M/s Shantanu Investments Private Limited vs M/s Aksh Optifibre Limited

Per: Ms. Reeta Kohli, Judicial Member

The Company Petition bearing CP No. (IB)- 45/7/JPR/2023 has been filed by M/s Shantanu Investments Private Limited ('Financial Creditor') against the Corporate Debtor, namely, M/s Aksh Optifibre Limited ('Corporate Debtor'), under Section 7 of the Insolvency and Bankruptcy Code, 2016 ('IBC'/ 'Code') read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 seeking initiation of the Corporate Insolvency Resolution Process ('CIRP') of the Corporate Debtor on account of default in repayment of the outstanding loan amount.

The Corporate Debtor is a Limited Company incorporated on 19.03.1986 and duly registered with the Registrar of Companies, Jaipur, having Identification No. L24305RJ1986PLC016132. The registered office of the Corporate Debtor is situated at F-1080, Phase III RIICO Industrial Area, Bhiwadi- 301019 (Rajasthan). The authorized share capital of the Corporate Debtor is Rs. 2,60,05,00,000/- and the paid-up share capital is Rs. 81,34,89,855/- The same has been verified from the online database maintained by the Ministry of Corporate Affairs.

The details of the transactions leading to the filing of the Company Petition bearing CP No. (IB)- 45/7/JPR/2023 as averred by the Financial Creditor are as follows:

In Financial Year 2010-11, the Corporate Debtor approached the Financial Creditor for certain financial assistance in the form of Unsecured Loan for an amount of Rs. 2,00,00,000/-. The Corporate Debtor has requested for disbursement of the financial assistance from time to time in installments, and the Corporate Debtor promised that it will refund the said unsecured loan of Rs. 2,00,00,000/- along with interest calculated @ 15% per annum from the date of payment till the date of repayment. The Corporate Debtor further assured that in case it is unable to repay the said unsecured loan amount; it will pay interest calculated @ 24% per annum on the outstanding interest amount from the date of payment till the date of repayment.

In the balance sheet of the Corporate Debtor as on 31.03.2021 under the heading 'Inter Corporate Deposit from others' - Unsecured loan of Note 20, an amount of Rs. 2,00,00,000/- have been shown to be payable by the Corporate Debtor to the Financial Creditor. 3.3. Further, a notice was sent by the Financial Creditor to the Corporate Debtor for refund of the said unsecured loan along with interest @ 12% per annum from the date of payment till the date of refund. A legal notice dated 22.01.2022 was also sent by the Financial Creditor to the Corporate Debtor.

Thereafter, a demand notice under IBC, 2016 read with Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 was sent by the Financial Creditor to the Corporate Debtor. 3.5. It was contended that as on date, the outstanding amount in default is Rs. 3,33,14,075/- (Rupees Three Crore Thirty Three Lakhs Fourteen Thousand Seventy Five Only). The relevant details as enumerated under Part IV of the instant Petition are reproduced hereunder:

The Corporate Debtor has filed its Reply vide Diary No. 2881/2023 dated 05.12.2023 wherein it stated the following:

There is no debt or financial debt as defined under Section 2(11) or Section 5(8) of the IBC, which is due and payable by the Corporate Debtor to the Petitioner and hence, the Petitioner is not a financial creditor in terms of Section 5(7) of IBC. Accordingly, even the Respondent is not a debtor in terms of the IBC. As a matter of fact, the Petitioner has concealed that the Corporate Debtor had raised a dispute with the Petitioner in the year 2012 itself with respect to the transaction in question, which was further notified to the Petitioner in September, 2019 during their meeting in this regard.

Further, the Petitioner has also concealed the fact that while responding to Petitioner's legal notice dated 22.01.2022 vide its reply dated 09.02.2022, the Respondent had unequivocally clarified that the Petitioner was liable to pay an amount of Rs. 46,79,908/- as on 31.08.2019 to the Respondent. The Respondent also demanded interest on the aforesaid amount w.e.f. 01.09.2019 in case of Petitioner's failure to pay the above amount within two weeks. The aforesaid amount was arrived at after making all the adjustments towards the loan obtained by the Respondent and the payments made thereafter. The Respondent exercised its right of adjustment, which is legally available to it and hence, it is the Petitioner who is in debt of the Respondent and not vice versa.

There is a long pending dispute between the parties, and it is the Petitioner who owes a debt towards the Respondent, it is submitted that the present Petition is also hopelessly barred by limitation as is evident from the facts stated in the Petition. The loan in question was obtained during the period between 2010 to 2012. However, the Respondent had duly notified its dispute vide its email dated 24.07.2012 itself. Therefore, the present Petition having been filed before this Adjudicating Authority in August, 2022 thereby making a claim, which is even otherwise false, is clearly barred by limitation.

It is also interesting to note that the present Petition, though was filed on 06.08.2022, however, got registered only on 31.08.2023 i.e., after more than 1 year. If at all, the Petitioner would have a genuine claim, it would not have waited for more than a year for the registration and listing of the Petition. In terms of NCLT Rules, 2016, only a reasonable time is to be provided to any party for removing the defects, if any, before the same can be registered. However, the period of more than one year taken by the Petitioner, speaks volumes about its conduct. Such inordinate delay also raises serious doubts over the intentions as well as motives of the Petitioner behind filing of this Petition.

The malafide intentions of the Petitioner is further evident from the mere fact that in addition to concealing the necessary facts establishing a pre-existing dispute between the parties, the Petitioner also suppressed the fact that no such financial debt is appearing in the balance sheets of the Respondent for Financial Year 2021-22 as well as for Financial Year 2022-23 (the latest balance sheets/ financial statements) filed by the Respondent before the Registrar of Companies/ MCA.

The Petitioner has relied upon two entries appearing in the balance Sheet filed by the Respondent for Financial Year 2020-21, which are nothing but old entries and thus, such information cannot be relied upon especially in view of the latest balance-sheets of the Respondent. Moreover, there exists a serious dispute between the parties qua the debt. Even otherwise, the said entries were subject to the outcome of disputes between the parties and therefore, cannot be said to be an acknowledgement by the Respondent as alleged by the Petitioner.

The Respondent is a 37 years old ISO 9001:2000 certified, listed Company on BSE and NSE since Aug 2000. The shareholding of the company is widely held by public comprising of 69,411 shareholders representing 73.05%. The Respondent is a leading manufacturer of Optical Fibre, Optical Fibre Cables & Fiber reinforced Plastic Rods with manufacturing facilities in Bhiwadi, Kahrani and Reengus. The Respondent has significantly contributed to the Make in India initiative of the Government of India besides providing employment to approximately 462 persons (including contractual workmen) and approximately 10,000 vendors largely MSME. By giving such employment to the employee's and to vendors, the Respondent had made immense contribution to the local economy and community.

It was stated that the Petitioner being represented through one Mr. Arun Sood who is the director and promoter of the Petitioner and also a partner in Arun Industries, was friends with Dr. Kailash Choudhary of the Respondent Company. It was due to the said relationship, Mr. Sood offered the Respondent to take on rent one of his properties which was in the name of his partnership concern firm Arun Industries and was situated at A-16, Mohan Cooperative Industrial Estate, Mathura Road, New Delhi, for operating Respondent's business.

It was also agreed between the parties that the electricity bill for the use of said premises would be paid by the Respondent subject to the reading in a sub-meter installed by the Petitioner for the premises which in turn was supposed to be connected with an electricity connection provided by the concerned electricity department. However, instead of Arun Industries, Mr. Sood, started raising invoices for electricity consumption in the name of the Petitioner Company for the licensed premises which was in the name of Arun Industries. Since, the promoters were friends, the Respondent never raised any objection on the same. However, the Petitioner acting with malafide intentions, instead of providing the actual electricity bill with the meter reading of the sub-meter, used to raise its invoices by manually mentioning the units allegedly consumed by the Respondent without providing the actual electricity bill. Thereby depriving the Respondent to make the necessary verification. The Respondent acting in good faith never doubted the authenticity of the said bills. This is a matter of fact that the actual electricity bills were never provided by the Petitioner to the Respondent.

