Krashin V. Thummar & Ors. vs M/s. Cosmos Technocast Pvt. Ltd.

These I.B. Petitions have been preferred by the above named different Petitioners/ Financial Creditors against the same Respondent/ Corporate Debtor, M/s. Cosmos Technocast Private Limited under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("the Code") and they have sought for initiation of Corporate Insolvency Resolution Process ("CIRP") in respect of the Corporate Debtor Company. Since the facts about the Corporate Debtor are common and similar are raised by these Financial Creditors, although they preferred to file independent petitions seeking for initiation of CIRP against the Corporate Debtor. Hence, these petitions are being dealt with together for the purpose of its adjudication as per merits and in accordance with the Law are being dispose of by this "Common Order."

The fact in brief which arised for consideration and necessary for disposal of these petitions are stated herein under:

The Corporate Debtor had issued cheques in favour of the Financial Creditor for an amount of Rs.4,75,000/- vide cheque nos. 008261 dated 03.11.2016, cheque no.008363 dated 14.12.2016 and cheque no. 008787 dated 17.02.2017 drawn on Bank of Baroda against the repayment of the aforesaid amount as held as deposit/unsecured loan by the Corporate-Debtor. The Financial Creditor had accepted an amount of Rs.4,00,000/- under protest and with a clear understanding that the interest is to be calculated at 2% per month as also that the remaining outstanding amount shall be repaid at the earliest. But the Financial Creditor did not encash cheque no.008788 dated 17.02.2017 for Rs.75,206/- as the same was unacceptable and against the understanding between the parties since the period of deposit with the Corporate-Debtor as also rate of interest were disputed. In order to support its claim, the Financial Creditor has annexed copies of cheques issued by the Corporate-Debtor along with the present Petition.

It is stated that the Corporate Debtor, pursuant to the notices issued by the Petitioner had issued a cheque of Bank of Baroda having no.008787 dated 17.12.2017 for an amount of Rs.86,473=00 (Rupees Eighty-Six Thousand Four Hundred Seventy-Three only) to the Petitioner against the repayment of the aforesaid amount held as deposit to the Petitioner. It is stated that the financial creditor did not encash the cheque as the amount in the cheque was unacceptable to the Petitioner/ Financial Creditor, as it was not as per the terms they entered into.

The Petitioner/ Financial Creditor has produced a calculation of interest in a tabulated form as per the below:

It is stated that the Corporate Debtor, pursuant to the notices issued, the Petitioner had issued a cheque of Bank of Baroda having no.008786 dated 17.12.2017 for an amount of Rs.4,32,000=00 (Rupees Four Lakh Thirty-Two Thousand only) to the Petitioner against the repayment of the aforesaid amount held as deposit to the Petitioner. It is stated that the financial creditor did not encash the cheque as the amount in the cheque was unacceptable to the Petitioner/ Financial Creditor, as it was not as per the terms they entered into.

As per the material available on record, the Corporate Debtor has filed separate and independent reply by denying the contentions/ allegations made therein and thus, to oppose the admission of the present I.B. Petition under the provisions of the I.B. Code. The relevant Paragraphs of the reply filed are being reproduced herein below:

In response to the present Petition, the Respondent/ Corporate Debtor has filed its objection in this Bench on 02.08.2018 stating that the present application suffers from Suppression veri and suggestion falsi, as the petitioner has suppressed many material facts.

Stating such, the Respondent, by denying all the averments made by the petitioner has stated that, the Petitioner is holding total 30,000 equity shares, i.e. 3.00% of the total share equity of the company. Further, it is averred that the petitioner did not encash the cheque of Rs.86,473=00 dated 17.02.2017 and also another cheque issued for Rs.95,826=00 dated 15.01.2018 with a malafide intention to harass the petitioner and to initiate frivolous proceedings under the I.B. Code. It is stated that the present corporate debtor company is a healthy and profit making company and there is no loan default by the Respondent. It is also stated that the respondent company has submitted and annexed copies of net profit-loss account for the last audited statement for the year ended on 31.03.2017, showing total revenue of Rs.9,18,87,437=00 and total net profit of Rs.36,93,751=00.

