Mr. Vipin Sharma vs Kaliber Associates Private Limited & Anr.

Ashok Bhushan, J.

This Appeal by a Shareholder and Suspended Director of the Corporate Debtor has been filed challenging the order dated 03.01.2023 passed by National Company Law Tribunal, New Delhi Bench, Court-III (hereinafter referred to as “The Adjudicating Authority”) admitting Section 7 Application of Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “The Code”) filed by the Respondent No. 1.

Brief facts of the case necessary to be noticed for deciding this Appeal are:-

We have heard Mr. Krishnendu Dutta, Sr. Advocate along with Mr. Vikas Mishra for the Appellant and Mr. Anirban Bhattacharya, Advocate for Respondent No. 1 and Mr. Vinod Chaurasia, Advocate for Respondent No. 2.

Learned Counsel for the Appellant submits that financial creditor and the corporate debtor are related parties and family owned companies. It is submitted that the Adjudicating Authority failed to consider the MoU dated 27.09.2017 executed between the corporate debtor and under which Respondent no. 1 agreed to pay amount as investment. Denial of Respondent No.1 for want of knowledge to the MoU is no denial. There was no financial debt due on the corporate debtor so as to admit the Section 7 Application filed by Respondent No. 1. Erstwhile shareholders of the corporate debtor did not prosecute the Company Petition resulting ex-parte proceeding against the Corporate Debtor. Erstwhile director Lalit Modi assured that he shall prosecute the Company Petition but he failed to duly prosecute the Company Petition. Due to above reasons, Appellant could not bring on record MOU dated 27.09.2017. The Adjudicating Authority failed to consider that alleged loan disbursement was not made for consideration of time value of money and does not qualify to be financial debt within meaning of Section 5(8) of the Code. Appellant may be given opportunity to defend the Company Petition especially due to existence of MoU dated 27.09.2017. Appellant’s further case is that Appellant and other shareholders tookover the Corporate Debtor from its erstwhile shareholders in June, 2018. Appellant also has admitted that he received the letters from the Respondent No. 1 in the year 2019 demanding the alleged financial debt by the IRP/RP of Respondent No. 1.

Leaned Counsel appearing for Respondent No. 1 refuting the submissions of Learned Counsel for the Appellant submits that ample opportunity was given to the Corporate Debtor to file Reply, twice Adjudicating Authority granted time to file a Reply but no reply was filed and the Adjudicating Authority left with no option directed on 02.12.2021 to proceed ex-parte against the corporate debtor. Although an Application I.A No. 3106 of 2021 was filed by the Corporate Debtor to set aside the Order dated 02.12.2021 but the said application was also withdrawn by the Corporate Debtor on 29.08.2022. The Appellant cannot be heard in saying that Corporate Debtor was not granted ample opportunity by the Adjudicating Authority. MoU dated 27.09.2017 relied on by Corporate Debtor is not available on record of the Respondent No. 1 hence is not admitted. It is submitted that amount advanced by Respondent No. 1 to the Corporate Debtor is reflected in the balance sheet of the Corporate Debtor as well as financial statement of the Financial Creditor. Balance sheet of the Corporate Debtor as on 31^st March, 2017 reflects the amount as short term borrowing. Appellant cannot be permitted to challenge the financial statement relying on unregistered MoU. It is submitted that IRP/RP of the Respondent No. 1 has written several letters in 2019 to the Corporate Debtor for refunding the amount which was not responded by the directors of the Corporate Debtor. NESL report itself indicates the financial debt owed by Corporate Debtor to the Financial Creditor which has rightly been relied by Adjudicating Authority. Between 14.12.2013 to 28.12.2017, Respondent No. 1 had disbursed total sum of Rs 27,69,02,500/-. Loan was demanded back by the IRP/RP of Respondent No. 1 vide various letters issued in 2019 and 2020 which having not been complied, with the permission of the Adjudicating Authority Section 7 Application was filed by the Liquidator of Respondent No. 1 before the Adjudicating Authority.

We have considered the submissions of Learned Counsel for the parties and have perused the record.

We need to first notice submission of the Appellant that Appellant is entitled for an opportunity by the Adjudicating Authority especially in view of the fact that MoU dated 27.09.2017 could not be brought on record before the Adjudicating Authority.

Respondent No. 1 in its Reply has given the details where various orders passed by the Adjudicating Authority by which opportunity was given to Corporate Debtor to file a Reply. Learned Counsel for the Corporate Debtor appeared before the Adjudicating Authority on 11.03.2021 and was directed to file Reply within three weeks. By a further order dated 02.11.2021, three weeks further time was allowed to file a Reply and when no Reply was filed, the Adjudicating Authority having no option, directed on 02.12.2021 to proceed ex-parte against the corporate debtor. Although corporate debtor filed an I.A. No. 3106 of 2021 to recall the order dated 02.12.2021 but the said application was withdrawn on 29^th August, 2022. The Corporate Debtor having not filed any Reply in spite of ample opportunity being granted by the Adjudicating Authority and the Application to recall the order proceeding ex-parte having also been dismissed, Appellant cannot be allowed to contend that one more opportunity be given to the Appellant.

Now we come to the MoU dated 27.09.2017 which is relied on by the Appellant in the Appeal.