Mr. Sood citing his friendship requested Mr. Choudhari, to appoint him as one of the directors in the Respondent. Accordingly, Mr. Arun Sood was appointed as an Additional Director of the Respondent w.e.f. 17.05.2010 and subsequently, his appointment was regularized, and he was appointed as a director w.e.f. 03.07.2010. It is clearly evident from the above that the Petitioner, Mr. Arun Sood as well as his partnership firm were making good money because of Mr. Sood's association with Mr. Choudhari and the Respondent. The Respondent was diligently making payment of all the bills, however, in the beginning of the year 2012, the Respondent observed that the reading of the electricity meter mentioned in Petitioner's monthly invoices were highly exaggerated. Therefore, in order to assess the correct position, the Respondent with the consent of the Petitioner installed six sub-meters to understand the actual consumption of electricity at the aforesaid premises. To the utter shock and surprise of the Respondent, it was found out that the Petitioner was raising highly inflated invoices for the electricity consumption whereas the actual consumption by the Respondent was much less. It was revealed that the Petitioner was charging the Respondent almost double the amount towards electricity consumption as compared to the actual consumption. This fact was notified to the Petitioner vide Respondent's email dated 24.07.2012 giving day wise consumption of the electricity consumed by the Respondent along with detailed particulars of the discrepancies and the excessive amount charged, which was to the tune of more than Rs. 1,00,00,000/- (Rupees One Crore only). However, no response was received from either from Arun Industries or from Mr. Arun Sood or from the Petitioner Company to the said email. The Respondent also made several requests to the Petitioner as well as Mr. Arun Sood to reimburse the excess amount received by them unlawfully, but to no avail.

In the mean time, Mr. Arun Sood also offered the Respondent an unsecured loan of Rs. 4,55,00,000/- (Rupees Four Crores and Fifty-Five Lacs Only) through the Petitioner Company and paid the same on various dates between 21.09.2010 to 17.02.2012 as Inter Corporate Deposit ("ICD"). Since the promoters were good friends, no documents were executed in writing. The Respondent was making regular payment including the interest agreed between the parties towards repayment of the above-mentioned ICD. It is evident from the above fact that the Petitioner as well as Mr. Arun Sood were exploiting the Respondent in every possible manner.

The Respondent vacated the above-mentioned premises in the month of October, 2013 and the license agreement between Arun Industries and the Respondent came to an end. On finding the irregularity in the invoices for electricity consumption and pursuant to notifying the same vide email dated 24.07.2012, the representatives of both the parties including Mr. Arun Sood and Dr. Kailash Choudhari had a meeting to resolve the said issue. After several rounds of discussions, it was agreed by the Petitioner that they had received an excess payment towards the electricity charges and the said excess amount would be reimbursed to the Respondent. It was further agreed that for the accounting purposes, the Respondent would continue to make repayment of the unsecured loan (ICD) obtained from the Petitioner, however, the Petitioner at the same time would refund the excess amount received by them to the Respondent. Due to such unlawful conduct of the Petitioner, Mr. Sood was also asked to resign from the Respondent. Consequently, Mr. Arun Sood resigned from the Respondent on 27.09.2013.

Based on the above understanding, the Respondent continued making repayment of the loan amount till 11.01.2019. The aforesaid repayment was being made with a clear understanding that the excess amount received by the Petitioner as electricity charges would be reimbursed. However, taking undue benefit of the friendship with Dr. Kailash Choudhari, the Petitioner and Mr. Arun Sood evaded their liability and did not bother to fulfil its promise causing grave financial loss to the Respondent.

On account of continuous failure of the Petitioner to refund the excess amount received by it, despite repeated requests, the Respondent was constrained to stop making any further payment with respect to the ICD. The Respondent, however, had the right of adjustment as available to it under the law and hence, the Petitioner was liable to pay the excess amount which was due and payable by it after making the necessary adjustments.

In view of the above position, a meeting was again held between the representatives of the parties in September, 2019 whereby once again it was agreed by the Petitioner and Mr. Arun Sood that they would refund the excess amount received by them towards electricity charges.

Since the entire transaction was based on the relationship between the promoters of the two companies and Mr. Sood's partnership firm, therefore, the Respondent continued to show the outstanding loan amount as Rs. 2,00,00,000 (Rupees Two Crores Only) in its records as the Petitioner had promised to reimburse the excess amount and on repayment of the excess amount, the entry of Rs. 2,00,00,000 (Rupees Two Crores Only) was to be removed from the records as "settled". As on 31.08.2019 the Respondent was to recover an amount of Rs. 46,79,908/-.

However, despite the understanding reached between the parties in the meeting held in September 2019, the Petitioner did not bother to honour its obligations resulting in complete frustration of the understanding. Subsequently, due to pandemic Covid-19, the office of the Respondent remained closed for a substantial period of time, though discussions between the parties were going on and the Petitioner consistently assured the Respondent that it would refund the amount of Rs. 46,79,908/- along with interest. the Petitioner instead of honouring its promise and refunding the excess amount received by them, proceeded to issue a legal notice dated 22.01.2022 making a false claim against the Respondent by relying upon the entry of Rs. 2,00,00,000/- (Rupees Two Crores Only) appearing in the financial statements of the Respondent. At this stage, the Respondent realized that the Petitioner had no intention of refunding the excess amount received by it fraudulently and would go to any extent to make wrongful gains at the cost and prejudice of the Respondent. Accordingly, the Respondent through its advocates duly responded to the above-mentioned legal notice vide reply dated 09.02.2022 and once again demanded the excess amount of Rs. 46,79,908/- along with interest from 01.09.2019. It is pertinent to mention here that the Petitioner did not bother to either respond to Respondent's reply or made any effort to pay the excess amount received. The Petitioner's and Mr. Arun Sood's malafide intention is evident from the mere fact that they did not place on record Respondent's reply dated 09.02.2022 which demonstrates the correct factual position.

At this stage, it was also pointed out by the auditors of the Respondent that when no amount was due and payable to the Petitioner, the entry of Rs. 2,00,00,000 (Rupees Two Crores Only) could not continue in its books as the same would-be incorrect portrayal of Respondent's liabilities. Accordingly, the said entry was removed from the financial statements of FY 2021- 22 onwards to portray the correct position of Respondent's liabilities. the Petitioner has concealed this material fact from this Adjudicating Authority deliberately with the sole motive of misleading this Adjudicating Authority despite the fact that the same is a public record and available on the website of Ministry of Corporate Affairs.

Further, as on 25.11.2023, the Respondent is entitled to recover an amount of Rs. 76,55,176/- from the Petitioner. It is submitted that there was no agreement between the parties to pay any penal interest @ 24% as demanded in the present Petition and therefore, even the said prayer is not maintainable in any manner. Even otherwise, there is no question of payment of any interest, when it is the Petitioner who is a debtor of the Respondent.

It is also a well settled law that proceedings under IBC are not recovery proceedings but much more serious than that and therefore, a Petition solely filed for recovery may not be entertained by this Adjudicating Authority. The Respondent is a solvent entity and is a going concern having so many projects in hand. The Respondent is also servicing all its loans and other financial obligations and thus, is a completely running concern. Therefore, the present Petition being purely in the nature of recovery suit is not maintainable and is liable to be rejected by this Adjudicating Authority.

The Court has heard counsels for the parties and perused the Petition, Reply, Rejoinder, and the documents annexed therewith.

