PVL Koteshwara Rao vs M/s. Grandhe Developers Pvt. Ltd.

[Per; Ms. Shreesha Merla, Member (Technical)]:

The present `Appeal’ is filed under Section 61 of the Insolvency and Bankruptcy Code, 2016, (hereinafter referred to as the Code), is against the `Impugned Order’ dated 06.05.2020, passed by the `Learned Adjudicating Authority’ (National Company Law Tribunal, Hyderabad Bench) in C.P. (IB) No.573/7/HDB/2019, whereby the `Adjudicating Authority’ had `dismissed’ the `Section 7 Application’ filed by the `Appellant’ herein, observing as follows:

The Learned Counsel for the `Appellant’ submitted that the `Appellant’ herein entered into an `Agreement of Sale’ dated 12.03.2013 and paid an amount of Rs.91,55,000/- in cash and Rs.22,45,000/- through RTGS, and as per the terms and conditions of the `Sale Agreement’, a further amount of Rs.51,000,000/- was also transferred to the `slipping partners’ of `M/s. Grandhe Developers Private Limited’. It is further submitted that Mr. Grandhe Madhusudhan Rao and Mrs. Grandhe Surekha are the Directors of the Company and that the `Corporate Debtor Company’ had also taken an amount of Rs.1Crore/- the executing Promissory Notes in favour of the `Financial Creditor’. It is also the case of the `Appellant’ that the interest payable on this amount of Rs.1Crore/-as on 02.07.2019 is Rs.1,12,08,403/- and that the total amount due on the demand Promissory Notes along with the interest is Rs.2,12,08,403/- and that the `Corporate Debtor’ had issued cheques, which were dishonoured, on account of which Legal Notices dated 12.09.2017, 25.01.2019 and 18.03.2019 were issued to the `Corporate Debtor’, for refund of cheques amount and he had failed to refund the same.

A `Demand Notice’, in `Form 3’, was sent to the `Corporate Debtor’ on 03.07.2019, demanding payable of Rs.2,12,08,403/- for which there was no reply. Learned Counsel for the `Appellant’ vehemently contended that Mr. G Madhusudhan Rao, the Director has taken from the `Financial Creditor’ for business purposes and it is also mentioned in the Sale Agreement dated 12.03.2013 that about 116 Plots has been allotted to the `Financial Creditor’ against the amount paid to them, but so far, no registration was done in the name of the `Financial Creditor’. The `Appellant’, had filed `Cheque Bounce Cases’, and the `Recovery Suit’ against the `Corporate Debtor’ who is only evading these proceedings.

Learned Counsel for the `Respondent’/`Corporate Debtor’, submitted that the `Corporate Debtor Company’ herein was struck-off from the Registrar of Companies (`RoC’) in the Year 2017 and that they have promptly replied to the Demand Notice dated 03.07.2019, stating that they are not concerned that the payment in respect of the unpaid dues to the `Appellant’ herein as the Demand Promissory Notes are not executed by the `Corporate Debtor’. It is contended that for any amounts given to the Directors in their personal capacity to the Company will not be bound for any such liabilities. The date of Agreement for Sale is 12.03.2013 and hence the `Application’ is also `barred by Limitation’. Moreover, it is submitted that this `Agreement of Sale’ is not a genuine one but a forged one as evidenced by the `final Report’ filed by the Sub-Inspector of Police, Special Team-II, CCS Hyderabad, in Crime No.98/2017 dated 30.07.2018 before XII^th ACMM, Nampally, Hyderabad. Therefore, only the Criminal Court can decide whether the said `Agreement of Sale’ is genuine or not. All the three legal notices issued by the `Appellant’ herein pertain to the Directors and not the Companies.

