Krishnakripa Estate India Limited vs R.K. Nirman Private Limited

Per: Rohit Kapoor, Member (Judicial)

The court convened by video conference today.

This petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 has been filed by Krishnakripa Estate India Limited, through its director Mr. Suresh Chandra Agarwal, authorised vide Board Resolution dated 26^th of July, 2019. The financial creditor seeks initiation of Corporate Insolvency Resolution Process in respect of R.K. Nirman Private Limited /Corporate Debtor.

It is stated that a sum of Rs. 35,00,000/- had been disbursed by the Financial Creditor to the Corporate Debtor on diverse dates in July and August, 2021 by way of bank draft as will appear from copies of the relevant extracts from the Financial Creditor’s bank account maintained with Kotak Mahindra Bank, which are collectively annexed as Annexure - E.

It is submitted that the said amount had been given as an advance for sale of land by Corporate Debtor measuring about 7 (seven) Bighas in Singur, Hooghly, West Bengal. Particulars of the said land will appear from a schedule annexed as Annexure – F.

The Corporate Debtor had duly acknowledged receipt of such sum by issuing a letter dated October 10, 2012, a copy whereof is annexed as Annexure – G.

It is further submitted that the total sale consideration at which the land was agreed to be sold to the Financial Creditor was at Rs. 10,00,000/- per bighas. However, the Corporate Debtor failed and neglected to provide documents to the Financial Creditor to enable the latter to verify or authenticate the marketable title of ownership of the said land.

In fact, the Corporate Debtor had acknowledged and admitted its inability to comply with its obligations in this regard and had also refunded a sum of Rs. 10,00,000/- to the Financial Creditor on January 27, 2018.

However, the Corporate Debtor has failed and neglected to return the balance amount of Rs. 25,00,000/- to the Financial Creditor despite repeated reminders and requisites. It is to be noted that the said advance amount had been disbursed by the Financial Creditor for the time value of money and it was agreed and understood between the parties that the Corporate Debtor would repay the amount to the Financial Creditor together with interest @ 18% per annum, particularly as the Financial Creditor had been deprived of the time value of such amount for several years due to no fault on its part and due to the failure and negligence of the Corporate Debtor to comply with its obligations. Anyhow, the Financial Creditor is entitled to charge and receive interest on the balance amount of advance on account of time value of the same. The Corporate Debtor also has due notice of the same in terms of the Interest Act, 1978. In any event, the rate of interest of 18% per annum is reasonable having regard to the commercial nature of the transactions in question.

The Corporate Debtor is unduly enjoying the benefit of the amounts advanced by the Financial Creditor without any justification.

It is further stated that the outstanding dues are admitted and the liability in this regard has been acknowledged and admitted in writing and otherwise by the Corporate Debtor. Written account balance confirmations had also been regularly issued by the Corporate Debtor from time to time from April 1, 2015 onwards and lastly on April 1, 2019. Copies of such account confirmations issued by the Corporate Debtor are collectively annexed as Annexure – H.

The Financial Creditor has also issued a notice of demand dated July 27, 2019 to the Corporate Debtor, a copy whereof is annexed as Annexure – I. Despite receiving the same, however, the Corporate Debtor did not contemporaneously reply to or dispute the contents of the same. However, after an inordinate delay the Corporate Debtor issued a letter dated August 21, 2019 making baseless and incorrect allegations. However, even in such letter the Corporate Debtor acknowledged the jural relationship between the parties and a copy of the said letter is annexed as Annexure – J.

No part of the outstanding dues or claims is barred by limitation and the same is being withheld by the Corporate Debtor without any justification.

The Financial Creditor had earlier filed an application under Section 9 of the Code on the self-same cause of action before this Tribunal which was numbered as C.P. (IB) No. 1512/KB/2019. However, the same was allowed to be withdrawn with liberty granted by this Hon’ble Tribunal to file afresh under appropriate provisions of law. A copy of the order dated 24/01/2020 is annexed as Annexure – K.

After adjusting for and giving credit to the payment made by the Corporate Debtor, a sum of Rs. 61,82,109/- is in default as on January 31, 2020 as per the following particulars:-

The applicant subsequently filed a supplementary affidavit on the ground that due to inadvertence and oversight, certain facts and documents, were not placed on record in application filed under Section 7 of the IBC, 2016. It is stated by the applicant in Supplementary Affidavit that prior to filing of the instant application the Financial Creditor herein, being Krishnakripa Estate India Limited, had filed an application under Section 9 of the said Code against the Corporate Debtor which was registered as CP (IB) No. 1512/KB/2019. However, the same was withdrawn by the Financial Creditor, herein, with the liberty to file afresh petition under appropriate section of law as would be evident from a copy of the order dated January 24, 2020 passed in CP (IB) No. 1512/KB/2019, a copy whereof is annexed to the application as “K”. In the said matter, the Corporate Debtor, therein, had filed its reply wherein the Corporate Debtor had sought to allege that debt did not fall within the definition of operational debt. Furthermore, the Corporate Debtor therein had further sought to aver that the principal debt was due from September 1, 2013. A copy of the said reply/opposition filed by the Corporate Debtor therein in CP (IB) No. 1512/KB/2019 is annexed as Annexure – A.