The present Petition has been filed by the Financial Creditor alleging a defaulted of an amount of Rs. 3,33,14,075/- which has the principal amount of Rs. 2 crores and interest of Rs. 1,05,15,476/- and penal interest amounting to Rs. 27,98,599/-. The case of the Petitioner/ Financial Creditor is that the amount of Rs. 2 crores was disbursed on the asking of the Corporate Debtor as a loan. The disbursements were made from 21.09.2010 to 13.06.2013 and the amount had to be return back on demand. The recall notice was sent in August 2024. In view of the fact that the Corporate Debtor failed to repay the due amount, the Financial Creditor was left with no other option but to approach this Adjudicating Authority. The date of default has been stated to be 01.09.2019, the date on which the Corporate Debtor stopped paying the amount to the Financial Creditor. The counsel has further submitted that even though there is no written loan agreement, however the advancement of loan can be corroborated by the fact that Corporate Debtor has been regularly paying interest from 2011 to 2019 along with TDS and in view of the fact that the loan stands reflected in the financial statement of the Corporate Debtor. Thus, the basic necessary ingredients for admission of a Petition i.e. debt and default stands established. The payment of interest from 2011 to 2019 itself establishes that the said loan was against the time value of money. The notice sent for recall of the said loan was duly delivered upon the Corporate Debtor. Hence the Petition deserves to be admitted.

On the other hand, the learned counsel for the Respondent/ Corporate Debtor at the outset raises a preliminary objection that there is material concealment of necessary facts which the Petitioner was duty bound to bring to the notice of the Hon’ble Court. The Respondent has brought to our attention that Mr. Arun Sood, the director and Authorized Representative of the FC was in fact on the board of directors in the Respondent Company at the time of disbursal and the entire disbursal was made by him from the Financial Creditor when he was on the board of the Respondent. The fact that Mr. Arun Sood was made a director on 17.05.2010 of the Respondent Company and he resigned on 20.09.2013 stands duly corroborated from the perusal of the relevant documents on record. The counsel has drawn our attention to the lease agreement having been entered between the Respondent and M/s Arun Industries Ltd. The counsel contends that Arun Industries is a sister concern of the Financial Creditors and it was their premises which were leased out to the Respondent for running its business. The counsel has drawn our attention to the parties to this license agreement i.e. M/s Arun Industries and the Respondent. The counsel has further drawn our attention to Clause 22 of the Lease Agreement wherein it is stated as under :

The counsel has further drawn the attention to the invoices towards the electricity charges raised by the Financial Creditor and not by the licensee which are placed on record ranging from invoices pertaining to the period of 01.07.2008 to 01.06.2012. The counsel has submitted that even though the amount was advanced by the Petitioner to the Respondent but the same was not in the form of any loan agreement but in the form of running transactions. Further, the record reveals that there were regular debit and credit entries which itself proves that it was a running account and thus, not a financial debt. The counsel further states that in view of the inflated electricity charges being raised by the Petitioner, there arose certain issues between the parties in the year 2012 and the said fact was brought to the attention of the director of the Petitioner vide email dated 24.07.2012. The counsel further submits that even the recall notice sent by the Petitioner was duly responded to by the Respondent vide email dated 09.02.2022 which was a detailed reply raising various concerns about the electricity bills raised by the Petitioner. It was submitted that the Financial Creditor was charging almost double the amount towards electricity consumption as compared to actual consumption. The reply further refers to a meeting which was held between the parties in September 2019 and in the meeting all amounts' receivables and payable between the parties were discussed in detail and the accounts were reconciled. It was mutually agreed that after taking into account all the transactions, a sum of Rs. 46,79,908/- is to be paid by the Petitioner to the Respondent as on 31.08.2019. Tabulation of the same was provided in the reply dated 09.02.2022. Thus, no amount is due and payable by the Respondent to the Petitioner. By this communication, the Petitioner was called upon to pay the said due amount to the Respondent forthwith and in any case not beyond 2 weeks from the date of receipt of the notice along with interest @ 12% per annum from 01.09.2019 till the date of repayment. Learned counsel for the Respondent/ Corporate Debtor has vehemently contended that withholding of this vital document by the Petitioner has to be construed as an attempt to mislead the Hon’ble Court. The counsel further contended that there are specific allegations which remain unrepentant, thus, the same have to be taken as correct. On perusal of communication dated 24.07.2012 and 09.02.2022, it is evident that there is a pre-existing dispute between the parties, the reconciliation of account has been carried out and with mutual consent the amount of Rs. 46,79,908/- has been stated to be due by the Petitioner to the Respondent. Therefore, in view of its preliminary submissions itself, the present petition deserves to be dismissed.

The contention of the Petitioner in the rejoinder wherein it was stated that an amount of Rs. 25,50,458/- stands written off against the Respondent has not been reflected from any of the documents on record and no credit of the same has ever been given to the Petitioner, hence the contention of the Petitioner cannot be taken to be true.

Therefore, after having perused the documents placed on record and the contention of both the counsels, this court is of the considered opinion that the Petitioner in the present case has failed to bring the most relevant facts and necessary documents on record namely:-

A) The director of the Petitioner was one of the directors in the Respondent Company.

B) At the time of disbursal of the loan, he was on the board of the Respondent Company.

C) He entered into deed of license with the Respondent Company and leased out the premises of sister concern Arun Industries.

D) The invoices qua electricity charges were raised in the name of the Petitioner Company instead of Arun Industries, the licensor.

E) The Petitioner has been raising electricity charges invoice upon the Respondent which were duly paid.

F) There were issues with respect to the inflated electricity charges between the parties.

G) The said issued of inflated charges was raised by the Respondent vide email dated 24.07.2012.

H) Loan recall notice was duly responded to by the Respondent vide email dated 09.02.2022 and the detailed response gave out the entire background of the transactions between the parties. This document makes it conspicuous that in 2019 after reconciliation of the accounts by both the parties, an amount of Rs. 46,79,908/- was stated to be pending to be paid to the Respondent/ Corporate Debtor by the Petitioner/ Financial Creditor.

The aforementioned conscious non-disclosure of relevant facts and necessary documents by the Petitioner itself establishes that the Petitioner has not approached this Adjudicating Authority with clean hands.

At this juncture, this Court consider it appropriate to refer to the judgment of the Hon’ble coordinate bench in the case of Santoshi Finlease Pvt. Ltd. vs. Mothers Pride Dairy India Pvt. Ltd. wherein the Hon’ble Court in a similar set of circumstances has been pleased to hold that: -

Further, on perusal of the record, it transpires that an attempt has been made to mislead the court into initiating the CIRP of an otherwise solvent entity. On perusal of the documents, it is evident that the Respondent is not an insolvent company. The present Petition has been filed by the Petitioner not for the resolution of the Respondent Company but for recovery of the amount. The Court has also been informed that a recovery suit stands filed by the Petitioner and the same is pending before the Hon’ble Delhi High Court which further establishes the fact that the interest of the Petitioner lies in recovering the amount and not in the resolution of the Respondent Company.

Thus, keeping in view the totality of circumstances and the conduct of the Petitioner, this Court does not consider it appropriate to grant any indulgence in the present case. Thus, the Company Petition bearing CP No. 45/7/JPR/2023 stands dismissed.

Dissent Note / Dissent Order

Per: Ms. Kavita Bhatnagar Technical Member

This Company Petition has been filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("the Code") by the Financial Creditor seeking initiation of Corporate Insolvency Resolution Process ("CIRP") against the Corporate Debtor for alleged default in repayment of a financial debt.

The jurisdiction of this Adjudicating Authority is not in dispute. The registered office of the Corporate Debtor is situated within the territorial jurisdiction of this Bench and the threshold requirement under Section 4 of the Code stands satisfied.

I have independently examined the pleadings, documents, written submissions and the applicable law. For reasons recorded hereinafter, I am unable to agree with the order of Judicial Member and in my considered view, the application satisfies the statutory parameters of Section 7 of the Code and it is to be admitted.

The case of the Financial Creditor, in substance, is that monies were disbursed to the Corporate Debtor over a period of time and were duly reflected in the books of account of both parties, carrying the character of financial transactions and that the Corporate Debtor has failed to repay the same despite the amounts having become due and payable.

The Corporate Debtor does not deny receipt of funds. Its defence is founded on alleged inter-se adjustments, reconciliation of accounts, claims of over-billing towards electricity charges, and the prior relationship between the promoters/directors of the parties. The Corporate Debtor has further alleged concealment, malice, and abuse of the insolvency process, contending that the petition has been filed with an ulterior motive and not for resolution.

