TaxTMI 
TaxTMI 
2025 (10) TMI 972
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....nto insolvency on 06.03.2024 under Section 7 of the Code. This was an ex-parte order and against that an Appeal was filed before this Tribunal in CA(AT)(Ins.) No. 666 of 2024 and vide order dated 23.09.2024 this Tribunal remanded the matter back to NCLT to determine and construe the real nature of the transaction and set aside the initiation of the CIRP order. 3. Thereafter, the Adjudicating Authority came to a conclusion on 14.02.2025 through the Impugned Order admitting Section 7 Application against the CD thereby initiating CIRP against the CD. Brief Facts of the Case 4. The Corporate Debtor (CD) - West Star was engaged in providing consultancy services in the real estate sector. In October 2010, Respondent No.1-Kaliber approached the Corporate Debtor for consultancy services in relation to a commercial real estate project. Pursuant to a mutual understanding, Respondent No.1-Kaliber agreed to pay a sum of Rs. 1,00,00,000/- as a deposit (as claimed by the Appellant) to facilitate market research and analysis. On 20.11.2010, the Corporate Debtor (CD)-West Star received the said amount from Respondent No.1-Kaliber. Upon completion of the agreed services, the Corporate Debt....
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....However, the Adjudicating Authority, without undertaking any examination of the underlying transaction or applying its mind to the character of the alleged liability, has erroneously proceeded to hold the Corporate Debtor in default and to admit the Section 7 Application. 9. The genesis of the present dispute lies in a proforma invoice dated 15.12.2012 issued by the Corporate Debtor - M/s West Star Constructions Pvt. Ltd. for "Research Services in Real Estate." Under the arrangement, the total contract value was agreed at Rs. 1.20 crore, against which Respondent No.1-Kaliber advanced a sum of Rs. 1 crore to the Corporate Debtor towards performance of the said services. 10. Appellant contends that, owing to tax implications and since the balance amount of Rs. 20 lakh was never paid; the Corporate Debtor was constrained not to raise a final invoice. Accordingly, only a proforma invoice for Rs. 1 crore was issued. Several years thereafter, Respondent No.1-Kaliber, acting first through its Resolution Professional and subsequently as Liquidator, raised a demand of Rs. 1,00,00,000/- along with interest, alleging that the said amount constituted a financial debt. The sole basis for ....
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....ng AA has not given clear findings on these core objections so Adjudicating Authority has acted contrary to the binding remand directions of the Appellate Tribunal dated 23.09.2024. 13. The Appellant contends that the Corporate Debtor is a financially solvent and viable entity. Apart from the disputed claim of Respondent No. 1, no other creditor lodged any claim before the Resolution Professional. The sole reliance on the present disputed claim demonstrates that the Section 7 proceedings were never initiated for resolution of genuine financial distress, but rather as a means of securing recovery of money. The legislative intent of the Insolvency and Bankruptcy Code, 2016, is not to provide an alternative forum for money recovery, but to ensure resolution and restructuring of a Corporate Debtor in genuine cases of insolvency. Appellant claims that this has been reiterated by the Hon'ble Supreme Court in ^1M/s Invest Asset Securitisation and Reconstruction Pvt. Ltd. v. M/s Girnar Fibres Ltd., Civil Appeal No. 3033 of 2022, 2022 SCC OnLine SC 808. Submissions on behalf of the Respondent 14. This Appellate Tribunal vide its judgment dated 23.09.2024 set aside the Order dated 0....
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....inst the name of the Financial Creditor as "other long term liabilities". It is the case of the Corporate Debtor that the Corporate Debtor rendered consultancy services in real estate business for which Proforma Invoice for an amount of Rs. 1,20,00,000/- (Rupees One Crore Twenty Lakhs Only) was raised, out of which Rs. 1,00,00,000/- (Rupees One Crore Only) was received by the Corporate Debtor. It belies logic that after receiving Rs. 1,00,00,000/, the same amount is still maintained as a liability in the balance sheets of the Corporate Debtor. However, the total amount raised in the Proforma Invoice is Rs. 1,20,00,000/- (Rupees One Crore Twenty Lakhs Only) and liability shown in balance sheets is Rs. 1,00,00,000/- (Rupees One Crore Only). Further, the Corporate Debtor never demanded the remaining balance amount of Rs. 20,00,000/- (Rupees Twenty Lakhs Only) from the Financial Creditor which makes the case of the Corporate Debtor false on the face of it. It is only on 01.10.2024 when the Corporate Debtor submitted its claim of Rs. 20,00,000/- (Rupees Twenty Lakhs Only) to the Liquidator of the Respondent No.1. 18. It is claimed that the public announcement was made on 05.01.2020 a....