It is further pertinent to mention that in the reply filed by the Corporate Debtor to the instant application, it has sought to allege that the debt admittedly owed to Financial Creditor does not fall within the definition of financial debt as per provisions of the Code. In this regard, the Financial Creditor intends to rely on the copies of the Balance Sheets of Corporate Debtor for the Financial Years 2015-2016 to 2017-2018 obtained from the website of the Ministry of Corporate Affairs wherefrom it would appear that the amount borrowed by the Corporate Debtor and/or received or raised by the Corporate Debtor as advance has been accounted for under category of Long-Term Borrowing. From the fact as aforesaid, it would be evident that the admitted amount so raised by the Corporate Debtor from the Financial Creditor has the commercial effect of a borrowing and constitutes a financial debt within the meaning of the Code.

The Corporate Debtor has acknowledged and admitted specifically its continuing liability to the applicant and has deliberately made false averments in the Reply affidavit filed in the Section 7 application. The acknowledgements and admissions of liability by the Corporate Debtor and existence of jural relationship between application and Corporate Debtor as creditor and debtor respectively, by the Corporate Debtor are unqualified, unequivocal, specific and continuing in nature and no part of the applicant’s claims are barred by limitation. Copies of the Balance sheets of the Corporate Debtor for the Financial Years 2015-2016 to 2017-2018 obtained from the website of the Ministry of Corporate Affairs are annexed as Annexure – B.

Reply affidavit has been filed by the respondent through one of the Directors of the Corporate Debtor. It is stated that he has been duly authorized by other Directors by way of Board Resolution dated 5^th of January, 2021 to file this affidavit, sign and execute on behalf of the company in respect of any legal proceedings against the Financial Creditor. It is stated that the stand taken by the Corporate Debtor is that the application under Section 7 is not maintainable as the same is barred by the law of limitation. The contents of Part 1, Part 2 and Part 3 have been denied by the applicant by stating “ I deny and dispute each and every allegations made therein save and except what are matters of record and I such refrain from dealing with the same”.

It has further been stated by the Corporate Debtor in this affidavit that in the application there is no financial debt within the meaning and scope of Section 5(8) and, therefore, this application under Section 7 of the Code is liable to be dismissed.

It is submitted by the deponent / Corporate Debtor in this affidavit, an alleged sum of Rs. 35 lakh has been given as an advance for sale of land to the Corporate Debtor, measuring at about 7 Bighas in Singur, Hoogly. It is evident from the said statement that such advance made to the Corporate Debtor is not in lieu of any loan, any financial assistance neither the same bears any interest nor the same has any consideration for the time value for money. It is denied and disputed that the Corporate Debtor had duly acknowledged the receipt of such sum by issuing a letter dated 10.12.2012.

It is denied and disputed that the total consideration at which the land was agreed to be sold to the alleged financial creditor was at Rs. 10 lakhs per Bigha or the Corporate Debtor had failed and neglected to provide documents to the financial creditor to enable the financial creditor to verify or authenticate the marketable title of ownership of the said land. It is denied that the Corporate Debtor had acknowledged and admitted its inability to comply with its obligation, if any, and has thereby refunded a sum of Rs. 10 lakh to the alleged financial creditor/petitioner herein. It is also stated that there is no document on record to show that there is any formal agreement between the parties depicting that the total sale consideration of land to be sold was Rs. 10 lakh per bigha nor were there any obligation on the part of the Corporate Debtor to perform in pursuance of any written or oral agreement between the parties.

It is further stated that the Corporate Debtor has denied and disputed that it failed to return the balance sheet of amount Rs. 25 lakhs to the Financial Creditor. According to the Corporate Debtor there was no disbursement of the alleged amount and it was never agreed that the Corporate Debtor would repay the amount to the Financial Creditor @ interest 18% per annum.

The Corporate Debtor has denied any alleged transaction. He brought reliance upon one notice dated 21/08/2019 and corrigendum dated 29/08/2019 issued by an advocate representing the Corporate Debtor. It is the stand taken by the Corporate Debtor, that from the bare perusal of the reply dated 21/08/2019 that the Financial Creditor had approached the Corporate Debtor sometime in the year 2012 for buying a plot of land at Mouza- Ajabnagar, Rustampur, Telekpur at Singur Hooghly. The sum was tendered to the Corporate Debtor as an advance amount towards sale and purchase of the said plot. Thereafter, the Corporate Debtor had initiated the process for acquiring the said plots of land and had proceeded to make it free from all encumbrances as per the requirements of the petitioner herein. It was further mutually agreed between the parties that thee payment will be made in tranches and the final payment will be as per the market value of the said plot as existing at the time of making conveyance.

