TaxTMI 
TaxTMI 
2026 (1) TMI 1091
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....in I.A. No. 1220 of 2023 & I.A. No. 1630 of 2023 in C.P. No. (IB) 983 (ND)/2020. By the impugned order, the Adjudicating Authority has dismissed I.A No. 1220 of 2023 filed by the Appellant-Lalit Modi and rejected the claims of the Appellant in the CIRP of the Corporate Debtor and has allowed I.A No. 1630 of 2023 filed by the RP against the Appellant under Section 66 of IBC. Aggrieved by the impugned order, the present appeal has been preferred by the Appellant. 2. The Corporate Debtor-Vibrant Buildwell Pvt. Ltd. was admitted into CIRP on 22.02.2022 following which the Resolution Professional ("RP" in short) invited claims from the creditors of the Corporate Debtor by way of public announcement made on 24.02.2022. The Appellant submitted a claim of Rs 15,46,56,889/- on 30.05.2022 which claim of the Appellant was rejected by the RP-Respondent No.1 on 06.06.2022. Following the rejection of their claim, the Appellant filed IA No. 2769 of 2022 before the Adjudicating Authority seeking directions for admission of their claim. While the IA No. 2769 of 2022 was pending adjudication, in the meantime, the RP on 29.10.2022 had filed IA No. 5458 of 2022 for approval of the resolution plan. ....
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....head of 'Other Long-Term Liabilities' and under the head "Advances" which therefore reinforces the existence of financial debt. Emphasising that the Appellant had a right to payment under the Loan Agreement which constituted sufficient basis for filing of claim, the rejection of their claim on the ground that no charge had been registered and that no secured loan is reflected in the name of the Appellant was untenable as non-registration of charge did not render the transaction under the Loan Agreement void or render the debt as unrecoverable. Submission was further pressed that finding of the Adjudicating Authority that there was no evidence of deduction of TDS on interest was misplaced. In any case, it was contended that the component of interest was not a sine qua non for bringing a debt within the fold of a "financial debt" as held by the Hon'ble Supreme Court in Orator Marketing Pvt. Ltd. Vs Samtex Desinz Pvt. Ltd. 2021 SCC Online SC 513. Assertion was made that once the amount claimed was recorded in the balance sheet of the Corporate Debtor and there existed a Loan Agreement to show the disbursal, there was no reason for the Adjudicating Authority to reject the claim. It was....
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....ting the contentions made by the Appellant, Shri Sumant Batra, Ld. Counsel making submissions on behalf of the Respondent No.1-RP, submitted that the Loan Agreement was made on Stamp Paper which was not obtained from authorised or verifiable sources making the authenticity of the Loan Agreement document doubtful. Further, the Loan Agreement was unilaterally executed by the Appellant with his brother who had no authorisation from the Corporate Debtor for being a signatory on their behalf. Contending that the genuineness of the Loan Agreement was itself questionable, the claim filed on the basis of such an agreement was untenable. It was strenuously asserted that the claims were also unfounded as the balance sheet of the Corporate Debtor did not reflect any financial liability or loan obligation. Further the audited Financial Statements of Corporate Debtor for FY 2016-2017 showed Rs. 48,50,000/- in the head of 'Other Advances' and not as an unsecured loan. There was no provision of interest in the books of Corporate Debtor nor any document on record to support their claims including provision of interest in their books or TDS Certificate/Form 16-A. As per records of the Corporate Deb....
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....e RP, Shri Krishnendu Dutta, Ld. Sr. Counsel for SRA-Respondent No.2 submitted that the Loan agreement basis which claim has been filed by the Appellant before the Respondent No.1-RP was a forged and fabricated document and its authenticity and genuineness are disputed as it was executed without any proper authorization from Corporate Debtor. It was vehemently contended that the claim filed by the Appellant was done basis a Loan Agreement which was the outcome of collusion between the two brothers who are ex-Directors of the suspended management. It was also contended that perusal of the Loan Agreement read with the audited balance sheet of the Corporate Debtor also showed that the aforesaid amount was not in the nature of a secured loan but was recorded under the head of 'Other Advances' and therefore did not partake the character of a financial debt. Moreover, while the loan was purportedly advanced for the limited and specific purpose of facilitating land development activities and meeting related statutory dues, it was diverted for the purchase of Audi A6 Car. It was also asserted that the Appellant had claimed a total amount of Rs. 15,46,56,889/- of which principal amount was ....
