TaxTMI 
TaxTMI 
2025 (9) TMI 1093
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.... M/s Subh Chintak Commotrade Pvt. Ltd. (the Erstwhile Creditor who has now amalgamated with Drolia Agencies Pvt. Ltd./Respondent No. 2) was in trade of textile materials and had approached the appellant in 2009 for the supply of textile materials and fabrics and for that purpose has paid an advance of Rs. 50 lakhs, however, there was a delay in supply of materials due to some dispute in the quality and therefore, the advance which was given remained lying with the appellant and could only be settled by the supply of the textile material on 01.04.2016 and thus the advance money taken by the appellant was discharged by the supply of material by way of 23 invoices of amount of Rs. 72,39,520/- on 01.04.2016 pertaining to which the Respondent financial creditor has also issued confirmation of account on 04.04.2016. 3. It is further stated that an application under Section 7 of the Code was filed by the original creditor M/s Subh Chintak Commotrade Pvt. Ltd. for default of financial debt of Rs. 50 lakhs which was already settled in the manner stated herein before, however the Ld. Tribunal vide its order dated 09.07.2019 dismissed the same for non-prosecution and a restoration applicat....
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....ad deducted and deposited the TDS on the interest amounting to Rs. 4,50,000/- (@ 9% p.a.) on Principal amount of Rs. 50,00,000/- which is also reflected in Form 26 AS of Subh Chintak from the assessment year 2010-2011 till assessment year 2015-2016. 8. It is further stated that the Respondent continuously demanded the repayment of this inter corporate loan but he was assured by the appellant, however the amount was not paid and thus a notice was served on the CD on 04.04.2016 which was ignored by the appellant and no response of the same was given. 9. It is further stated that in the financial statement of 2016-2017 of the corporate debtor/appellant there is clear acknowledgement of debt by the CD and thus a fresh limitation period starts from this acknowledgement moreover the CD had reflected the amount of loan in their financial statements for the financial years commencing from 2009 to 2017 and the calculation of the loan amount made by the Creditor is also tallying exactly with the loan amount shown by the CD/appellant in the Balance Sheet of the year 2016-2017 i.e. Rs. 74,82,590/- under the head of loan term borrowings (Pg- 179 of the Appeal Paper Book). 10. It is als....
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....the examination of the balance sheet of CD as on 31.03.2017 pertaining to the financial year 2016- 2017, in order to assess, as to whether the application is barred by limitation. 16. It is vehemently submitted that Rs. 50,00,000/- were given only as advance money to the appellant by Subh Chintak for supply of fabric and there was some dispute with regard to its quality this money remained pending for long and since the CD had kept the money as advance a provision of 9% interest was made and TDS was also deducted till the year 2015-2016 and ultimately the advance given by the financial creditor was settled on 01.04.2016 by supply of material/goods which have also been acknowledged by the financial creditor by way of 12 invoices totaling Rs. 72,39,520/- and confirmation with regard to the same has also been issued by the financial creditor on 04.04.2016. 17. It is vehemently submitted that since there is no acknowledgment of alleged financial debt in the financial accounts of the CD in its financial statement of the financial year 2016-2017, in absence of any acknowledgment in writing the application was barred by limitation. 18. It is also submitted that the Ld. Tribunal h....
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....of limitation again after affording opportunities to the parties and after appreciating various documentary evidence the Tribunal has found that there is a clear acknowledgment of the debt in the financial accounts statements of the CD of 31.03.2017 and therefore held that the application had been moved within the extended period of limitation by virtue of Section 18 of the Indian Limitation Act. 24. It is further submitted that the CD has reflected the amount of loan in its financial statements right from the financial year 2009-2010 till 2016-2017 and the financial debt was categorised as sundry creditors/unsecured loan or long-term borrowings in its balance sheets which shows that it was not an advance for sale of goods but was an inter corporate loan. 25. It is further submitted that so far as the issuance of a false certificate by the CA of the appellant is concerned a complaint has already been filed against the said CA firm for issuing a false certificate. 26. It is further submitted that a notice under Section 433 and 434 of the Companies Act, 1956 was also issued, on 04.04.2016 to the CD for the payment of the loan amount however the said notice was not responded ....
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....uld show the debit of this amount from the bank account of Subh Chintak, who has been merged with Respondent No. 2 in favour of the CD. On default in payment committed by the CD a notice is claimed to have been issued by Subh Chintak under Section 433 and 434 of the Companies Act, 1956 read with Section 271 of the Companies Act on 04.04.2016. It is claimed that neither the loan has been paid nor reply to this notice has been given thus another demand notice is stated to have been issued by the Respondent No. 2 on 05.02.2019 on the registered address of the CD demanding Principal amount of Rs. 50,00,000/- plus accrued interest which is equal to Rs. 88,74,520/- till 31.01.2019. Default stated to have occurred on 15.02.2019 i.e. after ten days of the notice. 30. In Part-IV of the Form 1 following information has been provided by the financial creditor: Part-IV Particulars of Financial Debt 1. Total Amount of Debt Granted Date(s) of Disbursement As per arrangement and understanding between the parties, an inter -corporate loan of Rs. 50,00,000/- was disbursed to the Corporate Debtor by Subh Chintak Commotrade Pvt. Ltd. (now merged with Drolia Agencies Pvt. Ltd.) on 7t....
