Ashvinkumar Chandulal Shah & Ors. vs Desh Cam Technological Resources Pvt Ltd

I. It is submitted by the Respondent that the Applicants have preferred the present Application to pressurize the Respondent herein in giving away an amount which is not a debt admissible in the eyes of law and being allegedly supported by the dispute evidence. It is pertinent to note that the Applicants herein have placed reliance on the documents which are disputed and obtained fraudulently from the Respondent.

II. It is also submitted that the Applicants have suppressed the material facts that the Deceased and the father of Mr. Amit Deshmukh, one of the Directors of the Respondent, were old friends and use to support each other in their endeavours and the Respondent herein had never assured the Applicants of any returns of whatsoever manner. Moreover, if there was loan disbursed by the Applicants to the Respondent and the Applicants were entitled to any interest, the Applicants have failed to place on record any loan amount documents to substantiate their claim.

III. It is submitted Applicants have placed reliance on a piece of paper allegedly signed by the Respondent wherein the Respondent has agreed to pay 18.00% interest on the “Investment”. It is further pertinent to note that the alleged acknowledgement so produced by the Applicants shows that the alleged amount taken by the Respondent was an investment but have grossly failed to provide any documentary evidence apart from a piece of paper, which does not have legal binding and has been obtained fraudulently from the Respondent.

IV. It is submitted that alleged debt has arisen from the Transactions dated 15.04.2004 to 29.04.2005, However, the Applicants have not produced on record any licence issued by the concerned authority in favour of Applicants under Bombay Money Lending Act, 1946.

V. In view of the above, it is clear that there is no default on the part of the Respondent. The Applicants have not come before the Hon’ble Tribunal with clean hands. The Applicant have suppressed material information which if produced would clearly show the malafide of the Applicants. Alleged credit transactions are in violation of provisions of Companies Act, 1956 and Bombay Money Lending Act, 1946. The alleged debt is time barred.

I. The Applicant stated in the rejoinder that the averments made therein are mere allegations and the Respondent has miserably failed to indicate as to what is suppressed by the Applicant and it is vehemently denied that the present Application has been preferred without disclosing material information.

II. It is stated that the transaction under consideration duly includes the components of a loan, in so far as there is no denial whatsoever by the Respondent – Corporate Debtor that it had borrowed monies from the Applicant. Under the circumstances, the Respondent had absolutely no case to deny the fact that the Applicant had advanced disbursed the money to the Respondent solely as a loan and against payment of interest.

III. It is further stated that the Respondent has received monies from time to time from the Applicant and the receipts appended at Page Nos. 55 to 66 Annexure E-Colly of the application.

IV. Further, on 12.06.2012, a balance confirmation letter is issued (refer at Page Nos. 68 of the application [Annexure F), wherein the outstanding principal liability to the tune of Rs.72,79,985/- is duly confirmed by the Respondent against the Applicant as on 31.03.2012.

V. Thus, having carried forward and acknowledged the debt in the accounts prepared year after year, now it is not open for the Respondent to contend that the amount disbursed by the Applicant is not a financial debt as well as the same is not due and payable.

VI. The Applicant had made a written demand to repay the loan on 13.06.2012, by way of a statutory notice sent to the Respondent. The said statutory notice dated 13.06.2012 is duly produced at Annexure-I of the application.

VII. The amount disbursed by the Applicant to the Respondent becomes due and repayable on and from 13.06.2012. The Respondent has absolutely no case to allege that the debt of the Applicant is barred by the law of limitation. The debt of the Applicant is not barred by the law of limitation.

VIII. Even otherwise, the Hon'ble Supreme Court of India, in the case of Orator Marketing Pvt. Ltd. Vs. Samtex Desinz Pvt. Ltd. reported in 2021 SCC OnLine SC 513, has held that disbursement of loan without having any assured rate of interest in return, will also be covered within the definition of a "financial debt" under Se ction 5(8) of the Insolvency and Bankruptcy Code, 2016.

