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Judgment
Per: Justice Rakesh Kumar Jain (Oral)
This appeal is directed against the order dated 22.12.2023 by which an application filed under Section 7 of the IBC, 2016 bearing CP (IB) No. 195 of 2019 read with Rule 4 of the Insolvency & Bankruptcy (application to the Adjudicating Authority) Rules, 2016, for the resolution of an amount of Rs. 71,61,091/- has been admitted and Mr. Rajeshkumar Malani was appointed as the IRP.
Notice in this appeal was issued on 03.01.2024 and the operation of the impugned order was stayed. The said order is reproduced as under:
“03.01.2024: Learned Counsel for the Appellant submits that against the Loan of Rs. 52,50,000/- after filing of the petition Appellant has already paid 65 Lakhs which has been noticed by the Adjudicating Authority but the Adjudicating Authority has erred in observing that since there was no direction that it should be adjusted in the loan the amount has been adjusted in some other loan hence Section 7 Application has been admitted.
2.Learned Counsel for the Respondent submits that the amount has been adjusted in other loan with regard to which C.P.(IB) No. 196 of 2019 was filed which was dismissed as infructuous by order of the same date.
3.Learned Counsel for the Appellant submits that with regard to document which is subject matter of C.P.(IB) No. 196 of 2019 i.e. Master Lending Agreement dated 25th April, 2017, the land has already been conveyed to the Financial Creditor and there was no question of making payment against the said loan hence the amount was to be adjusted in the loan arising out of CP(IB) No. 195 of 2019.”
The brief facts of the case are that the respondent is allegedly in the business of ‘Manufacturing of Mattress and Finance Lending’. The respondent has allegedly granted a loan of Rs. 52,50,000/- with interest to the appellant. As per letter dated 11.04.2020, followed by a loan agreement dated 25.04.2017 executed between the parties. The respondent disbursed the loan on 21.04.2017 to which the appellant furnished the guarantee.
It is alleged that the appellant (CD) paid the EMI for the month of April, 2017 but did not pay the remaining amount, therefore, a demand notice was issued by the respondent on 18.01.2019 and when the appellant failed to repay despite the demand, filed the application under Section 7 for the resolution of an amount of Rs. 71,61,091/-.
It is pertinent to mention that after filing of the present application bearing CP (IB) No. 195 of 2019, the respondent also filed one more petition under Section 7 against the present appellant bearing C.P.(IB) No. 196 of 2019 in respect of default of loan of Rs. 7.5 crores alleged to have been advanced to the appellant vide agreement dated 25.04.2017.
The application bearing CP (IB) No. 195 of 2019 was heard on 16.09.2022 and the order was reserved. The said order is reproduced as under:
However, the matter was de-reserved on 19.12.2022. The said order is also reproduced as under:
“ Order
IA- 893 of 2022
Application is filed by the Corporate Debtor. In the main application filed u/s 7 of the IBC, 2016, arguments were heard and order was reserved. Thereafter in view of the Vidarbha judgment passed by the Hon'ble Supreme Court, Corporate Debtor has filed this application to consider the point raised in this application before passing any order in the main application. Learned Counsel Mr. Dave for the Applicant requests for adjournment stating that arguing counsel is not available. Pleadings are complete and matter will be heard. Order reserved in CP(IB) 195 of 2019 stands de-reserved. List on 20.01.2023.”
After de-reserving the order, hearing in the main application along with another application was continued and the Tribunal ultimately passed the order on 04.10.2023 for filing the written submissions by both the parties. The said order dated 04.10.2023 is reproduced as under:
“ORDER
Heard both counsels.
Both counsels are directed to file written submissions within a week.
List for hearing on 18.10.2023.”
It is alleged that in pursuance of the aforesaid order, the written submissions were filed by the appellant on 18.10.2023 i.e. the date on which the case was listed along with an email dated 13.10.2023 as Annexure-A. The said written submissions, which are only in two pages, is also reproduced along with Annexure-A as under:-
This fact has been noticed by the Ld. Tribunal in its order that the appellant has in fact made the payment of Rs. 65 lakhs against the total outstanding amount of Rs. 71,61,091/- and has also observed in paragraph 8 that “From this Annexure-A, it is clear that the respondent has repaid some amount towards loan as mentioned in this application.” yet admitted the application, on the premise that the amount which has been paid by the appellant was adjusted by the respondent in respect of the amount due in the other application bearing CP (IB) No. 196 of 2019 and admitted the application on the ground that the debt and default has been admitted.