The said MoU was not before the Adjudicating Authority to enable the Adjudicating Authority to consider the said MoU. MoU has been brought on record by Appellant in the present Appeal for the first time. The Respondent No. 1 in its Reply has submitted that MoU is not available on record of the Respondent No. 1 hence the same cannot be admitted. It is relevant to notice that amounts which was advanced by the Financial Creditor to the Corporate Debtor were amounts advanced from the year December, 2013 to December, 2017. The reasons by the Corporate Debtor not filing the Reply and placing any reliance on the MoU before the Adjudicating Authority are not forthcoming.

The main submission of the Appellant is that as per MoU, amount advanced was only an investment by Respondent No. 1 in the Corporate Debtor and hence is not a financial debt.

We need to consider as to whether the Adjudicating Authority committed any error in accepting the Financial Debt and Default on the part of the Corporate Debtor.

As noted above along with Section 7 Application, record of default was filed by the Respondent No. 1 where in the remarks following statement has been made under heading “other party information”:

In Section 7 Application, balance sheet of the Corporate Debtor as on 31^st March, 2017 acknowledges loan advanced from body corporate (Kaliber Associates Pvt. Ltd.) as on 31^st March, 2017 amounts of Rs. 17,47,50,000/-. Financial Statement of the Respondent No. 1 was also filed along with Section 7 Application where under the heading short-term loan and advance against the name of Corporate Debtor Diamond IT Infracon Pvt. Ltd. amount about 27,69,14,300/- was shown as on 31^st March, 2018 and an amount of Rs. 17,47,50,000/- as on 31^st March 2017. The Adjudicating Authority has rightly placed reliance on the financial statement of the Corporate Debtor as well as those of Respondent No. 1 both reflecting the amount as short term loan. When balance sheet and financial statement as on 31^st March, 2017 and 31^st March, 2018 was filed along with Section 7 Application which statements were prepared in due course and are not subject of any dispute, we are of the view that acknowledgment as contained in the Financial Statements cannot be wished away by the Appellant relying on unregistered MoU dated 27.09.2017 which was never brought on record before the Adjudicating Authority.

Learned Counsel for the Respondent No. 1 rightly placed reliance on judgment of this Tribunal in C.A. (AT) Ins. No. 470 of 2022, Vipul Himatlal Shah vs. Teco Industries & Anr. where two-member bench of this Tribunal has laid down that when the record of the information utility shows that there is a debt which is in default, the Adjudicating Authority and this Appellate Tribunal are not required to further examine the record maintained by the Information Utility more so when the record of the information utility is deemed authenticated and no dispute or refutation of said record has been done by the Corporate Debtor earlier. In paragraph 16 of the Judgment, following has been laid down:

It is well settled preposition that balance sheets and financial statement of the Corporate Debtor can be looked into for finding any acknowledgement. We may refer to the Judgment of the Hon’ble Supreme Court in Asset Reconstruction Company (India) Ltd. Vs. Bishal Jaiswal, 2021 6 SCC 366. The amount advanced to the Corporate Debtor by associates company to improve the financial health of the Corporate Debtor is a disbursement for time value of money. Ex-directors of the Financial Creditor were holding 100% share of the Corporate Debtor. This Tribunal in Shailesh Sangani v. Joel Cardso, C.A. (AT) Ins. No. 616 of 2018 decided on 30^th January, 2019 laid down that when promoter, director or shareholder of the Corporate Debtor as a stakeholder to improve financial health of the company and to boost its economic prospects, advance an amount, the same would have the commercial effect of borrowing on the part of the corporate debtor notwithstanding the fact that no provision is made for interest thereon. In paragraph 6 of the Judgment, following was held:

The findings recorded by the Adjudicating Authority that financial debt and default is proved is supported by the financial statements and balance sheets of the Corporate Debtor and Financial Creditor which were brought on record along with Section 7 Application. There is no infirmity in the findings of the Adjudicating Authority that debt and default is proved.

Learned Counsel for the Appellant has also referred to the grounds taken in the Appeal and also relied on ground taken in the Appeal that the Application Under Section 7 has been initiated by the Liquidator of Respondent No. 1 in collusion with the current stakeholders of Respondent No.1 including Stakeholder Consultation Committee with a sole view to drag into insolvency. We do not find any substance in the said ground raised in the Appeal, in paragraph 7.21. The Appellant themselves has brought on record letters dated 31^st January, 2019, 10^th May, 2019, 18.07.2019 and 09.03.2020 issued by the IRP/RP of Respondent No.1 to the Corporate Debtor demanding the amount due to the Financial Creditor by Corporate Debtor. The Liquidator filed Section 7 Application after obtaining order by the Adjudicating Authority permitting the Liquidator to file Section 7 Application. Section 7 Application was filed by the Respondent No. 1 and the Corporate Debtor failed to discharge its financial debt due to the Financial Creditor. We thus reject the allegations of the Appellant that in collusion with current stakeholders, Section 7 Application was filed by Respondent No. 1/Liquidator.

We thus are of the view that Adjudicating Authority has rightly come to the conclusion that financial creditor has successfully proved the financial debt and default on the part of the Corporate Debtor in initiation of Section 7 Application. In view of the finding and in view of the principles as laid down by Hon’ble Supreme Court in Innoventive Industries Pvt. Ltd. Vs. ICICI Bank, 2018 1 SCC 407 where Supreme Court laid down following in paragraph 30:

We do not find any error in the order impugned passed by the Adjudicating Authority admitting Section 7 Application, there is no merit in the Appeal, the Appeal is dismissed.