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Judgment
Heard Ld. Counsel appearing for the Appellant as well as Ld. Counsel appearing for the Respondent.
This Appeal has been filed against order dated 22.03.2024 passed by the National Company Law Tribunal, Mumbai Bench, Court-4 by which Section 7 application filed by the STCI Financial Ltd. has been admitted.
Brief facts of the case, necessary to be noticed for deciding this Appeal are:- “Loan amount of Rs. 20,00,00,000/- was taken by the Corporate Debtor (Man InfraProject Ltd.) on 27.11.2015. Two loan agreement was executed on 01.12.2015 of Rs. 10 crores each on the same date. The Corporate Debtor having committed default in servicing the loan, a Section 7 application was filed by the Financial Creditor being CP (IB) 312 of 2021 on 13.03.2021 claiming the default of Rs. 28,26,69,996/-. The Authorized signatory of the Corporate Debtor filed a reply to the Company Petition. Company Petition was heard, an I.A. No. 859 of 2024 was also filed in the CP (IB) 312 of 2021, which application was heard by the Adjudicating Authority and the Company Petition was initially dismissed on the ground of limitation on 24.02.2023, which order was set aside by this Tribunal by Judgment dated 07.12.2023, remanding the matter for fresh decision. After the remand by this Tribunal, the matter was heard and the Adjudicating Authority by the impugned order returned the finding that the loan facility sanctioned and various OTS proposals submitted by the Corporate Debtor indicates that the liability was admitted; The Adjudicating Authority being satisfied with the debt and default admitted Section 7 application. I.A. No. 859 of 2024 which was filed was also rejected. Aggrieved by the order admitting Section 7 application this Appeal has been filed.
When the Appeal came to be heard by this Tribunal, a statement was made by the Appellant that the Appellant is ready to deposit 25% of the amount as claimed in part-IV and order was passed on 10.04.2024, an interim order was also passed permitting the IRP to proceed with the collation of the claim, however shall not to constitute the CoC. After taking several extensions, the amount of 25% was deposited by the Applicant as directed. Subsequently, on 31.05.2024, the following order was passed.
“Heard Counsel for the Appellant as well as Sh. Arun Kathpali Sr. Counsel appearing for the Respondent and Counsel for the IRP.
2.By our interim order passed on 10.04.2024, we recorded the Appellant statement that Appellant is ready to deposit the 25% of amount as claimed in Part IV, which amount has been deposited.
3.Counsel for Appellant submits that however the settlement between the parties could not take place because Respondent are insisting for payment of the debt of the Corporate Debtor as well as the co-borrower whereas according to him his liability is only of the Corporate Debtor which submission is refuted Comp. App. (AT) (Ins.) No. 660 of 2024 by Sh. Arun Kathpalia. It is submitted that the amount as of Rs. 48 Crores due and hence the interim order be vacated.
4.In facts of present case, we are of the view that subject to deposit of 25% more of the amount as indicated in Part IV within 30 days from today, the interim order may continue. List this appeal on re-opening on 03rd July, 2024. Counsel for the Appellant submits that IRP expenses shall be paid by the Appellant.”
The amount was deposited on 27.10.2025. This Tribunal recorded the prayers of the Appellant that he shall take steps for continuation of deposit. The sequence of the event which has been noticed in the Appeal is clear indication of acknowledgement of debt by the Corporate Debtor. Adjudicating Authority after hearing the parties in Para 10, 11 & 12 has made following observations:
“10.This bench notes that the last payment made in respect of loan Account-I and Loan Account -II were on 06.02.2018 and 07.02.2018 as reflected in the statement of account/ledger of the Respondent/Corporate Debtor which extended the limitation period upto 07.02.2021. The Petition is filed on 30.03.2021. The petition was supposed to be filed on or within 07.02.2021. However, considering the extension of period of limitation in view of the suo moto order due to the COVID 19 outbreak passed by the Hon’ble Supreme Court of India, the present petition is within limitation.
11.We take note of decision passed by Hon’ble NCLAT that there were other material which have been brought in this appeal including the One Time Settlement dated 23.03.2019, 07.07.2020 and 06.11.2020 which appellant sought liberty and the same was granted Based on the documents placed on record by Financial Creditor through its Additional Affidavit, it is clearly evident, that the Corporate Debtor has acknowledged its liability in respect of dues payable to the Financial Credito through various OTS proposals 23.03.2019 and 07.10.2020 the Corporate Debtor has admitted its liability towards the outstanding amount . This tribunal is of the considered view that the OTS proposal and upfront part payment of debt by the Corporate Debtor falls within the definition of the ambit of ‘acknowledgement of debt’. The plea raised by the Financial Creditor clearly states that there is an outstanding debt which is to be paid by the Corporate Debtor to the Financial Creditor.