IX. The Applicants submitted that the averments made qua violation of the provisions of Bombay Money-Lenders Act, 1946 are fallacious and misleading, in as much as the Bombay Money- Lenders Act, 1946 has been repealed. Moreover, by virtue of Section 238 of the Insolvency and Bankruptcy Code, 2016, the provisions of the Insolvency and Bankruptcy Code, 2016 are given an overriding effect over any other law that is inconsistent with the provisions of the Insolvency and Bankruptcy Code, 2016.

X. It is of great relevance to submit that considering the provisions of the Insolvency and Bankruptcy Code, 2016, it has been duly manifested hereinabove that the debt due to the Applicant is a "financial debt" within the meaning of Section 5(8)( a) of the Insolvency and Bankruptcy Code, 2016 and the Applicant herein is a "financial creditor" within the meaning of Section 5(7) of the Insolvency and Bankruptcy Code, 2016. Further, the debt has admittedly not been repaid by the Respondent. Hence, there is even an admitted default within the meaning of Section 3(12) of the Insolvency and Bankruptcy Code, 2016. Thus, the present is a fit case to admit under the provisions of the Insolvency and Bankruptcy Code, 2016.

XI. Without prejudice to the above and even otherwise, the provisions of Section 10 of the Bombay Money-Lenders Act, 1946 are not applicable to the present case since those provisions are made applicable only to a suit to which the said Act applies and the term "suit to which this Act applies" is defined under Section 2(17) of the Bombay Money-Lenders Act, 1946 as follows: -

XII. That the instant proceedings do not fall within the meaning and definition provided under Section 2(17) of the Bombay Money-Lenders Act, 1946 and therefore, contentions of the Respondent fall flat.

XIII. Under the circumstances, the Applicant is not required to hold any license issued by the concerned authority under the provisions of the Bombay Money- Lenders Act, 1946, as alleged by the Respondent, for maintaining the instant proceedings. Further, it is thoroughly denied that the alleged transactions are an attempt to recover the amount thereunder, therefore would be in violation of the provisions of the Bombay Money -Lenders Act, 1946 and it is also denied that the present proceedings are required to be dismissed under Section 10 of the Bombay Money-Lenders Act, 1946. It is by now well-established that the proceedings under the Insolvency and Bankruptcy Code, 2016 are not for recovery of the debt, rather the proceedings are for resolution of the debt. Thus, it is not open for the Respondent to impose the provisions of another law which are otherwise not applicable to the instant case.

XIV. Further, in view of the judgment of the Hon’ble Apex Court in the case of Innoentive Industries Ltd. Vs. ICICI Bank Ltd. reported in [2017] 140 CLA 39(SC), it is urged before this Hon’ble Adjudicating Authority to allow the instant application filed by the Applicant to initiate Corporate Insolvency Resolution Process against the Respondent.

XV. Further, the allegations of the Respondent with regards to the documents being disputed and having been obtained fraudulently, it is submitted that no competent authority has adjudicated upon such documents holding them to be forged, fabricated or fraudulent as alleged by the Respondent. It is submitted that in the case of Radha Exports (India) (P) Ltd. Vs. K.P. Jayaram reported in [2021] 163 SCL 210 (SC), the Hon'ble Supreme Court of India has clearly held that

XVI. Therefore, a debt is disputed or not is immaterial, when the debt claimed to be outstanding is a financial debt. Reliance is placed on the judgement of the Hon'ble Supreme Court of India in the case of lnnoventive Industries Ltd . Vs. ICICI Bank Ltd. reported in [2017] 140 CLA 39 (SC), wherein it has been held thus:-

XVII. Further, even in the case of Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited reported in AIR 2017 SC 4532, the Hon'ble Supreme Court of India has held that the Adjudicating Authority is required to see and establish "existence of dispute" for rejecting an application preferred by an operational creditor and not a Financial Creditor. Accordingly, it is denied that the debt so claimed by the present Applicants is a disputed debt and hence, the ratio laid down by the Hon'ble Apex Court is applicable in the present case.