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....gencies Pvt. Ltd. (herein referred to as Financial Creditor) with all its assets and liabilities vide order passed by this Hon'ble tribunal. Copy of the said order is annexed herewith and marked as Annexure- 15 On effective of this order, all the rights, properties, interest, liabilities and duties of Subh Chintak Commotrade Pvt. Ltd. be transferred and be vested without further act or deed in Drolia Agencies Pvt. Ltd. pursuant to Section 230 to 232 of the Companies Act, 2013. The dues of the corporate Debtor are admitted and unimpeachable. Hence, Drolia Agencies Pvt. Ltd. (the Financial Creditor herein) is filing this instant section 7 application. 2. Amount claimed to be in default and the Date on which the default occurred Amount of default: The amount claimed as default is Rs. 50,00,000/- towards the principal amount given as Inter- Corporate Deposit. Further an interest of Rs. 40,39,250/-remains unpaid as on 31st March, 2019. Date of Default: 4th April 2016 and continuing every day including on 5^th February 2019 Total amount outstanding as on 31^st March, 2019 is Rs. 90,39,250/-. Working of Computation Sheet for the Amount in Default is Annexed herewith & Mark....
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....2 Long Term Borrowings 60,24,520 In note 6 with name of Financial Creditor; 2012-13 Long Term Borrowings 64,29,520 In note 6 with name of Financial Creditor; 2013-14 Long Term Borrowings 1,69,79,177 Note no 4 but name of Financial Creditor and details are not given; 2014-15 Long Term Borrowings 2,00,07,791 Note no 4 but Financial name of Creditor and details are not given; 2015-16 Long Term Borrowings 72,39,520 Note no 4, and figures matches with our calculation and respondent confirmed the same in his submission before Hon'ble NCLT; 2016-17 Long Term Borrowings 74,82,590 No details are provided in Financial Statement. In the aforesaid table till 2016-2017 loan amount is claimed to have been shown by the CD in his financial account books, though under different headings. 35. After filing of the application under Section 7 of the Code i.e. IA No. 1781 of 2019, reply was filed by the appellant copy of which has also been placed at page no. 274 of the appeal paper book. Apart from plea of limitation the plea of receiving Rs. 50,00,000/- as advance for supply of fabric and supply of fabric against this amount on....
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....en filed and also that the transaction is of the year 2009 and acknowledgment is stated to be of the year 2016-2017 which is beyond the limitation period and also not a direct acknowledgment. 41. As stated earlier Respondent No. 2/Drolia Agencies Pvt. Ltd. (assignee of the financial debt) preferred an appeal being CA (AT) (Ins) No. 1054 of 2022 which was decided by a coordinate Bench of this Tribunal on 07.12.2023. 42. It is also pertinent to mention here that during the course of hearing of appeal an additional affidavit was filed by the appellant Bijendra Prasad Mishra stating that the application is barred by limitation as the loan has not been recorded in balance sheet of date 31.03.2017. 43. It is also worth to mention here a certificate of M/s Pratap Singh Surana a CA firm was filed by the CD stating that unsecured sundry advances shown in the balance sheet dated 31.03.2017 does not belong to Subh Chintak while appellant contended that liability of the Respondent has been shown in the balance sheet of the Respondent from year 2019 till 31.03.2017. 44. It is in the background of these conflicting facts this Appellate Tribunal in CA (AT) (Ins) No. 1054 of 2022 had o....
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....als confirmation of accounts by Drolia itself is resolved to sum of Rs. 72,39,520/- in balance sheet of 31.03.2017 while the figures given in the certificate of the CA firm did not match with the balance confirmation certificate. (ii) On 04.04.2016 a notice has been given by Subh Chintak to CD for Rs. 72, 39,520/- showing dues till 31.03.2015 and in the balance sheet of the CD dated 31.03.2016 the balance due under the head of long term borrowing is also shown as Rs. 72,39,520/- which perfectly matches with the amount shown in the notice as well as in the confirmation of accounts by the CD, leaving no room for disbelieving financial debt. (iii) Petition has been filed within limitation and debt and default has been admitted and (iv) Acknowledgment of debt is emerging in the balance sheet of CD dated 31.03.2017. The aforesaid findings have been challenged by Ld. Counsel for the appellant by submitting various submissions which we have already recorded. The record would reflect that according to own admission of appellant provision of 9% interest was made and TDS was also deducted till the year 2015-2016 on the amount of Rs. 50 lakhs which was admittedly....