The main points which fall for consideration in this `Appeal’ are:

It is the case of the `Appellant’, that the Promissory Note issued by Mr. G. Madhusudhan Rao, the Director and Mrs. G. Surekha, is for business purpose; it has time consideration for value of money as the Promissory Note envisages that interest is to be paid and hence an amount of Rs.1,12,08,403/- is `due and payable’ to the `Appellant’, apart from which an additional amount of Rs.25Lakhs/- was executed in favour of the `Corporate Debtor’ for business purpose. It is argued that the Managing Director also executed a cheque in the capacity of Managing Director of the `Corporate Debtor’ for demand of this amount and therefore this amount falls under the definition of the `Financial Debt’ and that the very fact that post-dated cheques were issued evidences `acknowledgement of debt’.

It is the further case of the `Appellant’ that the `Corporate Debtor’ is legally obligated to pay-back in the form of delivery of 116 Plots. Though the `Sale Agreement’ transactions amount to Rs.1,65,00,000/-, the Respondent had refused to respond, either by way of `Registration’/`Refund’ of the `money’, which is due and payable. Learned Counsel for the `Appellant’ placed reliance on Clause 1 of the `Sale Agreement’, which is reproduced as under:

It is seen from the aforenoted Clause that the amounts were paid by mode of cash to one Mr. G. Madhusudhan Rao and Mrs. G. Surekha who are indeed the Directors of the `Corporate Debtor’ and that the Agreement nowhere states that the amounts were sent directly to the coffers of the `Corporate Debtor’ or that there was any Agreement directly between the `Appellant’ herein and the `Corporate Debtor Company’. At this juncture, it is relevant to reproduce Section 5(7) and 5(8) of the Code:

The material on record establishes that none of the Promissory Notes has been executed directly by the `Corporate Debtor’, but instead relate to the Directors in their personal capacity, as it is seen that the Promissory Notes have been signed by Mr. G. Madhusudhan Rao in his personal capacity.

The contention of the `Appellant’ that these amounts were used for business purposes, cannot, aid the `Appellant’ in establishing that the amounts were specifically and directly taken by the `Corporate Debtor’, in the absence of any `Account Statements’ or `receipts’ or any other material on record to evidence any direct transaction.

Additionally, it is not in dispute that the said `Agreement of Sale’ is disputed and a `final Report’ dated 28.05.2018 was filed in FIR No.98/2017, the relevant extract of which is reproduced as hereunder:

Having regard to the fact that the very `Agreement of Sale’ relied upon by the `Appellant’ herein is disputed and it is not within the jurisdiction of the `Adjudicating Authority’/`Tribunal’, to decide the correctness or otherwise of the `Sale Agreement’ in question, this `Tribunal’, is of the considered view that the same documents, cannot be relied upon to establish any `Financial Debt’. There is no documentary evidence to establish any `proof of disbursement’, directly to the `Corporate Debtor’.

The issues relied upon by the Counsel for the `Appellant’, with respect to `Acknowledgement of Debt’, cannot be applied in the instant case as the amounts were paid to the Directors, in their personal capacity and the cheques were also issued by them. Learned Counsel placed reliance on the decision of the Hon’ble Apex Court in `Pioneer Urban Land & Infrastructure Ltd.’ Vs. `Union of India & Ors.’^{11.WP Civil No.43/2019}, wherein the Hon’ble Apex Court, has held that a `Homebuyer’, is also a `Financial Creditor’. The facts in this case are distinguishable as the very `Sale Agreement’ is `disputed’ as `forged’. Moreover, these amounts were reportedly paid towards Plots and not in any `Housing Activity’. The scope and objective of the I&B Code, 2016, is one of the `Resolution’ and `Maximisation of Assets’ and cannot be used as a `Tool’ of `Recovery Proceedings’.

For all the foregoing reasons, this `Tribunal’, is of the earnest view that the `Appellant’ herein is not a `Financial Creditor’, as defined under Section 5(7) of the Code nor is the amount of `Financial Debt’, and does not fall within the ambit of the definition as defined under Section 5(8) of the I&B Code, 2016, and the points are answered accordingly.

Hence, TA No.116/2021 (Comp. App. (AT) (CH) (Ins.) No.750/2020), is devoid of merits and is `dismissed’. No costs. The connected pending `Interlocutory Applications’, if any, are closed.