It is further stated by the Respondent that it has publically placed its financial statements before Annual General Meeting every year, claiming to be a public document which cannot be disputed. It is vehemently opposed by the Respondent that this Petition is a result of family dispute arose among the brothers and therefore, filing present petition under Section 7 is merely to harass the Respondent. It is averred that the present matter is in-fact of an oppression and mismanagement, then it is to be filed under proper Section, i.e. under Section 241-246 of the Companies Act, 2013.

It is further to note as stated by the Respondent in its reply/objection that, if the claimed default has been occurred on 24.01.2008 and the legal proceedings were initiated by the Petitioner on 01.06.2017, by sending a notice. However, the present petition is filed in this bench on 09.01.2018 and on this ground also, the Limitation Act, 1963, does not permit the petition to be admitted.

In response to the present Petition, the Respondent/ Corporate Debtor has filed its objection in this Bench on 02.08.2018 stating that the present application suffers from Suppression veri and suggestion falsi, as the petitioner has suppressed many material facts.

Stating such, the Respondent, by denying all the averments made by the petitioner has stated that, the Petitioner is holding total 30,000 equity shares, i.e. 3.00% of the total share equity of the company. Further, it is averred that the petitioner did not encash the cheque of Bank of Baroda having no.008786 dated 17.12.2017 for an amount of Rs.4,32,000=00 (Rupees Four Lakh Thirty-Two Thousand only) and also another cheque issued for Rs.95,826=00 dated 15.01.2018 with a malafide intention to harass the petitioner and to initiate frivolous proceedings under the I.B. Code. It is stated that the present corporate debtor company is a healthy and profit making company and there is no loan default by the Respondent. It is also stated that the respondent company has submitted and annexed copies of net profit-loss account for the last audited statement for the year ended on 31.03.2017, showing total revenue of Rs.9,18,87,437=00 and total net profit of Rs.36,93,751=00.

It is further stated by the Respondent that it has publically placed its financial statements before Annual General Meeting every year, claiming to be a public document which cannot be disputed. It is vehemently opposed by the Respondent that this Petition is a result of family dispute arose among the brothers and therefore, filing a petition under Section 7 is merely to harass the Respondent. It is averred that the present matter is in-fact of an oppression and mismanagement, then it is to be filed under proper Section, i.e. under Section 241-246 of the Companies Act, 2013.

It is further to note as stated by the Respondent in its reply/objection that, if the claimed default has been occurred on 24.01.2008 and the legal proceedings were initiated by the Petitioner on 01.06.2017, by sending a notice. However, the present petition is filed in this bench on 09.01.2018 and on this ground also, the Limitation Act, 1963, does not permit the petition to be admitted.

In view of the decision of Hon'ble Supreme Court in the matter of Mobilox Innovations Pvt. Ltd. vs. Kirusha Software wherein it is held as categorically stated that this Code cannot be used as debts recovery mechanism.

We duly considered the above stated averments made by the Petitioner in the present I.B. Petition as well as in the reply / objection filed by the Respondent / Corporate Debtor.

By perusal of the materials available on record, it is evident that the Petitioners in these three I.B. Petitions have issued some cheques towards unsecured loan to the Corporate Debtor Company between the period of 13.12.2006 to 24.01.2007 (in respect of CP(IB) No.36 of 2018) and further, between 29.01.2007 to 18.05.2010 (in respect of CP(IB) No.37 of 2018) while the Petitioner in CP(IB) No.35 of 2018 has contended that he made payment of rupees three (03) lakh towards investment to the company during the year 2006 - 2007. Thus, all the petitioners in these petitions have contended that they are entitled to receive their money back along with 2% interest per month (i.e. 24% per annum) which was deposited with Corporate Debtor. However, it is found that the petitioners have issued notice for repayment of money deposited (given as unsecured loan) only on 28.07.2017 and 11.10.2017 which is apparently beyond three (03) years of date of disbursement of loan or issuance of cheque. Hence, their such claim/debt is barred by the Limitation. It is now the well settled legal position by the Hon'ble Supreme Court in respect of the I.B. proceedings that the limitation prescribed for filing an I.B. Petition is three (03) years from the date when default has occurred ("B.K. Education Services Private Limited Vs. Parag Gupta and Associates - MANU/SC/1160/2018", Gaurav Hargovindbhai Dave Vs. Asset Reconstruction Company (India) Ltd. and Ors. decided on 18.09.2019). Hence, on such count also, the present I.B. Petition is not maintainable. That apart, the Corporate Debtor has placed reliance on a decision of Hon'ble NCLAT in the matter of Prowess International Pvt. Ltd. Vs. Parker Hannifin India Pvt. Ltd. in company appeal (AT) (Insol.) No. 89 of 2017, wherein, their Lordship has held that the object of the Code is not the recovery of dues. Whereas, the code is made for the revival of debt ridden company. The relevant paragraph of the above stated decision is reproduced herein below:

