Pijush Banerjee vs IL & FS Financial Services Limited

Ashok Bhushan, J.

This Appeal has been filed by the Suspended Director of the Corporate Debtor - E Village Kendra Limited challenging the order dated 28.10.2022 passed by the Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, Court-I admitting Section 7 application filed by IL & FS Financial Services Limited. Brief facts of the case are:

We have heard Shri Debal Banerjee, learned senior counsel for the Appellant and Shri Krishnendu Datta, learned senior counsel appearing for the Respondent.

Shri Debal Banerjee, learned senior counsel appearing for the Appellant submits that the Financial Creditor in support of Section 7 application has not filed any statutory certificate as required by Section 65B(4) of the Evidence Act, 1872. The Financial Creditor was required to file the certified copies as prescribed under clause (3) of Section 2 of the Bankers Book Evidence Act, 1891 and in absence of such certified copies the Court should not be obliged to admit Section 7 application. No Balance Sheet admissible as evidence was annexed with the Section 7 application, hence, the application was liable to be rejected. Referring to statement of disbursement to the Corporate Debtor as annexed by the Financial Creditor alongwith the Rejoinder affidavit, it was submitted that said statement was a statement prepared only by IL & FS and was not a statement issued by the Bank. It is submitted that application under Section 7 was incomplete, hence, deserved rejection. Certificate under Section 65B (4) of the Evidence Act was mandatory to verify the computer generated documents or books of ledger. There was no compliance of Section 7(3) of the Code. Column 7 of Form 1 Part V requires copies of entries in a Bankers Book in accordance with the Bankers Book Evidence Act, 1891.

Learned counsel for the Respondent refuting the submissions of learned counsel for the Appellant contends that there was ample evidence attached alongwith Section 7 application to prove debt and default and no error has been committed by the Adjudicating Authority in admitting Section 7 application. It is submitted that requirement of filing certified copy of the entries in the account of the Bankers Book has been added by Regulation 2A to the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 by amendment w.e.f. 13.11.2020 which was not applicable at the time when Section 7 application was filed. Hence, it was not mandatory to file the copies of entries in Bankers Book in accordance with Bankers Book Evidence Act, 1891. In reply filed by the Corporate Debtor there was no denial to the facility and Loan Agreement executed between the parties. There is no denial of amount disbursed by the Financial Creditor. There is also no denial to default committed by the Corporate Debtor and the submissions which are now being advanced in support of the Appeal does not make any ground to reject Section 7 Application.

We have considered the submissions of learned counsel for the parties and perused the record.

Regulation 2A which has been added in Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 by amendment w.e.f. 13.11.2020 is as follows:

The above requirement was not even applicable when the application was filed under Section 7 by the Financial Creditor. Hence, the insistence of learned counsel for the Appellant for certified copy of entries of relevant account of the Bankers Book as defined in Clause (3) Section 2 of the Bankers Book Evidence Act, was not necessary requirement in facts of the present case. The Appellant has also alongwith the Section 7 application filed the copy of Sanction Letter dated 15.01.2018 and Sanction Letter dated 24.03.2017 as Annexure-F and Annexure-H to the Section 7 Application. Further, the Loan Agreement dated 26.03.2018 and Loan Agreement dated 29.03.2017 were annexed as Annexure-G and Annexure-I.

In the Reply which was filed by the Corporate Debtor to Section 7 application, there was no denial of those documents. We, in this context, need to refer to reply affidavit filed by the Corporate Debtor to Section7 application which is on the record as Annexure B to the Additional Affidavit brought on record by the Appellant. Sanction Letter dated 15.01.2018 and Sanction Letter dated 24.03.2017 has been referred to in the reply as well as Loan Agreement. There was no denial of the Sanction Letter and Loan Agreement executed. What was sought to be alleged that put options were exercised by the Financial Creditor without the situation occurring for such options in terms of the Loan Agreements dated 26.03.2018 and 29.03.2018. There being no denial of the Sanction Letters and the Loan Agreements, the submission which is much pressed by learned counsel for the Appellant is that the statement of disbursement is the statement which has been prepared by the Financial Creditor itself and was not the statement issued by a Bank.

The Appellant in the Rejoinder filed before the Adjudicating Authority has brought the statement of disbursement to the Corporate Debtor on the record, which statement was prepared by the Financial Creditor itself and bears seal and signature of the Financial Creditor. It is relevant to note that said financial statement was supported by HDFC Bank statement reflecting the transactions between the parties. There being no denial by the Corporate Debtor to the disbursement by the Financial Creditor in the reply, the Adjudicating Authority did not commit any error in admitting Section 7 application.

Section 7(3) of the Code provides as follows:

The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 provides for filing of Section 7 application in Form1 accompanied with the documents and records required therein. Part V of the Form-1, Item No. 8 of Part V is as follows:

The Part V also contemplates other documents in order to prove the existence of Financial Debt, the amount and date of default, on basis of which the Adjudicating Authority has come to the conclusion that the Financial Creditor has successfully proved the debt and default. The most important factor to be taken into consideration is that the Corporate Debtor in its reply has neither denied debt nor the default. What is contended by the Corporate Debtor is that it was not proved by the documents as envisaged by Section 7 application. Section 7 application envisage other documents also to prove the debt and default.

Learned counsel for the Appellant has placed reliance on judgment of Hon’ble Supreme Court in “Arjun Panditrao Khotkar vs Kailash Kushanrao Gorantyal, (2020) 7 SCC 1”, where the Hon’ble Supreme Court had occasion to consider Section 65B (4) of the Evidence Act, 1872. The said judgment was delivered by the Hon’ble Supreme Court in reference to trial of election petitions under the Representation of the People Act, 1951. The above judgment in no manner help the Appellant in facts of the present case which deals with requirement of filing of Section 7 application under the I&B Code.

We have noticed that in the reply which was filed before the Adjudicating Authority, the Corporate Debtor has also made allegations against the Financial Creditor that the Financial Creditor itself is undergoing insolvency resolution and there are serious allegations of fraud and concealing information. Allegations of fraud and forgery are very easy to make but very difficult to prove. In event, the case of the Corporate Debtor is that the insolvency proceedings were initiated fraudulently or with malicious intent for any purpose other than for resolution of insolvency, it is always open for the Appellant to make application under Section 65 of the Code before the Adjudicating Authority and it is for the Adjudicating Authority to consider such application.

In view of the foregoing discussion, subject to the observations as made above, we dismiss the Appeal.