to the conclusion that there was a Financial Debt. 29. Adjudicating Authority in Paragraph 3 of the Order has noticed the Balance Sheets maintained by the Corporate Debtor. Although the Balance Sheets have been noticed, but the Adjudicating Authority failed to notice that long-term borrowing and long-term liabilities have been mentioned under two different heads. Hence, n....
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....interest but that cannot be a ground for assuming that the loan was not interest- bearing. It is an undisputed fact that the Respondent No. 1 has not placed on record any document which shows that the disbursal made was in the nature of loan wherein interest was specifically payable. Be that as it may, we are of the considered opinion that the IBC does not provide for any prescriptive requirement for the Financial Creditor to place on record formal written agreements/documents between the parties to establish that the disbursal made was in the form of loan with interest. Given this background we therefore find that the Adjudicating Authority committed no error in holding that there was a financial debt owed by the Corporate Debtor to Respondent No. 1." 32. The Financial Statement of Financial Creditor where it is mentioned as loan and advances and the Financial Statement of Corporate Debtor where it is mentioned as long-term liabilities have already been noticed by us in proceeding Paragraph of this Judgment. As observed, there is no appropriate consideration by the Adjudicating Authority, regarding nature of debt and without completely looking to the Balance Sheets of the Corpo....
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....00/- was disbursement towards time value of money. Amount is of Rs.1,00,00,000/- is shown right from 2010 to 2020 and in the Balance Sheet of the Corporate Debtor, the amount is shown as Security amount as long-term liability. 35. From the facts as noticed above, we are satisfied that ends of justice be served in remitting the matter for fresh consideration before the Adjudicating Authority, with liberty to the Appellant to file a Reply within 3 weeks from today. 36. In result, Appeal is allowed Order dated 06.03.2024 is set aside. Appellant is allowed three weeks time to file a Reply to Section 7 Application before the Adjudicating Authority. The Respondent under Section 7 Application will also have opportunity to file a Rejoinder to the Reply within two weeks thereafter. Parties may request the Adjudicating Authority to fix a date after six weeks for fresh consideration of Section 7 Application. We make it clear that our observations made in the Orders have been made only for purposes of deciding the Appeal and may not be treated any conclusive opinion on the issues which are open to consideration in Section 7 Application. Adjudicating Authority may proceed to decide Sectio....