On perusal of the records, it is found that the Respondent has acknowledged to have received different amounts in tranches on different dates w.e.f. 15.04.2004 to 31.12.2004 as per annexed Annexure-E Colly with the petition at page-55 to 66 from Mr. Ashvinkumar Chandulal Shah (hereinafter referred to as the deceased).

The Respondent had issued a certificate dated 24.05.2012 stating therein that the outstanding balance of the deceased as an “Unsecured Depositor” in the Respondent Company is of Rs.30,00,000/- inclusive cheque of Rs.10,00,000/-deposited in the State Bank of India and the remaing amount is out of the sum paid by the deceased to Larsen & Toubro Limited on behalf of the Respondent. The copy of the same annexed with the petition as Annexure-H at page-71 – 72.

It is also found that on 12.06.2012 the Respondent and deceased Ashvinkumar Chandulal Shah agreed that interest shall be charged at the rate of 18.00% on the amount of investment. A copy of the consensus between the parties with respect to the interest to be levied is annexed with the petition as Annexure-G at page-69 – 70.

However, on 12.06.2012, the Respondent confirmed an amount Rs.72,79,985/- remained outstanding and payable by way of Balance Confirmation Letter issued by the Respondent on 12.06.2012 which is annexed with the petition as Annexure-F at page-67 – 68.

Further, on 20.03.2013 deceased Ashvinkumar C. Shah made a statement before the police authorities of receiving Rs.40,00,000/- from the Respondent. However, at the same time deceased Ashvinkumar C. Shah also categorically made a statement that out of the total money given to the Respondent in the Year 2004- 2005 Rs.55,88,000/- was deposited in shares Account and Rs.16,91,985/- in current Account. Thus, a principal amount in total Rs.72,79,985/- still due from the Respondent by giving breakup the amount given to the Respondent from time to time in the Year 2004-2005 which matches with details of acknowledgments given by the respondent from time to time annexed with the Petition as Annexure E-Colly, F, H.

As per Audited Financial Statement for the Financial Year ended on 31.03.2012 of the Respondent Company filed by the Respondent through affidavit dated 26.02.2024 vide diary No.D1830 on 29.02.2024 itself indicates that there were outstanding Long-Term Borrowings from other parties to the tune of Rs.1,35,85,219/-. Further, in the Audited Financial Statement for the years ended on 31.03.2021 and 31.03.2022 produced by the Respondent also indicates that there were outstanding Long-Term Borrowings from other parties to the tune of Rs.1,09,34,755/-.

However, neither the Respondent has given any breakup of outstanding Long-Term Borrowings nor the names of other parties either in the aforementioned Audited Financial Statements or in the affidavit dated 26.02.2024. Moreover, the Respondent has failed to prove that it has repaid the said outstanding amount of Rs.72,79,985/- either in reply to demand Notice, or reply, Sur-Rejoinder before Hon’ble High Court or before this Tribunal in reply and in additional affidavits. Hence, the said outstanding amount of Long-term borrowings from other parties can be very well assumed include the outstanding principal sum of Rs.72,79,985/-.

Even otherwise, after deduction of aforementioned an amount of Rs.40,00,000/- (received from the Respondent) from total principal amount Rs.72,79,985/-, an amount of Rs.32,79,985/- was still due at relevant point of time from the Respondent Company.

Whether, the present transactions are covered within the ambit of “financial debt” and the Applicants herein are a "Financial Creditor" and is there any “default” within the meaning as defined under the IBC?

