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Judgment
This petition was filed on 12.03.2024 under section 9 of the Insolvency and Bankruptcy Code, 2016 (for brevity ‘IBC’/Code) read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016, by VREON Tech India Private Limited for initiating Corporate Insolvency Resolution Professional Process (“CIRP”) against Augver Digital Solutions Private Limited on the ground that the Corporate Debtor has committed a default in payment of total outstanding amount of INR 4,58,94,838/- (Rupees Four Crores Fifty-Eight Lakhs Ninety-Four Thousand Eight Hundred and Thirty-Eight Only) including interest despite being served with statutory demand notice, with initial date of default being 10.07.2018. Form D & an affidavit U/s 9(3)(b) have been filed with the petition.
Brief relevant facts of the case as culled out of petition are as follows:
The Petitioner is engaged in the business of virtual and augmented reality technology development. The Respondent, is a company incorporated under the Companies Act, 2013 and is a subsidiary of EON Reality Inc., USA (hereinafter “EON USA”).
In the year 2016-17, EON USA, the holding company of the Corporate Debtor, approached the Operational Creditor with a proposal to establish a joint venture company for augmenting virtual reality technologies and offered 51% shareholding in the Corporate Debtor in return for a monetary investment.
The said understanding was recorded in the Interactive Digital Centre Hub Master Agreement dated 07.12.2017 (hereinafter “the Agreement”) executed by EON USA and the Operational Creditor. Under Clause 3 and Clause 8 of the Agreement, it was agreed that the Operational Creditor would invest $6,692,752.10 for 51% shareholding, while EON USA would invest $19,804,752.10 in kind for the remaining 49%. Although the Agreement required payments to be made to EON USA, the parties agreed that a portion would be paid directly to the Corporate Debtor.
Between 22.12.2017 and 01.06.2018, the Operational Creditor transferred a total sum of INR 2,28,00,000/- to the Corporate Debtor towards its equity contribution. Despite receipt and acknowledgment of the amount through emails and mobile communications, no shares were ever allotted to the Operational Creditor, and EON USA failed to perform its corresponding obligations under the Agreement.
Shockingly, the Corporate Debtor misclassified the funds received from the Operational Creditor as “advances from customers” and inaccurately reported only INR 92,16,040/- in its Auditor’s Reports for the financial years ending 31.03.2019 to 31.03.2022. This is contrary to documentary evidence showing total receipts of INR 2,28,00,000/-.
Further, even assuming without admitting that the amount was an “advance,” no goods or services were provided by the Corporate Debtor to the Operational Creditor, and the entire amount remains unpaid. A document dated 31.03.2021 signed by the Director of the Corporate Debtor lists INR 92,16,040/- under the heading “outstanding money or loan received by a company but not considered as deposits.”
Despite multiple follow-ups through emails, WhatsApp messages, mobile calls, and issuance of legal notices, no repayments are made. Consequently, the Operational Creditor issued a Demand Notice dated 30.11.2023 under Section 8 of the Insolvency and Bankruptcy Code, 2016, calling upon the Corporate Debtor to repay INR 2,28,00,000/- along with interest. The notice was emailed at their ID listed in the Ministry of Corporate Affairs portal. The Corporate Debtor has neither responded to the demand notice nor raised any dispute otherwise. No suit or arbitration is pending in relation to the claim. Now this petition.
Notice of the petition was directed to be served on the respondent through Speed Post and email. While the notices sent to the respondent and its Managing Director through Speed Post returned undelivered on 05.08.2024 with remarks ‘Addressee left without instructions’, the one sent through email dated 02.08.2024 at the email ID of respondent available in MCA master data (dated 15.04.2024) was delivered. As the petitioner had no other address of respondent, by way of abundant caution, its substituted service through publication was directed on 10.09.2024. Accordingly, the petitioner got the proclamation published in ‘The New Indian Express’ and ‘Kannada Prabha’, English & Kannada language newspapers respectively, in their issue of 17.09.2024, of which copies are produced on record. The respondent thus is deemed to have been duly served with notice of petition but chose to abstain. It was therefore, proceeded ex parte. Although the matter has repeatedly been listed in one year thereafter yet the respondent has not come forward.
We have heard Ms. Hema Srinivasan & Ms. N. Umayaparvathi, learned counsels for the Petitioner and carefully perused the file. We do not have the benefit of hearing the submissions or incorporating the stance of the respondent/corporate debtor.
The Petitioner asserts having paid INR 2,28,00,000/- (Rupees Two Crores Twenty-Eight Lakhs only) to the Corporate Debtor as part of its share under the agreement (and rest of the agreed amount to EON Reality Inc., the holding company of the Corporate Debtor). However, the Corporate Debtor has neither allotted the shares nor supplied any equipment or goods against the said payment nor refunded it. A demand notice in Form 3 dated 30.11.2023 was duly served on the Corporate Debtor and was acknowledged. The bank transfer of said amount is reflected from petitioner to respondent between 22.12.2017 to 25.05.2018, in the statement of account filed on 22.07.2025.