The contours of jurisdiction under Section 7 of the Code are now firmly settled. The Adjudicating Authority is required to ascertain only: -

- The existence of a financial debt; and - The occurrence of default.

The Hon'ble Supreme Court in Innoventive Industries Ltd. vs. ICICI Bank (2018) 1 SCC 407 authoritatively held that once these two ingredients are established, the Adjudicating Authority has no discretion to reject the application on extraneous considerations.

This position has been consistently reaffirmed in Swiss Ribbons Pvt. Ltd. vs. Union of India (2019) 4 SCC 17, E.S. Krishnamurthy vs. Bharath Hi-Tech Builders Pvt. Ltd. (2022) 3 SCC 161, & M. Suresh Kumar Reddy vs. Canara Bank (2023) 8 SCC 387.

Importantly, disputes relating to quantum, inter-se adjustments, reconciliation of accounts, or alleged counter-claims do not fall for adjudication at this stage. The Code deliberately excludes the concept of “pre-existing dispute” from Section 7 proceedings.

The argument that the absence of a formal loan agreement is fatal to the claim cannot be accepted. Section 5(8) of the Code does not mandate a written loan agreement. What is required is disbursal of money against consideration for time value of money, which can be inferred from the conduct of parties, accounting entries, and acknowledgements.

The Financial Creditor has placed on record ledger accounts evidencing disbursal of funds. The Corporate Debtor has not disputed the receipt of these amounts. Its defence proceeds on adjustment and set-off, which presupposes the existence of the underlying debt.

The Hon’ble Supreme Court in Asset Reconstruction Company (India) Ltd. vs. Bishal Jaiswal (2021) 6 SCC 366 has categorically held that acknowledgements in balance sheets and books of account constitute valid evidence of debt. Whether certain payments ought to be adjusted towards electricity charges or whether excess amounts were charged are matters requiring detailed factual examination. Such issues cannot negate the existence of financial debt at the admission stage.

The objection that no precise date of default has been mentioned or that recall notices were defective does not persuade me. Default under the Code is a state of non-payment when payment has become due. The Hon'ble Supreme Court in Laxmi Pat Surana vs. Union Bank of India (2021) 8 SCC 481 clarified that default need not be confined to a single rigid date if non-payment is otherwise established.

The material on record demonstrates that the amounts claimed were due and payable and remain unpaid. At this stage, the Adjudicating Authority is not required to examine the technical adequacy of recall notices or enter into contractual niceties. Allegations of Concealment, Relationship between Parties, and Section 65 of IBC, 2016.

The Corporate Debtor has urged that material facts were concealed and that the promoter of the Financial Creditor was earlier a director of the Corporate Debtor, thereby rendering the petition malicious. These allegations, even if assumed to be correct, do not automatically vitiate a Section 7 application once debt and default are otherwise established.

The Hon'ble NCLAT in Jignesh Shah vs. Union of India (2019) 10 SCC 750 has observed that the Code is not concerned with the motives of the creditor so long as the statutory ingredients are satisfied. Section 65 of the Code is a penal provision and cannot be invoked mechanically. The Hon'ble Supreme Court in Swiss Ribbons has cautioned that allegations of malicious intent must be clearly demonstrable and apparent on the face of the record.

The mere existence of a prior relationship, common directorship at an earlier point of time, or complex commercial dealings does not, by itself, render the initiation of CIRP fraudulent or abusive. To hold otherwise would exclude an entire class of genuine financial transactions from the ambit of the Code.

At the admission stage, the Adjudicating Authority must be circumspect not to convert allegations of concealment into a detailed factual trial, which is impermissible under Section 7 of IBC, 2016.

Reliance has been placed on decisions such as Phoenix ARC Pvt. Ltd. vs. Spade Financial Services Ltd. to contend that this Tribunal must unearth the real nature of the transaction. There can be no quarrel with the proposition that sham or colourable transactions cannot be permitted to misuse the Code. However, the Hon’ble Supreme Court itself has clarified that this principle applies where the transaction is ex facie not a financial debt.

In Orator Marketing Pvt. Ltd. vs. Samtex Desinz Pvt. Ltd. (2023)3 SCC 753, the Hon’ble Supreme Court held that even interest-free advances may qualify as financial debt, depending on the surrounding circumstances. Where disbursal of money and non-payment are admitted, the Adjudicating Authority cannot, under the guise of examining the “real nature”, conduct a roving enquiry into disputed adjustments, reconciliation statements, or alleged excess billing.

Such issues are best left to the resolution professional and the committee of creditors, or to appropriate civil fora, and cannot form the basis for rejection of a Section 7 application at the threshold.

The Corporate Debtor has highlighted its turnover, public listing, number of employees, and ongoing projects. While these factors may reflect commercial strength, the Code is triggered on default, not on insolvency in the balance-sheet sense.

The Hon’ble Supreme Court in Innoventive Industries Ltd. vs. ICICI Bank (2018) 1 SCC 407 has unequivocally held that once default is established, considerations of solvency or financial health are irrelevant at the admission stage.

After perusing the order of Judicial Member and considering the above stated facts in the pleadings, documents, and binding precedents, I am satisfied that: -

financial debt exists;

default has occurred; and

application is complete and maintainable as per section 7 of the IBC 2016.

The objections raised by the Corporate Debtor involve disputed questions of fact and accounting, which cannot be adjudicated in summary proceedings under Section 7 of IBC, 2016.

In my view, rejection of the petition would amount to enlarging the jurisdiction of the Adjudicating Authority beyond what is contemplated under the Code. Accordingly, I hold that the Company Petition deserves admission. I would therefore: -

Admit the Company Petition under Section 7 of the Insolvency and Bankruptcy Code, 2016;

Declare moratorium under Section 14 of the Code;

Appoint an Interim Resolution Professional in accordance with law; and

Direct public announcement as per the Code and Regulations.

In view of the same, let the matter be placed before the Hon'ble President, NCLT, New Delhi for appropriate instructions.

Per: Praveen Gupta, Member (Judicial)

The instant Company Petition has been filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 ('IBC/Code') seeking initiation of Corporate Insolvency Resolution Process ('CIRP') against the Corporate Debtor, in respect of which reply and rejoinder have also been filed by the respective parties. Thereafter, vide separate orders passed on 21.01.2026 by the Hon’ble Judicial Member and Hon’ble Technical Member of the NCLT, Jaipur Bench, whereby dissenting judgments have been given and accordingly, the matter has been referred to me for adjudication under section 419 (5) of the Companies Act, 2013 read with Rule 60 (2) & (3) of NCLT Rules, 2016 vide order dated 18.03.2026, File No. 06/13/2026-NCLT (JPR).

Accordingly, I have heard the matter on various dates through physical hearing as well as virtual mode. I have also carefully perused the pleadings, documents placed on record, and submissions advanced with the able assistance rendered by the Learned Counsels appearing on behalf of the respective parties.

In order to set out the factual and legal premise, it would be worthwhile to notice the facts briefly hereunder:

A reply has been filed by the Respondent/Corporate Debtor, inter alia, taking several averments as follows:

A rejoinder has been filed by the Petitioner whereby the reply filed by the Corporate Debtor has been disputed making the following submissions:

As briefly referred to in the opening of this order, it is noticed that the Hon’ble Member (Judicial) and Hon’ble Member (Technical) of NCLT, Jaipur Bench have passed orders on the same date i.e. 21.01.2026 by giving separate and divergent findings. The concluding paras of the order passed by the Hon’ble Member (Judicial) are reproduced as under:

The relevant concluding paras of order passed by the Hon'ble Member (Technical) are reproduced as under:

It is in the aforesaid background of difference of opinion given by the Hon'ble Members vide their respective judgements/order that the present matter has come before me to hear and decide with respect to the difference of opinion in the orders passed by the Hon'ble Members.

I have heard the Ld. Counsels for the Petitioner and the Respondent and perused the records, exhibits/annexures. I have also heard the Ld. Counsels on the points of difference arising from the separate orders passed by the Hon'ble Members.

