TaxTMI 
TaxTMI 
2026 (4) TMI 1518
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....ssion of a petition filed under Section 7 of the IBC by the respondent. 2. The respondent is a money lender. On 24.02.2010, he advanced a loan of Rs. 2,50,00,000/- to the appellant for a period of two months, carrying interest at 12.75% per annum payable on a half-yearly basis. The loan agreement also provided that in the event of default, the appellant would remain liable to pay interest at the stipulated rate. On 31.03.2010, a further loan of Rs. 2,00,00,000/- was taken by the appellant for a period of fifteen days, at 3% per month, again payable half-yearly. The appellant furnished cheques as security against both loans. 3. When presented, the cheques were dishonoured, leading to the respondent filing a complaint under Section 138 of the Negotiable Instruments Act, 1881, before the Metropolitan Magistrate, Tis Hazari, Delhi. During the pendency of those proceedings, the parties entered into a compromise on 31.08.2013, by which the appellant agreed to pay Rs. 3,22,02,660/- within twelve months. It is a fact that by 31.07.2014, the appellant had, in aggregate, made payments of Rs. 3,53,51,520/- to the respondent. 4. When the appellant did not honour the compromise in full....
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....nderlying loan transactions. 8. The NCLAT, by the impugned order dated 01.11.2022, reversed the NCLT's findings. On the question of whether the debt qualified as a "financial debt," the NCLAT held that both loan agreements expressly provided for interest rates and repayment periods and therefore satisfied the "time value of money" requirement under Section 5(8) of the IBC. The NCLAT observed that interest rates of 12.75% per annum and 3% per month were stipulated in the two agreements, respectively, and that the juridical relationship between the parties, as financial creditor and corporate debtor, was established by the loan agreements themselves. The NCLAT also held that the NCLT had erred in failing to notice that the interest rates in the loan agreements predated the 24% per annum interest awarded in the High Court decree. 9. On the question of whether a decree gives rise to a cause of action for initiating CIRP, the NCLAT placed heavy reliance on this Court's decision in Dena Bank (Now Bank of Baroda) v. C. Shivakumar Reddy (2021) 10 SCC 330., particularly paragraph 141 thereof, which states that a judgment or decree for money in favour of a financial creditor would give....
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....s. 92,28,545/-. The respondent's appeal before the Commissioner of Income Tax (Appeals) was dismissed on 21.09.2020. The respondent then approached the Income Tax Appellate Tribunal ("the ITAT") in ITA No. 555/KOL/2020. Before the ITAT, the respondent himself placed on record a computation chart showing the balance outstanding against the appellant. That chart, as extracted in the ITAT's judgment dated 01.09.2022, arrived at an amount of only Rs. 96,48,480/- due from the appellant as on 31.03.2012, after accounting for all loan disbursals, repayments, and adjustments made through M/S. Sriram Compounds Pvt. Ltd. No explanation has been offered by the respondent as to how the amount due can now be claimed to exceed Rs. 12 crores. 13. On 18.10.2024, this Court noted the appellant's statement that it was ready to deposit the full balance decretal amount and directed that the same be deposited within six weeks. In compliance, the appellant deposited Rs. 60,98,847/- by demand draft dated 29.11.2024 with the Registrar General, Delhi High Court, representing the appellant's computation of the balance due under the decree after crediting all prior payments. The appellant also placed on r....
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.... plainly at odds with the claim of Rs. 4,38,00,617/- in the summary suit. Fourthly, the NCLAT held that the income tax proceedings relating to the Assessment Year 2012- 13, decided on 01.09.2022 after the High Court decree of 11.01.2018, were relevant and could be considered. Fifthly, it noted that I.A. No. 17634 of 2022 was pending before the Delhi High Court under Section 151 CPC, and that the entertaining of that application by the High Court, with reference to the income tax proceedings, prima facie cast a doubt on the amount claimed in the summary suit, a question which would be finally determined by the Delhi High Court. Sixthly, the NCLAT concluded that the respondent's computation chart claiming Rs. 12,51,18,074/- as on 28.02.2026, though computed as per the decree dated 11.01.2018, could not be accepted as it would amount to disregarding the above observations. 17. We have heard the learned counsel for the parties. 18. The central question before us is not whether the respondent is owed money by the appellant. That may well be the case. The question is whether, in the facts and circumstances of this case, the initiation and continuation of the Corporate Insolvency Re....
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....rdinary execution or recovery proceedings. 21. In another instance, a three-Judge Bench of this Court in GLAS Trust Co. LLC v. BYJU Raveendran (2025) 3 SCC 625., consolidated the position in paragraph 39.3 in the following terms: "39.3. IBC must not be used as a tool for coercion and debt recovery by individual creditors. Improper use of the IBC mechanism by a creditor includes using insolvency as a substitute for debt enforcement or attempting to obtain preferential payments by coercing the debtor using insolvency proceedings. That the mechanism under the IBC must not be used as a money recovery mechanism has been reiterated in a consistent line of precedent by this Court." This statement of the law is directly applicable to the present case. The respondent, holding a final decree and having the full machinery of civil execution at his disposal, chose instead to invoke the insolvency jurisdiction. Such conduct is precisely what this Court in GLAS Trust (supra) has characterised as an improper use of the IBC using insolvency as a substitute for debt enforcement and as a means of coercing the corporate debtor into payment. 22. This Court had occasion to state the s....
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....ds a decree of the Delhi High Court dated 11.01.2018 for Rs. 4,38,00,617/- with interest at 24% per annum. The decree was affirmed in appeal, and this Court dismissed the Special Leave Petition on 22.10.2021. The decree has attained finality. No one disputes this. 26. The natural and ordinary remedy available to the respondent was to execute the decree under the provisions of the Code of Civil Procedure, 1908. The decree is a money decree, and the machinery for its execution is well established and effective. The respondent chose not to avail of this remedy. Instead, he filed a petition under Section 7 of the IBC on 13.12.2021, barely two months after the SLP was dismissed. 27. The conduct of the respondent in bypassing execution proceedings and directly invoking the insolvency process calls for scrutiny. The appellant is, on its own showing, a solvent company. The learned Single Judge of the Delhi High Court, in the order dated 31.10.2022, passed in I.A. No. 17634 of 2022, recorded the appellant's submission that it was a running company with revenue of approximately Rs. 35 crores, profits of Rs. 8 crores, and 95 full-time employees. The appellant gave an undertaking before ....
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....reliance on this Court's decision in Dena Bank (supra). It is true that in paragraph 141 of that judgment, this Court held that a decree for money in favour of a financial creditor would give rise to a fresh cause of action for initiating proceedings under Section 7 of the IBC. We do not doubt that proposition as a general statement of law. However, that principle does not operate in a vacuum. It does not mean that every decree holder who also happens to be a financial creditor is entitled, as a matter of right, to invoke the insolvency process in preference to execution. The question of whether, in each case, the invocation of the IBC amounts to misuse of the process or to the use of the Code as a recovery mechanism remains a question to be examined on the facts. 32. In the present case, the facts speak for themselves. The respondent held a decree. He did not file execution proceedings. He chose instead to file a Section 7 petition against a solvent, functioning company. The quantum of the 'debt' itself, as contemplated under the code, is seriously disputed. The appellant has deposited Rs. 3,60,98,847/- with the Registrar General of the Delhi High Court and has consistently mai....