12.Further, the Corporate Debtor in its Affidavit in reply has acknowleged its liability stating that “...The Corporate Debtor is unable to conduct its business on account of various litigations between its management and/or Promoters and/or shareholders, etc. and therefore, he is unable to repay the aforesaid loans sanctioned by the Financial Creditor...”
Numerous OTS proposals have been noticed and relied by the Adjudicating Authority to prove the acknowledgement of the liability, thus, present is not a case where debt and default is even disputed. Adjudicating Authority has admitted Section 7 application relying on the OTS proposals and other acknowledgements. In the reply to the Section 7 application, the Corporate Debtor never denied the outstanding and only disputed the quantum of amount as claimed in Section 7 application.
Ld. Counsel for the Appellant had contended that there were issues between two groups of the Corporate Debtor, JCM Group and RCM Group. Loan was taken at the instance of the JCM group. The Appellant has filed an I.A. before the Adjudicating Authority to bring all relevant facts in the notice of the Court by I.A. No. 859 of 2024, which was rejected by the Adjudicating Authority which denied the Appellant to place relevant facts, which may be relevant to decide the Section 7 application. Counsel for the Appellant has also referred to rule 120 of NCLT Rule’ 2016.
Shri Arun Kathpalia, Ld. Sr. Counsel appearing for the Respondent refuting the submissions of the Appellant submits that there was scheme of arrangement approved on 20.03.2015 which was to take effect from 20.05.2015. He submitted that the loan which was taken by the Corporate Debtor was never questioned and in the correspondence which was sent on behalf of the Appellant only objection was raised with regard to security which was given with regard to the loan. The said security has also been released in the year of 2017. It is submitted that Insolvency proceeding was also initiated against the Corporate Debtor by the Financial Creditor in the year of 2017. It is submitted that the debt and default having been proved, Adjudicating Authority did not commit any error in admitting Section 7 application.
Ld. Counsel for the Respondent further submitted that no benefit can be claimed of Rule 120 of NCLT Rule’ 2016 by the Appellant since in the Company Petition the Corporate Debtor was represented by the Counsel who could not have been displaced by a Counsel which was sought to be engaged by the Appellant in the I.A.
We have heard the Counsel for the parties and perused the record.
In part-IV of Section 7 application, details of loan and disbursement have been claimed including the amount claimed and date of default part-IV of the application, is as follows:
| PARTICULARS OF FINANCIAL DEBT | ||||||
| 1. | TOTAL AMOUNT OF DEBT GRANTED DATE(S) OF DISBURSEMENT | Amount of Debt as on 24.03.2021; Rs. 28,26,69,996/- [Rupees Twenty Eight Crores Twenty Six Lakhs Sixty Nine Thousand Nine Hundred and Ninety Six only] Date of Disbursements; Corporate Loan against Property (Account No. A20064): Date of Loan Amount Disbursement 02.12.2015 Rs. 10,00,00,000/- Corporate Short Term Loan (Account No. A20063): Date of Loan Amount Disbursement 02.12.2015 Rs. 5,00,00,000/-05.01.2016 Rs. 3,00,00,000/-09.02.2016 Rs. 2,00,00,000/-Total Rs. 10,00,00,000/- | ||||
Date of Disbursement | Loan Amount | |||||
| 02.12.2015 | Rs. 5,00,00,000/- | |||||
| 05.01.2016 | Rs. 3,00,00,000/- | |||||
| 09.02.2016 | Rs. 2,00,00,000/- | |||||
| Total | Rs. 10,00,00,000/- | |||||
| 2. | AMOUNT CLAIMED TO BE IN DEFAULT AND THE DATE ON WHICH THE DEFAULT OCCURRED (ATTACH THE WORKINGS FOR COMPUTATIONOF AMOUNT AND DAYS OF DEFAULT IN TABULAR FORM) | Amount claimed to be in Default: Rs. 28,26,69,996/- [Rupees Twenty Eight Crores Twenty Six Lakhs Sixty Nine Thousand Nine Hundred and Ninety Six only] being principal sum due as on 17,00,00,000/- and interest (including additional interest) as on Rs. 11,26,69,996/- | ||||
Date of Disbursement | Loan Amount |
| 02.12.2015 | Rs. 10,00,00,000/- |
| PARTICULARS OF FINANCIAL DEBT | |||||||
| charged at the contractual rates with monthly rests Sr. Particulars Amount (in Rs.) No. | |||||||
Sr. No. | Particulars | Amount (in Rs.) | |||||
Corporate Loan against Property bearing Account No. A20064 1. Principal Rs. 10,00,00,000/-Amount 2. Interest (at the Rs. 6,42,79,795/-rate of 13.75% and 2.00% Penal Interest) Amount 3. Total (A) Rs. 16,42,79,795/-Corporate Short Term Loan bearing Account No. A20063 1. Principal Rs. 7,00,00,000/-Amount 2. Interest (at the Rs. 4,83,90,201/-rate of 13.75% and 2.00% Penal Interest) Amount Total (B) Rs. 11,83,90,201/-GRAND TOTAL Rs. 28,26,69,996/-(C= A+B) Date of NPA: 31.03.2017: * In view of the Supreme Court decision dated 08.03.2021 Suo Motu Petition (Civil)-No.-3- of -2020 the present application is within the Limitation. Copy of the Supreme Court decision dated 08.03.2021 is annexed hereto Annexure-31 Date of Default: 02.12.2016 | |||||||