Upon careful perusal of the judgments passed by the Hon'ble Members, I find that the points of difference of opinion arising from the two judgments, which require determination by me, can be culled out and configured in the form of the questions in the following manner:

a. Whether there is a debt and default.

b. Whether at the stage of adjudication under Section 7 of the Code, the argument of pre-existing disputes can be considered.

c. Whether the concealment of surrounding facts and circumstances as alleged are of any material relevance under the given facts and circumstances of the present case.

As regards the question of existence of “financial debt” and occurrence of “default” for the purposes of Section 7 of the Code, the Financial Creditor has submitted that the Corporate Debtor had approached it in the financial year 2010-11 for financial assistance in the form of unsecured loan of Rs.2,00,00,000/-. In support of the said contention, the Financial Creditor has also placed on record certain documents as already discussed in para 3(iv) of this order.

At this stage, in order to determine whether the financial debt and default stand established, it becomes necessary to examine the balance sheet entries and the rival contentions of the parties with regard to acknowledgment of liability. In this regard, it is seen that the Financial Creditor has annexed copies of the Corporate Debtor’s Balance Sheets from Financial Year 2011-12 to Financial Year 2020-21 and has submitted that the claim amount of Rs. 2,00,00,000/- had been continuously acknowledged in the Balance Sheets of the Corporate Debtor. It has further been submitted that subsequent to Financial Year 2021-22, the Corporate Debtor unilaterally wrote off the aforesaid amount. The details of the same are tabulated herein below:

Per contra, the Corporate Debtor has submitted that no such financial debt appears in its balance sheets for Financial Years 2021-22 and 2022-23 and that the entries relied upon by the Petitioner are merely old entries. It has further been contended that after the meeting held in September 2019 between the parties, the Petitioner, instead of refunding the excess amount charged towards electricity dues, proceeded to issue a legal notice dated 22.01.2022, which was duly replied to by the Respondent vide reply dated 09.02.2022, whereby an amount of Rs. 46.79 lakhs along with interest was demanded from the Petitioner allegedly in lieu of excess payment made on account of electricity bills.

It has also been submitted by the Respondent that upon receiving no response to the aforesaid reply, the auditors of the Corporate Debtor pointed out that since no debt was due and payable, the entry of Rs. 2 crores could not continue in the books of accounts of the Corporate Debtor and accordingly the same was written off from the balance sheets of the Corporate Debtor from Financial Year 2021-22 onwards.

Since the contention of the Corporate Debtor is that subsequent removal of entries from the books of accounts reflects that no debt is due and payable, it becomes necessary to examine whether such a write-off in the books of accounts by the Corporate Debtor results in discharge of liability. In this regard, reference may be made to the judgment of the Hon’ble Supreme Court in Salim Akbarali Nanji vs. Union of India & Ors. [(2006) 5 SCC 302], wherein it was observed as follows:

Further, the Ld. Counsel for the Petitioner has placed reliance on the judgment of Hon’ble NCLAT in Subrata Sardar v. Central Bank of India and Anr., (Company Appeal (AT) (Ins) No. 45 of 2025) to support its argument that what is relevant is acknowledgment of the debt by a party and not how it has treated the debt in the books of accounts. The relevant excerpts in this regard are reproduced hereinbelow:

Similarly, the Petitioner also relied on the judgment of the Hon’ble Delhi High Court in Arti Mittal vs. State (Crl. M.C. No. 1525/2008) wherein it was observed as follows:

Further, the Hon'ble Supreme Court in State Bank of India vs Doha Bank Q.P.S.C & Anr. (Civil Appeal No. 8527 Of 2022) observed as under:

In Commissioner of Income-Tax, West Bengal II vs. Durga Prasad More (Civil Appeals Nos. 1898 and 1899 at 1968) the Hon'ble Supreme Court observed as follows:

The Hon'ble Appellate Tribunal for Forfeited Property, New Delhi in Shri Ajaib Singh vs. Competent Authority (FPA No. 31/Delhi of 1991) observed as under:

From the aforesaid judgments, discussed hereinabove, the settled legal position which emerges is that while books of accounts and balance sheet entries constitute relevant material for determining the existence of liability, greater evidentiary value is attached to admissions made against the interest of a party than to documents subsequently created in its own favour. It has also been observed that a unilateral act of changing the accounting treatment, removing entries, or altering the manner in which liabilities are reflected in the financial statements does not, by itself, determine the non-existence of a debt. Likewise, self-serving documents or self-favouring declarations in the balance sheet cannot be regarded against the Financial Creditor and in favour of the party who has created the document, as otherwise a party would be permitted to create evidence in its own favour through its own unilateral acts. This becomes all the more important in the facts and circumstances of the present case where in the financial statement of the previous years the corporate debtor has continued reflecting the financial debt while making due entries in the financial statement/ balance sheets and thereafter suddenly has shown the liability as nil in the later year of its financial statement.

Applying the aforesaid principles to the facts of the present case, it is seen that the Financial Creditor has relied upon disbursal of the loan amount, continuous payment of interest by the Corporate debtor year after year for establishing the debt in question as also has relied upon the financial statements and records of the Corporate Debtor, wherein the amount in question had continuously been reflected from Financial Year 2011-12 till Financial Year 2020-21 as an ‘outstanding unsecured loan/inter-corporate deposit’. Such entries were made by the Corporate Debtor in its own records over a considerable period of time. Such documents amount to acknowledgements emanating from the Corporate Debtor itself and, being admissions against its own interest, carry considerable evidentiary value.

The Corporate Debtor, on the other hand, seeks to rely upon the subsequent financial statements for Financial Year 2021-22 onwards, wherein the earlier entries reflecting the said entries ever since from the year 2011 onwards were written off on the basis that the auditors had advised that no amount remained due and payable after taking into account the alleged adjustment of electricity dues. However, such subsequent financial statements admittedly came to be prepared after disputes had arisen between the parties and after legal notices had already been exchanged.

In view of the aforesaid judicial precedents, these subsequent omissions or deletions from the books of accounts by the Corporate Debtor, being self-serving in nature, cannot be placed on the same footing as the earlier consistent acknowledgements made over several years. Further, in the absence of any independent material demonstrating actual discharge, settlement, reconciliation, or extinguishment of liability, the subsequent removal of entries appears to be an unilateral and self-serving creation by the Corporate Debtor, hence, the Corporate Debtor cannot defeat the effect of earlier acknowledgements which establish the debt merely by relying upon documents subsequently generated in support of its own stand. Therefore, the consistent reflection of the said amount of Rs. 2 crores under the head of unsecured loans/inter-corporate deposits repayable on demand and carrying interest constitutes a valid acknowledgement of debt by the Corporate Debtor.

Additionally, to establish the debt, the Financial Creditor has also placed on record the Ledger Account maintained with the Corporate Debtor for the period from 01.04.2010 till 22.07.2022, attached as Annexure-1 with the petition, evidencing that payments were indeed made to and received from the Corporate Debtor, with remaining outstanding balance reflected as Rs. 2,00,00,000/-. Further, the Financial Creditor has also placed on record a letter dated 03.09.2018 issued by the Corporate Debtor addressed to the Income Tax Officer, wherein the Corporate Debtor also provided a summary of the ledger accounts relating to the loan transaction evidencing the interest paid on the loan at the rate of 15% since Financial Year 2010-11 (page no. 47 of the petition). In the said communication, the Corporate Debtor had also categorically acknowledged that the amount of Rs. 2,00,00,000/- advanced by the Financial Creditor was in the nature of an ‘unsecured loan’. The relevant excerpts of the said communication are as follows:

It would also be relevant to mention that the Corporate Debtor has not denied receipt of funds from the Financial Creditor but instead has acknowledged the same at various instances in its reply and the Corporate Debtor’s principal defence is not that no amount was ever advanced, but that the amount allegedly stood adjusted against excess electricity dues. The relevant averments in this regard from the reply of the Corporate Debtor are reproduced hereinbelow:

