Munagala Roja Harsha Vardhini vs Vardhansmart Pvt Ltd

This petition is filed by Mrs.Munagala Roja Harsha Vardhini i.e., the Financial Creditor (in short FC) seeking to initiate Corporate Insolvency Resolution Process (CIRP) against M/s.Vardhansmart Private Limited i.e., the Corporate Debtor (in short CD) on the ground that the CD has committed default of the debt due to the FC. The total debt being Rs.31,79,616/-.

The facts which lead to filing of this Petition are briefly as follows:

The CD filed counter, questioning the maintainability of the Petition, on the ground that there is no Creditor and Debtor relationship between the parties. It is further stated that the CD paid the amount to the FC through one Mr.K.Ajay Kumar who is an elder known to both the parties and who is doing business in the State of Andhra Pradesh. Due to the disputes between the FC and CD, the said Ajay Kumar interfered and pacified the dispute amicably. Originally, the FC is indebted to the said Ajay Kumar to a tune of Rs.40,00,000/- for which she stated that the amount due to her by the CD, will be recovered by the said Ajay Kumar. On that Ajay Kumar approached the CD and made all his efforts for recovery of the said amount. On that, Ajay Kumar, by using his influence in the matter, settled the matter and the CD paid Rs.25,00,000/- towards full and final settlement of the above. The FC agreed for the same and executed a receipt to that extent and further agreed to withdraw the Petition before this Tribunal. The CD paid the amount on 02.11.2020 and Mr.Ajay Kumar received the said amount in the presence of the FC and attesters. The FC further stated that he will withdraw the case whenever the lockdown is lifted. The FC, by suppressing the real facts, filed this Petition. On the above grounds, the CD seeks to dismiss the Petition.

A rejoinder is filed by the FC, contending that the oath in the counter itself is wrong since the attestation by the notary has taken place at Vijayawada on 29.12.2020 and the oath is shown as submitted at Hyderabad on 02.01.2021. The CD is liable for punishment under the relevant provisions of the Court Rules and the NCLT Rules, 2016 for submitting false affidavit. There is an admission by the CD that he has availed unsecured loan of Rs.20,00,000/- from the FC. Hence the contention that there is no Creditor and Debtor relationship is false. The contention with regard to payment of Rs.25,00,000/- is false. The CD failed to submit the receipt if any issued by the FC. Though it is stated in the counter that the receipt is enclosed, no such receipt is enclosed. The integrity of the CD is totally doubtful. Hence in the above circumstances, the counter submitted by the CD has to be treated as invalid.

After the pleadings are completed, the CD filed an IA(IBC) No.1/2022 seeking permission to file an amended copy of the counter. The amendment sought for is as follows:

Heard both the counsel and perused the written submissions filed by both the parties. According to the FC the amount given to the CD is an unsecured loan which carries interest @24% per annum. The Petitioner terms himself as a Financial Creditor, hence, in the first place, he has the burden on him to prove that the debt is a Financial Debt. Under section 5 (8) of IBC, 2016 financial debt is defined as follows:

The CD filed counter, stating that the CD paid the alleged amount to the FC through one Mr.K.Vijay Kumar, who is an elder to both the parties. Due to the disputes between the FC and CD, the said Ajay Kumar interfered in the matter. The FC is indebted to the said Ajay Kumar to a tune of Rs.40,00,000/- for which the FC stated that the amount due to her by the CD, will be recovered by the said Ajay Kumar. On that Ajay Kumar approached the CD and made all his efforts to recover the said amount and by using his influence the matter was settled and the CD paid Rs.25,00,000/- towards full and final settlement of the case. The FC agreed for the same and executed a receipt. Mr.Ajay Kumar received the said amount in the presence of the FC and attesters. The FC further stated that he will withdraw the above case whenever the lockdown is lifted. Though it is mentioned in the counter that the photo stat copy of the receipt is filed, the same is not filed along with the counter. Later an amended counter is filed with totally different version from the one in the first counter. In the amended counter, the contention is that the FC gave Rs.20 Lakhs to the CD by way of transfer to the account of the CD. But it is not at the request of CD and it is shown by Mr.Narapu Reddy, one of the directors of the CD as his part of share money. Thereafter Mr.Narapu Reddy illegally started another partnership firm and various disputes for misappropriation of funds between the CD and M/s. R.S. Vardan Mart started by Mr.Narapu Reddy. The CD filed a recovery suit in O.S.No.7/2019. The FC herein is also a partner in Sai Grand Bazar. She colluded and filed the present Petition with twisted facts at the behest of Mr.Narapu Reddy. Another suit in O.S.No.12/2021 is filed before the XI Additional District Judge, Tenali against FC and others and the same is pending. It is true that totally contradictory pleas are taken by the CD. But the contention is that the advocate to whom they have given instructions with regard to the facts of the case, did not mention the facts as stated by them and are not reflected in the counter. Leaving aside the truth of the said submission for a while, it can be seen that the suit filed by the CD against Mr.Narapu Reddy is prior to the filing of this Petition which is O.S.No.7/2019. A copy of the plaint in the said suit is also filed. Several allegations are made against Mr.Narapu Reddy with regard to the diversion of funds. Hence there seems to be a dispute between the CD and the said Mr.Narapu Reddy. It can be now seen that the document filed by the FC in evidence of transfer of Rs.20 Lakhs to the CD is the statement of account of the FC, which shows that the amount of Rs.20 Lakhs is transferred to the CD’s account through RTGS and the same is admitted by the CD. But the contention of the FC is that she has given an unsecured loan to the CD, hence the said document does not stand as a proof of transfer of amount to the CD. A self-prepared copy of the interest calculation sheet is filed showing that an unsecured loan was given to the CD, but it does not have any basis. The ledger account of the CD, shows that on 07.09.2017 which is the alleged date of transfer of amount by the FC to the CD, an amount of Rs 20 lakhs was transferred from the FC and was adjusted to the balance of Mr.Narapu Reddy. It does not spell that it is an unsecured loan. The Counsel for the CD was however not in a position to answer the query properly which fell from the Bench as to how such contradictory pleas can be taken in the counters without any basis. The answer was that the counsel wrongly mentioned the facts. But the said explanation does not seem to be cogent. But it can be seen that there is some substance and truth in the version projected by the CD. The amount transferred by the FC to the CD is not an unsecured loan. The Balance Sheet as on 31.03.2017 shows the name of the FC under the list of unsecured loans, though the column specifying the amount is blank. As to why the name of the FC had to be shown under the unsecured loan is not explained by the CD. But however, the burden remains on the FC to show that the amount given to the CD is an unsecured loan and that it falls within the definition of the financial debt. As already observed a suit was filed even prior to the filing of this Petition and another suit was filed subsequent to the filing of this Petition, which shows the FC also as a party. In the background of the facts, which do not lend any assistance to this Tribunal to arrive at a conclusion whether the amount given by the FC to the CD would qualify for a financial debt, no finding can be given whether that the FC is a financial creditor within the meaning of Section 5 (7) of IBC, 2016, which is reproduced hereunder:

There are several discrepancies in the transactions between the parties which can be understood only by subjecting the parties to cross-examination, which can be done only in the suits, which are already pending before the Civil Courts. The Counsel for the CD submits that the CD is very much solvent, which can be evidenced from the letter issued by the Bank of India stating that a cash credit limit of Rs.90 Lakhs was fully paid on 25.11.2020 and there is only notional interest pending. Be that as it may, due to the reasons already mentioned, this Petition cannot be admitted. Hence, the CP(IB) No.4/7/AMR/2020 is dismissed.