Under the scheme of the IBC, the Insolvency Resolution Process begins, when a default takes place, in the sense that a debt becomes due and is not paid. Some of the relevant provisions of the IBC are set out herein below for convenience: -

In the present case the Respondent has acknowledged to have received different amounts in tranches on different dates w.e.f. 15.04.2004 to 31.12.2004 as per annexed Annexure-E Colly. The money was taken for purchase of Larsen & Turbo's property at Kalol. Further, on 12.06.2012 the Respondent and deceased Ashvinkumar Chandulal Shah agreed that interest shall be charged at the rate of 18.00% on the amount of investment as per annexed Annexure-G.

Now it is not open for the Respondent to contend that the amount disbursed by the Applicant is not a financial debt as well as the same is not due and payable. Further, the plea of violation of the provisions of Bombay Money- Lenders Act, 1946 are also not sustainable as by virtue of Section 238 of the Insolvency and Bankruptcy Code, 2016, the provisions of the Insolvency and Bankruptcy Code, 2016 are given an overriding effect over any other law that is inconsistent with the provisions of the Insolvency and Bankruptcy Code, 2016.

Even otherwise, Hon'ble Supreme Court of India, in the case of Orator Marketing Pvt. Ltd. Vs. Samtex Desinz Pvt. Ltd. reported in 2021 SCC OnLine SC 513, has held that disbursement of loan without having any assured rate of interest in return, will also be covered within the definition of a "financial debt" under Section 5(8) of the Insolvency and Bankruptcy Code, 2016.

The money was borrowed and disbursed against the consideration for the time value of money. Hence, the present transactions are covered within the ambit of “financial debt” as defined U/s 5(8)( a) of the Insolvency and Bankruptcy Code, 2016 and the Applicants herein are a "Financial Creditor" within the meaning of Section 5(7) of the Insolvency and Bankruptcy Code, 2016. Further, the “debt” as explained in forgoing paras has not been repaid by the Respondent. Hence, there is even a “default” within the meaning of Section 3(12) of the Insolvency and Bankruptcy Code, 2016.

Further, the plea of the Respondent with regards to the documents being disputed and having been obtained fraudulently is also not sustainable as no competent authority has adjudicated upon such documents holding them to be forged, fabricated or fraudulent as alleged by the Respondent. Hon'ble Supreme Court of India in the case of Radha Exports (India) (P) Ltd. Vs. K.P. Jayaram reported in [2021] 163 SCL 210 (SC), has clearly held that:-

Therefore, a debt is disputed or not is immaterial, when the debt claimed to be outstanding is a financial debt. Reliance is placed on the judgement of the Hon'ble Supreme Court of India in the case of lnnoventive Industries Ltd. Vs. ICICI Bank Ltd. & Anr. (2018) 1 SC 407, clearly held that:-

Whether, the present petition is filed with in limitation from the date of default under the IBC?

The Respondent has acknowledged to have received different amounts in tranches on different dates w.e.f. 15.04.2004 to 31.12.2004 as per annexed Annexure-E Colly. Further, on 12.06.2012, the Respondent confirmed an amount Rs.72,79,985/-remained outstanding and payable by way of Balance Confirmation Letter issued by the Respondent on 12.06.2012 which is annexed with the petition as Annexure-F.

Moreover, as per Audited Financial Statement for the Financial Year ended on 31.03.2012 of the Respondent Company filed by the Respondent through affidavit dated 26.02.2024 vide diary No.D1830 on 29.02.2024 itself indicates that there were outstanding Long-Term Borrowings from other parties to the tune of Rs.1,35,85,219/-. The said outstanding amount of Long-term borrowings from other parties can be very well assumed include the outstanding principal sum of Rs.72,79,985/-.

The judgment of Hon’ble Supreme Court in the Dena Bank which clearly held that: (Now Bank of Baroda) Vs Shivkumar Reddy and Anr. (2021) SCC Online SC 543, which clearly held that:-

On 13.06.2012, the Deceased Ashvinkumar C. Shah issued a Statutory Notice under Sections 433 and 434 of the Companies Act, 1956 seeking repayment of the outstanding principal amount of Rs. 72,79,985/- along with an interest amount of Rs. 1,37,95,192/- aggregating to Rs. 2,10,75,147/-. The said notice was duly served upon the Respondent. The copy of the Statutory Notice is annexed with the Petition as Annexure-I.