Having considered the material placed on record regarding the existence and acknowledgment of the transaction, it would now be appropriate to examine the contention regarding the absence of any formal written agreement between the parties and whether such absence, by itself, would negate the existence of a financial debt. The law in this regard is well settled. In Agarwal Polysacks Ltd. v. K.K. Agro Foods and Storage Ltd. (2023 SCC Online NCLAT 624), wherein the Hon'ble NCLAT held that a written financial contract is not the only basis for proving a financial debt, and that debt can be proved by other relevant documents. The relevant excerpts from the judgment are reproduced below:

Similarly, in Arunkumar Jayantilal Muchhala v. Awaita Properties 2024 SCC Online NCLAT 428, the Hon'ble NCLAT observed as follows:

Applying the aforesaid principles to the facts of the present case, although admittedly no formal written loan agreement was executed between the parties, however, the additional material placed on record evidencing the existence of an unsecured loan, prima facie indicates that the transaction was not merely a simple transfer of funds devoid of any commercial understanding, particularly when the fact that the loan was advanced has also not been denied by the Corporate Debtor and interest thereon was continued to be paid by the Corporate debtor year after year since the time the disbursal was made which remains an undisputed fact on the part of the Corporate debtor. Additionally, the contemporaneous documents placed on record, including ledger accounts, financial statements, confirmation letters and communications issued by the Corporate Debtor itself, independently lend support to the nature of the transaction as a financial debt. Therefore, merely because no written agreement was executed between the parties, the transaction cannot automatically be deprived of its character as a financial debt and the absence of a formal written agreement by itself cannot be treated as determinative of the nature of the transaction.

On the basis of the material placed on record by the Financial Creditor, the amount being continuously reflected as an unsecured loan/inter-corporate deposit in the financial statements of the Corporate Debtor, the amount of loan being specifically acknowledged by the Corporate Debtor in its communication dated 03.09.2018 as an unsecured loan carrying interest and the interest actually being paid year after year, and in the absence of any cogent material produced by the Corporate Debtor demonstrating discharge or extinguishment of liability, I am satisfied that the amount in question constitutes a “financial debt” within the meaning of Section 5(8) of the Code.

As regards “default” under Section 3(12), the same means non-payment of a financial debt when it has become due and payable, in whole or in part, and is not paid by the debtor or the Corporate Debtor. In the present case, the Financial Creditor has placed on record the recall notice dated 12.08.2019 recalling the outstanding principal amount of Rs. 2,00,00,000/- along with accrued interest, calling upon the Corporate Debtor to repay the amount within the stipulated period. Thereafter, legal notice dated 22.01.2022 was also issued seeking repayment of the outstanding dues. It is the case of the Financial Creditor that despite such recall and subsequent demands, the Corporate Debtor failed to repay the amount claimed to be due and payable.

It is true that the Corporate Debtor, in response to the legal notice dated 22.01.2022, issued a reply dated 09.02.2022 raising objections and alleging adjustment of electricity dues against the amount claimed by the Financial Creditor. However, as already discussed hereinabove, the defence of the Corporate Debtor is not that no amount was ever received from the Financial Creditor, but rather that the same stood adjusted against alleged excess electricity charges. Further, apart from such assertions, no independent material has been placed on record by the Corporate Debtor demonstrating actual discharge, settlement, reconciliation, or extinguishment of the liability. Rather, the Corporate Debtor itself, in its reply, has admitted as follows:

Hence, the aforesaid admission regarding stoppage of payments particularly the interest on the loan amount, coupled with the mere assertion of adjustment in the absence of any supporting material evidencing a concluded reconciliation or settlement between the parties shows that the Corporate Debtor failed to repay the amount due and payable.

The Financial Creditor has also placed on record the Record of Default issued by NeSL wherein the status of the debt has been reflected as “Deemed to be Authenticated” as per Form-D wherein the date of the default has also been reflected as 1st September 2019. Hence, although the Corporate Debtor disputes the liability and raises issues relating to adjustment of accounts, once the existence of financial debt and recall of the amount stand prima facie established and mere dispute with regard to the quantum or alleged adjustments that too at the stage of Section 7, cannot, in itself displace the material placed on record indicating non-payment of the recalled amount. Therefore, prima facie, the record indicates occurrence of default within the meaning of Section 3(12) of the Code.

To summarize the findings discussed hereinabove, I conclude, upon cumulative evaluation of the material placed on record, that the Financial Creditor has established: (i) disbursal of funds to the Corporate Debtor, (ii) the transaction being in the nature of a financial debt, notwithstanding the absence of a written loan agreement, in view of the surrounding circumstances and material placed on record, (iii) continuous acknowledgment of liability by the Corporate Debtor in its financial statements from Financial Year 2011-12 till Financial Year 2020-21, (iv) issuance of recall notice and subsequent legal notice seeking repayment of the amount due, (v) failure on the part of the Corporate Debtor to repay the recalled amount, and (vi) the Record of Default placed on record issued by the Information Utility reflecting the status as “Deemed to be Authenticated”. Further, the Corporate Debtor has failed to place any cogent and contemporaneous material establishing actual discharge or extinguishment of the liability by way of adjustment of electricity dues.

Thus, in view of the aforesaid analysis and findings, I am satisfied that the Financial Creditor has established the existence of “financial debt” and occurrence of “default” within the meaning of Sections 5(8) and 3(12) of the IBC, 2016 respectively.

As regards the issue whether, at the stage of adjudication under Section 7 of the IBC, 2016, disputes relating to the debt, including alleged adjustment of electricity dues as contended by the Respondent herein, are required to be considered, it becomes necessary to examine the nature of the defence raised by the Corporate Debtor and the scope of enquiry permissible under Section 7 of the Code.

It is the case of the Corporate Debtor that it subsequently came to know that inflated invoices had allegedly been raised towards electricity consumption by the Petitioner in respect of electricity supplied on the licensed premises belonging to the partnership firm of the Petitioner's Director. According to the Corporate Debtor, upon detecting such discrepancies, an email dated 24.07.2012 was addressed to the Petitioner wherein day-wise details of electricity consumption along with particulars of the alleged discrepancies and excess amounts charged were furnished, and according to the Respondent, the excess amount allegedly charged was to the tune of more than Rs.1,00,00,000/-. It has further been submitted that no response thereto was received from either Arun Industries or Mr. Arun Sood.

The Corporate Debtor has further submitted that pursuant to the aforesaid communication, meetings were held between the representatives of both parties for resolution of the issue and after several rounds of discussions, it was allegedly agreed that excess amounts had been received by the Petitioner towards electricity charges and the same would be reimbursed to the Corporate Debtor. It has also been contended that for accounting purposes, the Corporate Debtor was to continue repaying the unsecured loan/inter-corporate deposit obtained from the Petitioner while the Petitioner was to allegedly simultaneously refund the excess electricity amount to the Corporate Debtor.

It has further been contended that another meeting was held in September 2019 wherein the parties once again allegedly agreed that the excess amount would be refunded and since the promoters of both entities had friendly relations, no formal documentation was executed in this regard. However, apart from such assertions, no minutes of meetings, correspondence, settlement documents, reconciliation statements, or any contemporaneous record evidencing such arrangement have been placed on record by the Corporate Debtor.

In this regard, the settled legal position governing admission of an application under Section 7 of the Code is that the Adjudicating Authority is only required to satisfy itself regarding the existence of financial debt and occurrence of default and is not required to enter into an adjudication of disputes in the manner contemplated under Section 9 of the Code wherein the issue of pre-existing dispute is also available to the Corporate Debtor to raise as a defence against the alleged debt and default. In this context, the observations of the Hon’ble Supreme Court in Innoventive Industries Limited vs. ICICI Bank and another (2018) 1 SCC 407 are of relevance and are reproduced hereinbelow:

Similarly, the Hon'ble Supreme Court in Catalyst Trusteeship Limited versus Ecstasy Realty Pvt. Ltd. (Civil Appeal No. 7424 Of 2025) while reiterating the principles laid down in Innoventive Industries (supra), observed as follows:

From the aforesaid judgments, the legal position which emerges is that the concept of "pre-existing dispute", which assumes significance in proceedings under Section 9 of the Code, does not by itself constitute a ground to reject an application under Section 7 filed by a Financial Creditor. The scope of enquiry under Section 7 is confined to determining whether a financial debt exists and whether a default has occurred in relation thereto.