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....cuments which include the Loan Agreement; the Bank statements showing disbursement; the Audited Financial Statement of the Corporate Debtor as on 31.03.2017 as well as the interest calculation and that this was clearly reflected in the Form-C submitted by him as has been placed at page 230 of the Appeal Paper Book ("APB" in short). On the observations made by the Adjudicating Authority at para 27 of the impugned order that there were discrepancies in the Loan Agreement on account of lack of licenced vendor's stamping; lack of serial number and date of purchase of stamp paper besides the absence of any Board Resolution authorising the execution of the Loan Agreement it was contended by the Appellant that the Adjudicating Authority had wrongly raised doubts on the validity and enforceability of the Loan Agreement since the Adjudicating Authority did not enjoy the jurisdiction to decide on the validity and enforceability of contractual agreements being an evidence-based exercise. Per contra, it is the case of the Respondents that besides the deficiencies and defects noted in the stamp paper on which the Loan Agreement had been executed, the absence of formal authorisation by the Corpo....
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....t claimed by the Appellant under the head of 'Other Advances' and not a loan. 11. When we look at the balance sheet of the Corporate Debtor for FY 2016- 17 which appears at page 201 of the APB, it reads to the effect: Vibrant Buildwell Private Limited Notes Forming Part of Balance Sheet as at 31st March, 2017 Note '3' Long Term Borrowings Particulars As at 31st March 2017 As at 31st March 2016 Rs. Rs. Unsecured Loans From Related Parties Raj Associates 1,734,646.00 1,099,660.00 Dilwara Leasing and Investment Limited 176.241,966.00 154,311,932.00 Total 177,976,612.00 155,411,592.00 Note '4' Other Long Term Liabilities Particulars As at 31st March 2017 As at 31st March 2016 Rs. Rs. Advances Against Registration Charges Arti Mehta - 291,008.00 Gopal Krishna Gupta - 291,008.00 Other Advances Primex Estate Private Limited 3,095,000.00 3,095,000.00 J. R. Modi Associates Limited 400,000.00 400,000.00 Surender Modi 510,000.00 510,000.00 Lalit Modi 4,850,000.00 ....
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....t the liability owed by the Corporate Debtor to the Appellant, nevertheless, it remains unexplained as to then why the Appellant failed to assert his right when the objections were sought before mortgaging the land to DTCP, Haryana. 14. We now come to another limb of argument of the Appellant that the Adjudicating Authority had erroneously held that the Appellant was not entitled to file claims merely because the records of the Corporate Debtor did not reflect accrual of interest in any financial year. It was contended that simply because the Corporate Debtor had not made provision for interest payment in the balance sheet or had failed to deduct interest, this cannot become a ground for denying the sum advanced by them to be treated as a financial debt. It was further contended that in terms of the judgment of the Hon'ble Supreme Court in Orator judgment supra, even interest free loans are financial debts within the meaning of IBC. 15. We have no quarrel with the proposition of law laid down in the judgment of Hon'ble Supreme Court in Orator judgement supra that financial debt also includes any sum raised under any transaction having the commercial effect of borrowing even i....
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....ed for the purpose of raising the loan in terms of the Loan Agreement as stipulated at Clause 2 thereof. The purpose for which loan was to be used was for the purpose of developing the land available with the Corporate Debtor and was not to be used for any other business purpose. However, in the present case, as the loan was used for purchase of an Audi A6 Car for personal use of the Appellant, the Adjudicating Authority has correctly held that the Appellant has filed a claim to recover the sum purportedly advanced by him to the Corporate Debtor which not having been utilised for the purpose for which the sum was advanced tantamount to defrauding the creditors of the Corporate Debtor. 18. When we look at para 17 of the impugned order, we find that the Adjudicating Authority has taken cognisance of the purpose for which the Loan Agreement by extracting Clause 2 in the impugned order. From a plain reading of Clause 2, it is amply clear that the loan was to be used for development of land and Clause 2.2 made it adequately clear that diversion of the loan for any other business purpose was not permissible. However, when we look at the bank statement of the Corporate Debtor as placed....