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....hat in fact no such supply has been made. It is also highlighted that the closing inventory of the appellant as on 31.03.2016 is shown in the books of account as Rs. 30,94,726.06/- whereas goods to the tune of Rs. 72,39,250/- is shown to have been supplied. 50. We are of the considered view that claim of the appellant to have discharged the advance of Rs. 50,00,000/- by supplying goods of Rs. 72,39,250/- on01.04.2016 is not substantiated by the record, especially by the presence of loan amount in the balance sheet of the CD of date 31.03.2017. 51. We are of the view that in the preceding years also pertaining to which the appellant has admitted entry of this loan amount (according to CD as advance money) has been shown irregularly, which reveals that perhaps the account books of the CD were not maintained on the basis of established accounting standards. However, the matching of the figure of loan as calculated by the financial creditor in the balance sheet of CD of date 31.03.2017 which has also been relied on by the Tribunal and has also been shown in Part -IV of Form I appears to be a substantial evidence with regard to the disbursement of the loan of Rs. 50,00,000/-. 5....
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....respect of a claim which is due from any person and includes a financial debt and operational debt; 3(12) "default" means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not paid by the debtor or the corporate debtor, as the case may be; 5(7) "financial creditor" means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to; 5(8) "financial debt" means a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes- (a) money borrowed against the payment of interest; (b) any amount raised by acceptance under any acceptance credit facility or its de-materialised equivalent; (c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument; (d) the amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital lease under the Indian Accounting Standards or such other accounting standards as may be prescribed....
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....may be proved by any of the document referred to in Sub-regulation 2(b) also. Thus Claim of a financial Creditor may be proved by various documents mentioned therein and it cannot be assumed that in absence of a written contract the existence of legally payable financial debt could not be established, per contra the existence of such debt may very well be proved by other documents referred therein. 55. A coordinate Bench of this Appellate Tribunal in 'Agarwal Polysacks Limited vs K.K. Agro Foods and Storage Limited, 2023 SCC Online NCLAT 624, while considering its earlier decisions i.e. "Company Appeal (AT) (Ins.) No. 713 of 2019, Prayag Polytech Pvt. Ltd. vs. Gem Batteries Pvt. Ltd.", "Company Appeal (AT) (Ins.) No. 468 of 2019, Jagdambey International vs. Visa Powertech Pvt. Ltd.", "Company Appeal (AT) (CH) (Ins.) No. 108 of 2023, 'IFCI Ltd. vs. Sutanu Sinha" and "Company Appeal (AT) (Ins.) No. 251 of 2020, 'Pawan Kumar vs. Utsav Securities Pvt. Ltd." (relied on by appellant) held as under;- "11. We need to test the submission of learned counsel for the Respondent that the written financial contract is necessary for proving debt. A financial contract supported by fina....
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....t of interest, the absence of formal written agreement would not bar the 'Financial Creditor' (the Respondent No. 1 herein) from initiating the CIRP. 15. We take note from the record made available that there have been clear acknowledgments which have been issued by the 'Corporate Debtor' for the money received from the Respondent No. 1 which also mentioned the quantum of interest payment to be made by the 'Corporate Debtor' to the Respondent No. 1. Similarly, we also take into account the fact that TDS was deducted regarding interest paid and the name of the Appellant as 'dedutor' and the name of the Respondent No. 1 as 'deductee' is clearly evident. This does not give any scope for benefits of the 'Appellant'." In Desana Impex Limited vs. Brick and Mortar Realty Private Limited, Company Appeal (AT) (Insolvency) No. 318 of 2024 decided on December 18, 2024, this tribunal held as follows: - "29...........Adjudicating Authority has placed great reliance on RBI Master circular on Fair Practices Code, which makes written agreement mandatory. It is to be noted that this was issued on 01.07.2015. However, Corporate Debtor had approached the Financial Creditor in the....
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....d. Vs K. K. Agro Foods & Storage in CA(AT)(Ins)No.1126 of 2022 wherein after going into Regulation 8(2) of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and Rule 3(1)(d) and Rule 4(1) of Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 which regulates filing of application by the Financial Creditors, it has been held that written financial contract is not a pre-condition or an exclusive requirement for proving existence of debt. It has been further amplified therein that the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 and CIRP Regulations makes it clear that financial debt can be proven from other relevant documents and it is not mandatory that written financial contract can be the only basis for proving the financial debt. 12. It is the contention of the Respondent No.1 that the Corporate Debtor had clearly acknowledged the receipt of assistance from the Financial Creditor in their balance sheet for the year ending 31.03.2017 which was filed with the RoC. The assistance received was reflected under the heading "Short term Borrowings Inter Corpo....