Curiously enough, the respondent included a sum of Rs.92,16,039/- as unsettled advance from related party/advance from customers in its audited balance sheets for the FY ending on 31.03.2019 and 31.03.2021. In the audited Balance Sheet for FY 2021-22 besides a sum of Rs.92,16,000/- as Advance from Customers, a sum of Rs.2,48,000/- is shown as outstanding under the head ‘sundry creditors.’ There is nothing to perceive the repayment of any part of the total transferred amount, in any form/mode by the respondent to the petitioner. The petitioner having produced the evidence of transfer of amount, the onus shifted on the respondent to establish as to how the amount other than that reflected in the balance sheets was subsumed/utilized. It also needs to be shown as to when and how the description of the amount entered in the balance sheets became an ‘Advance.’ Nonetheless, reference to the ratios in Asset Reconstruction Company (India) Limited v. Tulip Star Hotels Limited and Others [2022 SCC Online SC 944], M/s Kisten Realtech Pvt. Ltd. v. M/s Aerens Jai Realty Pvt. Ltd. [IB-867(ND)/2022], and S.S. Engineers Vs Hindustan Petroleum Corporation Ltd [2022 SCC Online SC 1385] may usefully be made to canvass that (i) entries in audited financial statements function as acknowledgments of liability and demonstrate jural relations for purposes of limitation; (ii) shares may constitute goods under IBC, and debts relating to their purchase qualify as operational debt; and (iii) where operational debt remains unpaid and undisputed, initiation of CIRP is warranted. Reliance on the judgment in Dena Bank vs. C. Shivakumar Reddy & Anr., Civil Appeal No. 1650 of 2020 (2021 SCC Online SC 543) is also placed in the context of limitation.
The entries in balance sheets of respondent, even for a reduced sum, constitute acknowledgment within the meaning of Section 18 of the Limitation Act, 1963, effectively extending limitation. As clarified in M/s Kataria Infrastructure Corporation v. M/s Manas Vyapar Private Limited and in IL&FS Financial Services Ltd v. Adhunik Meghalaya Steels Pvt Ltd, 2025 INSC 911, the Hon’ble Supreme Court has affirmed that even without specifying the creditor’s name or exact amount, acknowledgment in balance sheet suffices to extend limitation for Section 9 IBC proceedings. The initial limitation period for initiating the proceedings by petitioner got extension through acknowledgment of liability contained in audited balance sheets of the respondent and counting therefrom, the petition is within limitation.
In further support, reliance is placed on Vipul Himatlal Shah and anr Vs Teco Industries – Company Appeal (AT) (Insolvency) No. 470 of 2022, holding that absence of refutation or denial to information utility notifications and legal communications is sufficient to establish default for Section 9 admission. Considering all records, including information utility confirmations, undisputed bank statements, and absence of any pre-existing dispute or denial, it is discerned that statutory threshold for initiation of CIRP under Section 9 has been amply met. In Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., (2017) ibclaw.in 01 SC, the Hon’ble Supreme Court has held that in the absence of a pre-existing dispute, the petition under Section 9 must be admitted.
The petitioner substantiates the operational debt in respondent above prescribed threshold that has become due & payable and default in payment despite issuance of demand notice and absence of any pre-existing dispute. Thence the petition under Section 9 deserves to be admitted.
Accordingly, the essential parameters having been established, the Company Petition bearing CP (IB) No. 121/BB/2024 is hereby allowed and the Corporate Debtor Augver Digital Solutions Private Limited is admitted to undergo Corporate Insolvency Resolution Process. Consequently, moratorium is following terms is declared under Section 14 of the Code for compliance by all concerned: -
a. The institution of suits or continuation of pending suits or proceedings against the Project of Corporate Debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;
b. Transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein;
c. Any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;
d. The recovery of any property by an owner or lessor, where such property is occupied by or in the possession of the Corporate Debtor;
It is further directed that the supply of essential goods or services to the Corporate Debtor as may be specified, shall not be terminated or suspended or interrupted during the moratorium period.
The provisions of Section 14(3) shall however, not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator and to a surety in a contract of guarantee to a Corporate Debtor.
The order of moratorium shall have effect from the date of this order till completion of the CIRP or until this Bench approves the Resolution Plan under sub-section (1) of Section 31 or passed an order for liquidation of Corporate Debtor under Section 33 as the case may be.
As proposed in Part-III of Form No.5, Mr. Ramamoorthi Srinivasan bearing Registration IBBI/IPA-001/IP-P01163/2018-2019/11916 having registered address at E 902, Mantri Tranquil ,Off Kananakapura Road, ,Gubbalala ,Bangalore, Karnataka, 560061, Phone no. 98880 04981 e-mail: Usne902@gmail.com is appointed as Interim Resolution Professional to carry out the functions laid down in the IBC. The fee/remuneration of IRP/RP shall be fixed in accordance with relevant IBBI Regulations/Circulars/Directions.
The Operational Creditor shall deposit a sum of INR 2,00,000/- (Rupees Two Lakhs Only) with the IRP for meeting the expenses arising out of issuing public notice and inviting claims etc. These expenses are subject to approval by the Committee of Creditors.
The Interim Resolution Professional shall after collation of all the claims received against Augver Digital Solutions Private Limited and the determination of the financial position of the Corporate Debtor constitute a Committee of Creditors and file a report, certifying constitution of the Committee to this Authority on or before the expiry of thirty days from the date of his appointment and shall convene first meeting of the Committee within seven days for filing the report of Constitution of the Committee. The IRP is further directed to send regular monthly progress reports to this Authority.
A copy of the order shall be communicated to both the parties. The learned Counsel for the Petitioner shall deliver a copy of this order to the Interim Resolution Professional forthwith. The Registry is also directed to forward a soft copy of this order to the Interim Resolution Professional at his email address immediately.