TaxTMI 
TaxTMI 
2026 (7) TMI 1195
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.... initiative promoted by the Government of India. The other material facts which are relevant for the current purpose are: a) Appellant claims to have advanced loans to the first respondent/corporate debtor on multiple occasions, which aggregates to Rs.. 2,26,45,568/- and it remained unpaid, and together with interest calculated @ 18% per annum, a sum of Rs.. 3,55,54,900/- became due and payable. b) While so, on 14.05.2022, appellant issued a demand notice calling upon the corporate debtor to repay the outstanding amount. Upon failure of repayment, the appellant instituted the present petition under Sec. 7 of the Code before the Adjudicating Authority, for initiating a CIRP. c) During pendency of the petition, Respondent No:2 and 3, both partner or legal representative of a deceased partner of the appellant firm, took out Intervenor Petition 44 of 2023 and 46 of 2023 respectively and opposed the initiation of CIRP against the first respondent and questioned the authority of the persons who had instituted the proceedings. d) Eventually, vide an Order dated 07.02.2024, the Adjudicating Authority dismissed the Section 7 application holding that there....
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.... three partners remained, and the petition under Sec.7 was instituted with two, who constituted the majority of the surviving partners, consenting to it. 4. The learned counsel for the first Respondent contended: a) no financial debt within the meaning of Section 5(8) of the Code has been established by the Appellant since there exists no contract or loan agreement, repayment schedule, due date, interest stipulation or any other document evidencing a borrowing arrangement between the parties. The amounts advanced were in the nature of financial assistance extended to support the corporate debtor and were never intended to constitute a financial debt. Indeed, the amount in question was consistently reflected in the books of the Corporate Debtor as sundry creditors, and not as financial borrowings. The financial statements containing such disclosures were signed by Shri Nandkishore Jaynarayan Jethale, who is one of the partners of the appellant firm, while he was also the director of the corporate debtor. b) the Demand Notice dated 14.05.2022 claimed only the principal amount of Rs. 2,26,45,568/- and contained no claim for interest. The claim towards interest was....
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....ts and interests of the partnership while disregarding the rights of the estate of the deceased partner. d) Respondent No.3 has a legitimate interest in protecting the estate of the deceased partner and was therefore entitled to oppose the filing of the Section 7 Application. e) disputes relating to authority, rights of partners, settlement of accounts and management of partnership affairs are governed by Clause 31 of the Partnership Deed and are required to be resolved through arbitration. f) the present proceedings cannot be maintained without first resolving the disputes arising amongst the partners and persons claiming through them in accordance with the mechanism prescribed under the Partnership Deed. Discussion & Decision 7. There indeed are two aspects: (a) Has the Adjudicating Authority overstepped the scope of enquiry when it is required to examine merely the existence of a financial debt and the occurrence of default; (b) the other is an anterior question and it relates to the authority of the petitioner invoking the insolvency jurisdiction. On the issue of Authorisation 8. Second issue first, and to reiterate it relates to the autho....
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....urisdiction to take cognizance of any such disputes, nor has it the requisite authority to decide it. Suffice to state, unless the third respondent is a partner of the firm, he cannot have locus standi to intervene. 10. The next aspect pertains to the resistance of the 2nd respondent to the decision of the other two partners to institute the petition under Sec.7 IBC. As stated earlier, there are three partners now, and the decision to file the petition was taken by the majority of two partners. Sec.12 (c) of the Partnership Act, 1932, instructs that, 'any difference arising as to ordinary matters connected with the business may be decided by a majority of the partners, and every partner shall have the right to express his opinion before the matter is decided, but no change may be made in the nature of the business without the consent of all the partners". If this provision is briefly analysed, it contemplates two categories of decisions: (a) matters connected with the business of the firm; and (b) matter relating to the change of very business of the firm. The first part of Sec.12(c) concerns itself with business-decision of the firm, of which we are also concerned in this case,....
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....petition and the uncertainty it has created as the date of default was changed from 31.03.2019 to 30.05.2022 by the appellant vide affidavit dated 13.07.2023. 12. Turning to the first aspect, the appellant relies on the balance sheet of the corporate debtor for the years 2015-2016 and 2016-2017 wherein the appellant was shown as sundry creditors under the head current liabilities. This would imply that the contention of the corporate debtor that the appellant did not advance any loan for time value of money but only 'financial assistance' finds itself on a slippery wicket. The corporate debtor contends that its balance sheet was signed by the very person, who has now filed the petition under Sec.7 IBC. The corporate debtor having admitted the receipt of money from the appellant, it may not matter that the one who has signed the balance sheet of the debtor is also a partner of the lender firm, the legal relationship between the parties can still be distinct. In our efforts to ascertain these facts, we probed the ledger account of the corporate debtor in the books of account of the appellant. It covers the period from 12.06.2010 to 31.03.2019. And there was apparently no transacti....