However, even assuming for the sake of argument that the defence relating to adjustment of electricity dues raised by the Corporate Debtor is examined on merits, it is seen that the same primarily rests upon alleged oral understandings and purported meetings between the parties. Though reliance has been placed upon email dated 24.07.2012 raising concerns regarding electricity charges, the subsequent case of the Corporate Debtor regarding an alleged oral understanding for adjustment and reimbursement of amounts is not supported by any written settlement, reconciliation statement, board resolutions, correspondence, or any independent material evidencing conclusion of such arrangement.

The Respondent has further submitted that the amount of Rs. 46.79 lakhs claimed in reply dated 09.02.2022 had been arrived at after making adjustments towards the loan amount and other payments allegedly due from the Petitioner. In support of the plea of adjustment and set-off, reliance has been placed on the judgment of the Hon'ble Supreme Court in Bharti Airtel Limited and Another vs. Vijaykumar V. Iyer and others (Civil Appeal Nos. 3088-3089 of 2020) wherein the following was observed:

However, the reliance placed upon the aforesaid judgment does not appear to advance the case of the Corporate Debtor. In Bharti Airtel (supra), the set-off was considered in the context of mutual dealings arising out of contractual arrangements between parties and founded upon independent agreements governing such transactions. In the present case, no such independent agreement or established arrangement regarding adjustment of electricity dues against the loan amount has been placed on record. Hence, mere assertions regarding an oral understanding or friendly relationship between promoters, without any contemporaneous material establishing a concluded arrangement, cannot by themselves establish a legally enforceable adjustment or extinguishment of liability.

Also, the Petitioner has specifically denied the existence of any such arrangement and has disputed the Corporate Debtor's assertions regarding reconciliation and adjustment of accounts. Thus, the rival stands taken by the parties would necessarily require detailed examination of disputed questions of fact, including oral understandings, meetings between the parties, reconciliation of accounts and adjustment of mutual claims, which cannot be undertaken within the limited scope of proceedings under Section 7 of the Code.

Accordingly, in view of the judicial precedents discussed hereinabove and the settled legal principles governing the limited scope of enquiry under Section 7 of the Code, I am of the considered view that the plea of pre-existing dispute raised by the Corporate Debtor cannot defeat the maintainability of the present proceedings. Even otherwise, the alleged adjustment of electricity dues is not supported by any contemporaneous material establishing extinguishment of the liability. Therefore, in the facts of the present case, such defence cannot displace the material placed on record already establishing the existence of financial debt and occurrence of default as discussed in the preceding paragraphs of this order.

The Respondent has contended that the Petitioner has suppressed and concealed material facts, inasmuch as (i) the Corporate Debtor had raised a dispute with the Petitioner as far back as in the year 2012, which was again reiterated in September 2019, (ii) in response to the legal notice dated 22.01.2022 vide reply dated 09.02.2022 the Corporate Debtor had specifically stated that the Applicant was liable to pay a sum of Rs.46.09 lakhs along with interest after making necessary adjustments towards the loan and subsequent payments made thereafter, (iii) the promoters of both entities shared friendly relations and taking advantage of such relationship, Mr. Arun Sood had permitted use of premises belonging to Arun Industries under a Deed of License, whereafter disputes allegedly arose regarding electricity charges, and (iv) the Petitioner has incorrectly reflected the loan amount as Rs.2,00,00,000/- whereas according to the Corporate Debtor the aggregate loan amount was Rs.4,55,00,000/-.

In support of the contention that the Petitioner has not approached this Tribunal with clean hands, reliance has been placed by the corporate debtor on a judgment of the Hon’ble Supreme Court in Kishore Samrite vs State Of U.P. & Ors (Criminal Appeal No.1406 of 2012) relating to suppression of material facts and concealment of relevant circumstances on the judgment wherein the Hon’ble Court observed as under:

Further, the Respondent also relied on the judgment of the Hon’ble NCLAT Shree Ambica Rice Mill vs. Kaneri Agro Industries Ltd. (Company Appeal (At) (Insolvency) No.143 of 2021) to contend that while considering an application under Section 7, the Adjudicating Authority is not precluded from examining the true nature of the underlying transaction and the surrounding circumstances. The relevant observations are reproduced hereinbelow:

The Respondent has also relied on the judgment of the Hon'ble NCLAT in Acute Daily Media Pvt. Ltd. & Ors. vs. Rockman Advertising and Marketing (India) Ltd. & Ors. (Company Appeal (AT) (Insolvency) No. 1480 of 2024) wherein it was observed as under:

Reliance has further been placed on the judgment of Hon'ble NCLAT in M/s Santoshi Finlease Private Limited vs. State Bank of India (Company Appeal (AT) (Insolvency) No. 974 of 2023). The relevant observations are reproduced hereinbelow:

There can be no dispute with the legal proposition emerging from the aforesaid judgments that a litigant is under an obligation to disclose all material facts and that Section 7 proceedings cannot be permitted to be used for any purpose other than insolvency resolution. Further, where surrounding circumstances indicate fraud, collusion, or artificial creation of a debt, the Adjudicating Authority is empowered to examine the real nature of the transaction. However, such examinations must rest on objective material placed on record and not merely on allegations.

The judgments relied upon by the Respondent are distinguishable on facts. In Kishore Samrite (supra), the issue pertained to deliberate suppression and concealment of material facts having a direct bearing on adjudication. In Acute Daily Media (supra), contemporaneous material disclosed collusive arrangements and artificial creation of debt, leading to a finding of fraudulent initiation of CIRP. Similarly, in Santoshi Finlease (supra), apart from the existence of common directorship, the contemporaneous material itself demonstrated that the amounts advanced were in substance the investments made for acquisition of stake, control and management of the Corporate Debtor rather than genuine financial debt. It was in such peculiar circumstances that the Hon’ble Courts proceeded to examine the real character of the transaction and concluded that the proceedings were initiated with malicious intent. However, in the present case, although certain surrounding circumstances and prior associations between the parties have been pointed out, no material has been placed on record demonstrating that the transaction in question was intended for acquisition of control, artificial creation of debt, or initiation of CIRP with malicious intent. It has also not been brought on record as to how previous association of the parties concerned has prejudiced the corporate debtor in any manner particularly when there is a clear disbursal of the loan amount duly admitted by the corporate debtor as reflected in its balance sheets, as also in its reply and further in the backdrop of the fact that the interest was being paid by the corporate debtor on such loan amount from time to time.

Further, the allegation of concealment of material facts against the Petitioner also requires examination in light of the pleadings as a whole. It is also relevant to note that the Petitioner has not remained silent on the aforesaid allegations raised by the Corporate Debtor. Rather, in the rejoinder, the Petitioner has specifically denied the allegations regarding the alleged adjustment of electricity dues and sought to explain the surrounding circumstances alleged and relied upon by the Corporate Debtor.

The Petitioner has also disputed the Corporate Debtor's contention that disputes had existed between the parties since the year 2012 and has contended that the email dated 24.07.2012 relied upon by the Corporate Debtor itself stood subsequently withdrawn. Had there been any deliberate intention to suppress material facts from this Tribunal, the Petitioner would not have specifically dealt with and contested the said allegations upon these being so raised.

The Petitioner has also taken a specific stand in the rejoinder that for the purposes of adjudication under Section 7 of the Code, the enquiry is confined to determination of debt and default and has placed reliance on Innoventive Industries (supra) and E.S. Krishnamurthy (supra) in support thereof. Hence, the mere fact that all surrounding factual assertions subsequently raised by the Corporate Debtor were not elaborately narrated in the petition itself cannot automatically lead to an inference of deliberate suppression or lack of bona fides, particularly when such allegations have been specifically dealt with and denied through subsequent pleadings and supporting material.