Furthermore, the petitioner had made payments in tranches amounting to Rs. 35 lakhs till 13.08.2012 but thereafter, in spite of several assurances, the petitioner have failed and/or neglected to make complete payment towards the total consideration of land after maintaining a stoic silence for a period of six years. All of a sudden in the year 2018, the petitioner cited his personal reasons and requested for a payment of Rs. 10 lakh and considering the long term relationship with the petitioner, the Corporate Debtor duly refunded the sum of Rs. 10 lakh to the petitioner and the petitioner promised to adjust the same with thee final consideration amount to be paid at the time of execution and registration of the Deed of conveyance at the then market value. Needless to mention herein that according to the property valuation reports obtained from the Office of the Government of West Bengal, Directorate of Registration and Stamp Revenue the market value of the plots of land as on 21.08.2019 was Rs. 8,25,51,600/- Copy of the Notice dated 21.08.2019 and the corrigendum dated 29.08.2019 are annexed as Annexure – A.

It is further stated that it would be apparent from the query report or the market valuation report obtained from the office of ADSR, Singur, Hooghly that the valuation of the property in question is way beyond the advance sum paid to the respondent/Corporate Debtor herein. Furthermore, there is no delay or default on the part of the Corporate Debtor who was acting as an agent of the financial creditor to acquire the said plot of land on behalf of the financial creditor and it is the financial creditor themselves who have failed to pay the entire amount required for purchase and subsequent registration of the said property and as such the Corporate Debtor cannot be held liable for the same. The present valuation of the said property as on 01.02.2021 is 9,17,24,000/- (Nine Crore Seventeen lakh Twenty Four thousand only). Copy of the said valuation reports obtained from the Official website Government of West Bengal are annexed as Annexure- B.

It is further submitted that the Financial Creditor has never disputed that the said sum was advanced as an earnest money for the purchase of the said land nor they have ever disputed the contents of the Notice dated 21.08.2019 which is the stand taken by the Corporate Debtor herein and as such the instant application filed under Section 7 is not maintainable in the eyes of law.

It is stated that in the instant application filed by the alleged Financial Creditor, there is no pleading with regard to any proof of default nor there is any iota of evidence to show any record of such default and thereby the basic pre-mandate for instituting a proceeding under Section 7 is not present.

We have heard the Ld. Counsel for the parties and perused the record.

From the contentions of the parties and documents on record particularly reply dated 21^st of August, 2019 to the demand notice, we are of the view that the amount of Rs. 35 Lakhs was paid by 1 corporate entity that is R.K. Nirman Private Ltd. Page 8 of 12 hereinafter the Corporate Debtor to Krishnakripa Estate India Ltd, the Financial Creditor in this application.

It is stated in the reply that the amount of 35 Lakhs was tendered as an advance towards the sale and purchase of the said plot. It is further mentioned that there was an agreement between the parties that the payment will be made in tranches and the final payment will be made as per the market values of the said plot as existing at the time of making conveyance.

The stand taken by the Corporate Debtor in its earlier reply dated 21^st of August, 2019 (Annexure – A) reply affidavit of Corporate Debtor in this petition which is reproduced herein;

We see no agreement on record as contended by the Corporate Debtor. The plea taken in the reply notice appears to be merely an after thought, thus, cannot be accepted. On the basis of the pleadings & the record before us it is apparent that the amount of Rs. 10 lakhs paid to the Financial Creditor was merely a refund of the total amount of 35 lakhs.

We are of the considered opinion that the amount payable of Rs. 25 lakhs is the amount of default within the scope of Section 7 of Insolvency and Bankruptcy Code, 2016 by the Corporate Debtor. We find there is a debt and default.

On the question of limitation, we would like to rely on the provision of Section 18 of the Limitation Act, 1963, under which a fresh limitation period starts from the date of acknowledgement of the debt. In the instant case, the confirmation letter of the Corporate Debtor dated October 10, 2012 and the subsequent balance sheet acknowledgements by the Corporate Debtor as mentioned under Annexure B of the Supplementary Affidavit will act as acknowledgment of the financial debt due to the Financial Creditor. Since the last confirmation dates to April 1, 2019, a fresh period of limitation will start from April 2, 2019. Hence, the instant application is well within the prescribed period of limitation.

The present petition made by the Financial Creditor is complete in all respect as required by law. The petition also establishes that the Corporate Debtor is in default of a debt due and payable and that the default is more than the minimum amount stipulated under Section 4(1) of the Code, i.e., Rupees one Lakh, at the relevant time.

It is, accordingly, hereby ordered as follows:-

CP (IB) No. 756/KB/2020 to come up on 6/05/2022 for filing the progress report.

A certified copy of this order may be issued, if applied for, upon compliance with all requisite formalities.