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....e case that the Respondent No.1/Financial Creditor extended any service or made any supply to the Appellant qua which the trade payables are there in balance sheets. 22. The Respondent No. 1 had disbursed an amount of Rs. 1,00,00,000/- (Rupees One Crore Only) to the Appellant as loan and advances which was repayable on demand and accordingly demands were raised vide letters dated 18.07.2019 and 20.07.2020. The said amount is also reflecting in the balance sheets as on 31.03.2018 and 18.01.2019 of the Respondent No. 1 against the name of the Appellant as "loan and advances to others". Further, the balance sheets of the Appellant are also reflecting the said amount against the name of the Respondent No. 1 as "other long-term liabilities" thereby, clearly establishing debt and default. 23. It is contented by the Respondent that the Hon'ble Supreme Court in 2Pioneer Urban Land and Infrastructure Limited and Ors. vs. Union of India (UOI) and Ors. (09.08.2019 - SC): MANU/SC/1071/2019 [Para 70-71 @ Pg. 96] has interpreted "time value of money" and observed that "disbursal" must be money and must be against consideration for the "time value of money", meaning thereby, the fact that s....
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....r on the Judgment of the Hon'ble Supreme Court in 7Vidarbha Industries Power v. Axis Bank Limited contending that the proceedings under Section 7 of IBC are liable to be dismissed if it is established that the Corporate Debtor is a going concern and solvent company. Respondent No.1 - Kaliber contends that this Hon'ble Appellate Tribunal in 8Edelweiss Asset Reconstruction Company Ltd. v. Takshashila Heights India Pvt. Ltd., Company Appeal (AT) (Insolvency) No. 2261 of 2024 [Paras 42 & 46 @pg. 417 & 422], has held that the arguments that the Corporate Debtor being a going concern or a viable entity does not absolve the Corporate Debtor from its liabilities to repay the outstanding dues of the Financial Creditor, once the NCLT is satisfied that the default has occurred, there is hardly any discretion left with the NCLT to refuse admission of the Application under Section 7 IBC. Since in the present case the debt and default on the part of the Corporate Debtor has already been established, therefore, the Adjudicating Authority has rightly admitted Section 7 application. Appraisal 28. Heard counsels of both sides and also perused material placed on the record. 29. We note that ....
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....ists, the Adjudicating Authority has discretion not to admit the Section 7 Application, particularly when the Corporate Debtor is a solvent and going concern. 31. The Respondent No.1 - Kaliber disputes the consultancy services narrative, contending that no evidence of services rendered has been produced. It is argued that the proforma invoice of 2012 is a sham document relied upon belatedly to convert a loan transaction into a services transaction. The Respondent highlights that the amount of Rs. 1,00,00,000/- was disbursed on 20.11.2010, much prior to the alleged invoice of 2012, which belies the claim of advance for services. The Respondent submits that the balance sheets of the Corporate Debtor consistently reflect Rs. 1,00,00,000/- as "other long-term liabilities" against the Financial Creditor. Relying on 3G.S. Buildtech (P) Ltd. v. Ardee Infrastructure Venture (P) Ltd., it is urged that balance sheet entries are reliable evidence of existence of financial debt. The Respondent relies on 2Pioneer Urban Land v. Union of India and Agarwal Polysacks Ltd. v. K.K. Agro Foods, to argue that absence of a formal loan agreement is not fatal, and what matters is disbursal of money aga....
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....ported by the decision of the Hon'ble Supreme Court of India in 5Manish Kumar which supports the case of the Corporate Debtor to recover its dues from its debtors. Even if the application under Section 7 of the IBC has been filed for the purpose of recovery, then also the same is not barred by law. 35. It is also noted that appellant has tried to place reliance on ^7Vidarbha which does not support the case of the Appellant. The Vidarbha Judgment specifically says that "Ordinarily, the Adjudicating Authority (NCLT) would have to exercise its discretion to admit an application under Section 7 of the IBC and initiate CIRP on satisfaction of the existence of a financial debt and default on the part of the Corporate Debtor in payment of the debt, unless there are good reasons not to admit the petition". Since in the present case the debt and default on the part of the Corporate Debtor has already been established, therefore, we cannot find any infirmity in the decision of the Adjudicating Authority in admitting Section 7 application. 36. With respect to defence of this being a consultancy fees the Appellant's case rests upon a proforma invoice dated 15.12.2012, raised nearly two y....