In addition to the above, the Hon'ble Supreme Court in its judgment in the matter of K.Kishan vs M/S Vijay Nirman Company Pvt. Ltd. Civil Appeal No. 21824 of 2017 has also held that the theme and object of the code is not meant for the recovery of debt but to bring the resolution/ revival of the company by a resolution plan. The relevant portion of the decision of Hon'ble Supreme Court is reproduced herein below:

By following the above stated judicial precedent, we are of the view that the present petitioners have filed this petition with a some-malafide intention only to create pressure on the Corporate Debtor for recovery of its amount invested or unsecure loan given to the Corporate Debtor without having a formal and written contract and that is too with an exorbitant rate of interest of 24% per annum, which cannot be treated as fair and legally sustainable. Moreover, it appears that the present petition is result of some family dispute arose among them and merely to harass the Respondent/ Corporate Debtor. The Corporate Debtor is showing a positive net-worth as per its last balance sheet, hence, it cannot be termed that the company is unable to pay its debts but there may be some dispute with regard to "oppression and mismanagement" in the company, which is not the subject matter of the present I.B. Petition. The parties are at a liberty to approach competent court(s) including this NCLT under Section 241-242 of the Companies Act, 2013.

During the course of hearing on 12.08.2019, the present Petition, it is a matter of record that the Corporate Debtor has come forward with demand draft(s) as mentioned below:

Which were not accepted by the Petitioner towards the satisfaction of the debt. Therefore, the arguments, on merits of the present case were heard and the order was reserved.

By taking into consideration the above stated facts and circumstances of the present case, we find that there seems bonifiedy on the part of the Corporate Debtor for making payment of debts and by offering the demand draft in the open court, which was refused to be received by the Petitioner for the reason best known to them. It gives such impression that the petitioner is not having any bonafide intention to seek revival or resolution of the debt stressed company and want to use this forum as a court of recovery of its disputed debts.

This Court under the discipline of the I.B. Code is not expected to adjudicate the Civil Disputes including the issue of contractual rate of interest because there is no such written agreement made available to this Bench from either side. So, as to prove that the Corporate Debtor Company has agreed for making payment of interest as claimed by the Petitioner while accepting such unsecured loan. Such dispute can be decided only by a competent court of law or by the Civil Court.

Notwithstanding the above, this Court cannot lose sight from the fact of the case that the Petitioner are shareholders of the Corporate Debtor Company and they paid the money as an investment in the company by way of deposit. It is also contended that such deposit has been treated as unsecured loan(s) and the Corporate Debtor has shown bonafide for returning the amount by issuing cheques earlier in favour of the petitioner which was not encashed by the Petitioner as there was a dispute on the rate of interest to be paid.

Considering such circumstances, we are of the view that there is no proof of default of the debt on the part of the Corporate Debtor because it earlier has tendered a cheque in favour of the petitioner as discussed in the preceding Paras of this judgment, specifically the averments made in reply of the Corporate Debtor to the respective petitions.

Moreover, during the course of hearing, the petitioner has agreed to pay 12% interest and came forward with the demand draft(s), but the same was refused by the Petitioner in-front of the open Court. That means, the Petitioner has no intention to settle the matter nor seeking resolution or revival of the company under the I.B. Code but it is their sheer attempt to harass the Corporate Debtor which may amount that the present Petitioner had other than the intention of bringing the resolution plan and this may attract the Penal Provision under Section 65 of the Insolvency and Bankruptcy Code, 2016.

However, at this stage we are not inclined to initiate such proceedings, but in order to meet the end of the justice, the present Petitions are hereby rejected with an exemplary cost of Rs.30,000/- in each matter, which are payable to the Prime Minister's Relief Fund for Corona Virus Relief Fund (COVID-19 Care).

Accordingly, the present I.B. Petitions, CP(IB) No.35 of 2018, CP(IB) No.36 of 2018 and CP(IB) No.37 of 2018 are rejected and disposed of.

A copy of this order be communicated to the Registrar of Companies, Ahmedabad.