| 1. | Principal Amount | Rs. 10,00,00,000/- |
| 2. | Interest (at the rate of 13.75% and 2.00% Penal Interest) Amount | Rs. 6,42,79,795/- |
| 3. | Total (A) | Rs. 16,42,79,795/- |
| 1. | Principal Amount | Rs. 7,00,00,000/- |
| 2. | Interest (at the rate of 13.75% and 2.00% Penal Interest) Amount | Rs. 4,83,90,201/- |
| Total (B) | Rs. 11,83,90,201/- | |
GRAND TOTAL (C= A+B) | Rs. 28,26,69,996/- |
Copy of Ledger Statement and the computation of amount of default is hereto annexed and marked as Annexure-2 colly”
There is no dispute with regard to the sanction of the loan, agreement entered with the Corporate Debtor by the Financial Creditor. Counsel for the Respondent has referred to letters written on behalf of the Appellant on 09.05.2016 and 26.05.2016. In letter dated 09.05.2016, in para-5 following has been stated on behalf of the Appellant:
“5.My client states that he has recently learnt that the captioned plot has been mortgaged by JCM group through Mrs. Anita Jagdishchandra Mansukhani by way of deposit of original title deeds with you to secure repayment of the Corporate Term loan of Rs. 20 crores availed of by Man Tubniox Ltd. and Man Infraprojects Ltd. My client states that the aforesaid act of mortgaging the captioned property is illegal, immoral, unethical and amounts to criminal breach of trust and cheating. My client further states that despite POA in force act of Mrs. Anita Jagdishchandra Mansukhani of mortgaging the captioned plot to you calls for both civil and criminal action.”
The said letter was issued at the time when Company Petition was not even in existence, thus, there was no issue pertaining to dispute regarding the sanction or the disbursement of the loan. Appellant filed an application being I.A. 859 of 2024 where prayers were made to record the Vakalatnama signed by the Applicant in favour of Advocate and requested the Court to discharge the earlier Advocate. Adjudicating Authority has considered the said application in para b, c & d by making following observations, rejected the application:
“b)At the time of hearing the Advocate on Record submitted that she has appeared as Counsel for the Corporate Debtor in the main Company Petition and had filed reply to the main Company Petition No 312/2021. The Advocate on Record vehemently opposed for discharging them as counsel on the record and allowing the applicant to bring on record as counsel for the Corporate Debtor in the main Company Petition.
c)This bench is of the considered view that, the Interlocutory Application No 859/2024 is filed under section 7 of the Insolvency and Bankruptcy Code, 2016. While adjudicating a petition u/s 7 the bench is required to examine the twin conditions of debt and default as prescribed under the said section. In the present case, after perusing all documents and the record of default of Information utility (NesL) and after hearing both the counsels whose vakalatnama is on records, the bench has given its decision on the petition u/s 7 and passed the necessary orders. The bench also observes that there is no NOC from the counsel who is on record. It is the obligation of the inducting counsel to obtain NOC and file it before the registry which has not been done by the inducting counsel. Hence this court has no jurisdiction to discharge the existing counsel and take on record the new counsel.
d)This bench is not required to adjudicate on disputes between the counsels, as this is not the correct forum to decide such disputes and hence, the bench refrains from adjudicating on the same.”
The Corporate Debtor was already represented and filed reply under Section 7 application represented through a Counsel. Present was not the case where Counsel representing could have been allowed to be displaced by the Adjudicating Authority in excise the power of under Rule 120 as claimed by the Appellant. The Corporate Debtor has also filed the reply which has been noticed and considered by the Adjudicating Authority. The Adjudicating Authority being satisfied of the debt and taking note of various OTS proposals given by the Corporate Debtor admitting its liability, had not committed any error in admitting Section 7 application in the CIRP proceeding.
Ld. Counsel for the IRP submitted that in view of the interim order operating from 10.04.2025, no further steps except collation of claims were made by the IRP. We are of the view that the Adjudicating Authority by giving valid reasons and findings admitted Section 7 application, which does not warrant any interference by this Court in excise of our Appellate Jurisdiction.
Counsel for the Appellant submitted that the amount which was deposited under the order of the Court has already lapsed and no further steps have to be taken. However, the Appellant submits that no direction needed with regard to deposited amount. The period from 10.04.2024 till date shall be excluded from the CIRP period. The IRP shall now proceed further in the CIRP in accordance with law.
The Appeal is dismissed subject to above.