Also, no prejudice has been shown by the corporate debtor in view of the alleged association between the parties in the past. Moreover, the contention of the Respondent Corporate Debtor for alleged concealment of surrounding facts and circumstances relating to prior association between the parties and one of the director of the Petitioner being on the board of the Respondent Corporate Debtor is of no significance when such surrounding facts are seen and tested under the facts and circumstances of the present case relating to debt and default. I find that such surrounding facts as allegedly concealed do not have any bearing or impact whatsoever on the merits of the case under Section 7 of the Code, not even remotely, as the debt and default is conclusively proved as there is an admitted disbursement and consequential non-repayment.

Similarly, the contention regarding variation in the amount of loan being Rs. 2 crores or Rs. 4.55 crores also does not by itself establish fraud or suppression of material particulars. The relevant consideration is whether the claim forming the subject matter of the present proceedings has been substantiated by the material placed on record. Merely because there may exist financial dealings of a larger value between the parties would not automatically lead to an inference that the claim made in the present petition is false or that material facts have been concealed.

The issue, therefore, does not appear to be one of concealment of material facts, but rather revolves around the rival interpretations of the same set of transactions and surrounding circumstances by the respective parties. Accordingly, the judgments relied upon by the Respondent are distinguishable on facts and do not advance its case and, therefore, the argument of concealment of material facts cannot be accepted in the peculiar facts and circumstances of the present case.

In view of the foregoing discussion and findings on the issues framed hereinabove and while agreeing with the order of the Hon'ble Member (Technical), I conclude that the Financial Creditor has been able to establish the existence of "financial debt" and occurrence of "default" within the meaning of Sections 5(8) and 3(12) of the IBC, 2016. I further conclude that the plea of pre-existing dispute raised by the Corporate Debtor does not constitute a valid ground for rejecting the present proceedings under Section 7 of the Code and that the allegations regarding concealment of material facts and surrounding circumstances, in the facts of the present case, do not disclose any fraud, collusion, artificial creation of debt, or malicious initiation of CIRP so as to warrant rejection of the petition.

In view of the above findings, I am of the considered opinion that there is a debt and default which meets the ingredients of Section 7 of the Code, and therefore the petition deserves to be admitted. I order accordingly and direct initiation of Corporate Insolvency Resolution Process against the Corporate Debtor along with all consequential directions, including declaration of moratorium under Section 14 of the Code and appointment of the Interim Resolution Professional (I.R.P.).

The reference (File No. 06/13/2026-NCLT (JPR)) as per the order of the Hon'ble President, is answered accordingly.

Let the matter be placed before the concerned/Regular Bench for further proceedings, as per law.

The present application has been preferred by the applicant-Corporate Debtor seeking following prayers: -

The contention of the counsel for the applicant-Corporate Debtor is that subsequent to the conflicting judgments dated 21.01.2026 passed by this Hon'ble Tribunal, the parties have been engaged in mediation proceedings before the Hon'ble Delhi High Court so as to resolve the issues. It is stated that multiple mediation sessions have been taken place and the next date for mediation is 03.07.2026. The Counsel further states that mediation has progressed substantially and the broad settlement terms have been agreed upon between the parties. Therefore, taking these subsequent proceedings on record is not going to prejudice the interest of any of parties. To further substantiate his bona fides the applicant-Corporate Debtor is ready and willing to deposit the entire amount of Rs. 1.55 Cr; out of which a demand draft of Rs. 50 lakhs in the name of MCA is ready with the applicant now as well. On the issue of the maintainability the counsel places reliance on judgment of Hon'ble NCLAT in 2026 SCC online NCLAT 584 wherein in similar set of circumstances the Hon'ble Court has been pleased to take on record various subsequent events after rendering of the judgment by the third Member as has happened in the present case. The counsel refers to Para 19 of the judgment wherein the Hon'ble NCLAT states as under:-

Hence, the contention of the counsel is that the subsequent events deserve to be taken on record and the CP be deferred till 03.07.2026 to await the outcome of mediation proceedings. On the other hand, Ld. Counsel for the Respondent-Financial Creditor vehemently opposes the present application not only on the issue of maintainability in a CP wherein firstly the conflicting orders by the Bench have been issued and further the third Member has also adjudicated upon forming a majority opinion. The Counsel further states that otherwise also in a CP preferred by the Financial Creditor an application by the Corporate Debtor does not deserves to be considered. In addition, the counsel is also not in agreement with fact that the parties are about to arrive at any settlement though negotiation. Though the fact of parties being before Mediation Centre of Hon'ble Delhi High Court is not denied. After having heard the ld. Counsel for the parties and after perusing the judgment of the Hon'ble NCLAT referred wherein Hon'ble NCLAT has been pleased to hold that the subsequent event can always be placed before the Adjudicating Authority having material bearing on the proceedings. But the fact which deserves to be noticed in the present case is that the conflicting judgment by the Bench was delivered on 21.01.2026 and the third Member gave his opinion on 09.06.2026. It was firstly open to the parties to bring this fact of an attempt by resolution through mediation before the Hon'ble third Member during the course of arguments which the parties failed to bring. In addition, the documents now placed on record infact show that the parties have been before the Mediation Centre since 12.01.2026. Whereas the conflicting order in the present case is dated 21.01.2026. The applicant had the opportunity to bring this fact of attempt by resolution in the Mediation Centre before the Regular Bench at the first instance and then subsequently also before the Hon'ble third Member which the applicant failed to do. Now that there is a majority opinion against the interest of the applicant it may not be fair at this stage to grant indulgence by deferring the matter therefore we deem it appropriate to dismiss the present applicant. IA dismissed.

The present application has been preferred by the applicant-Corporate Debtor with the following prayers:-

It deserves to be noted that the Single Bench constituted under Section 419(5) of the Companies Act delivered the order on 09.06.2026. The majority view in this case is for admission of the Corporate Debtor to CIRP. In the Judgement dated 21.01.2026, the Hon'ble Member Technical while admitting the Corporate Dated to CIRP had appointed Mr. Praveen Kumar Singhal as the IRP. The Counsel for the applicant though states that in view of the fact that Mr. Praveen Kumar Singhal is an empanelled IRP on the list of SBI's empanelled RPs. Thus, he could be biased. The Counsel for the Respondent-Financial Creditor initially offered his consent for the change of IRP in view of the contentions by the counsel for the Applicant but subsequently stated that he has no such instructions to make a statement to this effect. On perusal of the contents of the application, it is evident that the only reason stated by the Applicant is that the IRP appointed has been proposed by the Financial Creditor and thus there is a likelihood of bias. In addition, it is stated that proposed IRP is based out of Delhi whereas the registered office and the substantial operation of the Corporate Debtor are in Rajasthan. Therefore, for more efficient management of the process of CIRP any local IRP based out of Rajasthan be appointed. After having appreciated the contentions of the counsel and perusing the contents of the application, we do not find any justifiable and legally sustainable reason to change the IRP as Section 7(3) of IBC, 2016 itself grants this liberty to the Financial Creditor to propose the name of the IRP. In the present case the IRP appointed has been proposed by the Financial Creditor in terms of the law. Keeping in view the same, we do not find any justifiable grounds or reasons to allow the present application.

Hence, Application is dismissed and thus disposed off.

Ld. Single Bench has rendered the judgment dated 09.06.2026. In view of the same, the opinion rendered by Member Technical dated 21.01.2026 is considered as the majority opinion. Hence, the order of Member Technical be considered as final order of the CP. Ld. Counsel for the IRP has brought to our attention that the order dated 21.01.2026 by Member Technical does not mention of IRP fee. In view of the same, let the IRP be paid an amount of Rs. 1 Lakh to initiate the process of CIRP within a period of three days from today i.e. the date of commencement of CIRP. The amount so paid be considered as CIRP cost. CoC to take a final on the fee in its meeting.