Thereafter, originally, C.P. No.174 of 2012 dated 20.07.2012 was filed by the deceased Ashvinkumar C. Shah before the Hon’ble high Court which was listed before the Registrar on 04.09.2012 for admission. However, vide an order dated 26.11.2021, the Hon’ble High Court of Gujarat was pleased to transfer Company Petition No. 174 of 2012 to this Tribunal which is annexed with the petition as Annexure-P. Therefore, we find that the present Petition was filed before the Hon’ble High Court well within the limitation period.

The Respondent/Corporate Debtor M/s Desh Cam Technological Resources Private Limited is admitted in Corporate Insolvency Resolution Process (CIRP) under section 7 of the Code.

As a consequence thereof, moratorium under Section 14 of Insolvency and Bankruptcy Code, 2016 is declared for prohibiting all of the following in terms of Section 14(1) of the Code.

The order of moratorium under section 14 of the Code shall come to effect from the date of this order till the completion of the Corporate Insolvency Resolution Process or until this Adjudicating Authority approves the Resolution Plan under sub-section (1) of section 31 or passes an order for liquidation of the corporate debtor under Section 33 of the IBC 2016, as the case may be.

However, in terms of Section 14(2) to 14(3) of the Code, the supply of essential goods or services to the corporate debtor as may be specified, if continuing, shall not be terminated or suspended, or interrupted during the moratorium period. The corporate debtor to provide effective assistance to the IRP as and when he takes charge of the assets and management of the corporate debtor.

As proposed by the Financial Creditor, we appoint Mr. Parag Sheth, having registration No. IBBI/IPA-002/IP-N00142/2017-18/10381(AFA valid upto 10.12.2024) under section 13 (1)(c) of the Code to act as Interim Resolution Professional (IRP). He shall conduct the Corporate Insolvency Process as per the Insolvency and Bankruptcy Code, 2016 r.w. Regulations made thereunder.

The IRP so appointed shall make a public announcement of the initiation of Corporate Insolvency Resolution Process and call for submissions of claims under section 15, as required by Section 13(1)(b) of the Code.

The IRP shall perform all his functions as contemplated, inter-alia, by sections 17, 18, 20 and 21 of the Code. It is further made clear that all personnel connected with the corporate debtor, its promoters, or any other person associated with the management of the corporate debtor are under legal obligation as per section 19 of the Code to extend every assistance and cooperation to the IRP. Where any personnel of the corporate debtor, its promoters, or any other person required to assist or co-operate with IRP, do not assist or cooperate, the IRP is at liberty to make appropriate application to this Adjudicating Authority with a prayer for passing an appropriate order.

The IRP shall be under a duty to protect and preserve the value of the property of the ‘corporate debtor company’ and manage the operations of the corporate debtor company as a going concern as a part of obligation imposed by section 20 of the Code.

The IRP or the RP, as the case may be shall submit to this Adjudicating Authority periodical report with regard to the progress of the CIRP in respect of the Corporate Debtor.

We direct the financial creditor to pay IRP a sum of Rs.2,00,000/- (Rupees Two Lakh Only) in advance within a period of 7 days from the date of this order to meet the cost of CIRP arising out of issuing public notice and inviting claims etc. till the CoC decides about his fees/expenses.

The Registry is directed to communicate this order to the financial creditor, corporate debtor, and to the Interim Resolution Professional, the concerned Registrar of Companies and the Insolvency and Bankruptcy Board of India after completion of necessary formalities, within seven working days and upload the same on the website immediately after pronouncement of the order. The Registrar of Companies shall update its website by updating the Master Data of the Corporate Debtor in MCA portal specific mention regarding admission of this Application and shall forward the compliance report to the Registrar, NCLT.