Counsel for the appellant has argued that in the email dated 13.10.2023, the appellant has categorically mentioned that in terms of Section 59 of Indian Contract Act, 1872 (for short ‘Act’) the payment of Rs. 65 lakhs made is to be adjusted in the petition filed by the respondent under Section 7 bearing CP (IB) No. 195 of 2019 and not in respect of C.P.(IB) No. 196 of 2019. Therefore, the Ld. Tribunal should not have adjusted the amount of Rs. 65 lakhs in CP (IB) No. 196 of 2019 specifically when the appellant had categorically mentioned to the respondent that it should not be adjusted towards C.P.(IB) No. 196 of 2019. In this regard, he has not only referred to Section 59 of the Act but also to Section 60 of the Act which provides that in case there is no intimation by the Corporate Debtor for the adjustment of the amount in a particular manner, then the Creditor may adjust the said amount at his choice. He has also submitted that at no point of time the respondent had informed the appellant that the amount paid by the appellant has been adjusted in the C.P.(IB) No. 196 of 2019 nor any reply has been given to the email dated 13.10.2023, which is not denied to have been received by the respondent because it has been referred to in the impugned order by the Ld. Tribunal itself.
He has thus submitted that out of Rs. 71,61,091/- if a sum of Rs. 65 lakhs is deducted, the appellant is ready and wiling to pay the balance amount with whatever interest has accrued upon it. He has also submitted that for a petty amount which is left to be paid, the company which is a going concern should not be pushed into CIRP.
As against this argument, counsel for the respondent has vehemently argued that there is no error in the impugned order which calls for any interference by this Court because the amount of Rs. 65 lakhs which has been paid by the appellant has rightly been adjusted in C.P.(IB) No. 196 of 2019. It is submitted by counsel for the respondent that this fact has been mentioned in the written submission as well. He has further submitted that the appellant had earlier sent an email dated 13.07.2022 in which he has offered to pay Rs. 4 crores but the same has never been acted upon. He has also submitted that in the C.P.(IB) No. 196 of 2019, the appellant has not executed the sale deed etc., therefore, if this petition is allowed then the appellant shall be nowhere.
In this regard, counsel for the appellant has submitted that C.P.(IB) No. 196 of 2019 has in fact not been decided by the Ld. Tribunal on merits. He has submitted that even the said application is not maintainable because it was not a case of advancement of loan rather it was a case where the sale deed was to be executed and which in fact has been executed. He has further submitted that the interest of the respondent has been duly protected by the Ld. Tribunal while disposing of C.P.(IB) No. 196 of 2019 on the same date i.e. 22.12.2023 by observing that “this petition is disposed of with liberty to file again before this Tribunal in case the petition admitted in CP (IB) No. 195 of 2019 is set aside by any other court.”
We have heard counsel for the parties and perused the record with their able assistance.
The issue involved in this case is as to whether the amount paid by the appellant to the tune of Rs. 65 lakhs was to be adjusted in CP (IB) No. 195 of 2019 or C.P.(IB) No. 196 of 2019?
In this regard, the only evidence available on record is the email dated 13.10.2023 which has been sent by the appellant before the decision could have been taken by the Tribunal. There is no reply to this email by the respondent though the respondent could have easily replied to this email dated 13.10.2023 by putting a line that the amount of Rs. 65 lakhs has been adjusted in C.P.(IB) No. 196 of 2019 and cannot be adjusted in CP (IB) No. 195 of 2019.
In the absence of any direction on the part of the respondent and in the presence of an express intimation by the appellant, we are of the considered opinion that Section 59 of the Act would apply with full force instead of Section 60 as argued by the counsel for the respondent. In this regard, it would be relevant to refer to both the Section 59 & 60 of the Act, which are reproduced as under:
“Section 59: Application of payment where debt to be discharged is indicated.
59.Where a debtor, owing several distinct debts to one person, makes a payment to him, either with express intimation, or under circumstances implying, that the payment is to be applied to the discharge of some particular debt, the payment, if accepted, must be applied accordingly.
Section 60. Application of payment where debt to be discharged is not indicated.—
Where the debtor has omitted to intimate, and there are no other circumstances indicating to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in force for the time being as to the limitations of suits.”
It is also pertinent to mention that at no point of time the respondent had given any express intimation to the appellant about the treatment of the amount which has been paid by the appellant to the tune of Rs. 65 lakhs, therefore, the respondent cannot take the plea that in the presence of an express intimation by the appellant by virtue of email dated 13.10.2023, Section 60 would be applicable.
No other point has been raised.
In view of aforesaid facts and circumstances, we are of the considered opinion that the Ld. Tribunal has committed a patent error in not appreciating the facts of this case in its true prospect while observing that “it is pertinent to note that the lender has discretion to adjust the amount paid to any loan if particular direction is not given by the borrower” and then referring to the email dated 13.10.2023 in which a specific intimation has been given by the appellant, which goes to the root of the case, for adjustment of the amount of Rs. 65 lakhs in CP (IB) No. 195 of 2019 instead of C.P.(IB) No. 196 of 2019.
In view of the aforesaid facts and circumstances the present appeal succeeds and the impugned order is set aside.
The remaining amount after deducting Rs.65 lakhs out of Rs.71,61,091/- shall be paid by the appellant to the respondent with interest calculated @ 9% PA from the date it became due till the date it is paid, within two months from the date of this order. No costs. I.As if any pending, stands closed.