National Company Law Appellate Tribunal: Dismissing the appeal, the bench comprising of Ashok Bhushan*, J. and Barun Mitra (Technical Member) held that there is no error in the impugned order passed by the Adjudicating Authority and materials on record fully proved the ingredients of financial debt, thus establishing that there was loan agreement between the parties.
Factual Matrix
In the instant matter, an application under S. 7 IBC was filed by the respondents, financial facility against the Corporate Debtor claiming the repayment of unpaid loan with interest. Vide order dated 12-07-2022, the Adjudicating Authority admitted the application after hearing the same. Aggrieved by the impugned order passed by the Adjudicating Authority, the appellant, suspended Director of the Corporate Debtor filed an appeal challenging the same.
Contentions
The appellant contended that there was no financial debt as no loan agreement is entered between the appellant and the respondents and deduction of TDS does not prove that Corporate Debtor owed any financial debt to the Respondents. The appellant further contended that the Adjudicating Authority did not consider that the respondents are not registered under the Banking Regulation Act, 1949 therefore does not have permission or license to advance any loan to the Corporate Debtor, before admitting the S. 7 IBC application.
The respondents contended that there are enough materials on record to prove the financial debt, moreover, the appellant himself replied to the demand notice admitting the grant of loan. The respondents further contended that depositing TDS clearly proved that loan was taken with interest.
Moot Point
Whether there are any other materials on record which may prove that there was any financial debt by the transaction between the parties?
Observations
The Tribunal observed that it is undisputed that there is no loan agreement between the parties and the Tribunal needs to look into other materials on record to prove the financial debt.
After taking into account the reply to the demand notice by the Corporate Debtor, the Tribunal observed that it can be clearly concluded that the appellant admitted grant of loan, moreover, the claim of interest was not refuted.
The Tribunal observed that deduction of TDS and deposit by the Corporate Debtor does not itself prove that there is any financial debt but deduction of TDS and deposit in Form 16-A under Section 194-A of Income Tax Act clearly proves that the deduction which was deposited was TDS relating to “Interest other than interest on securities”.
Relying on S. 3(33) IBC and Arrow Engineering Ltd. v. Golden Tobacco Ltd., 2021 SCC OnLine NCLAT 446, the Tribunal observed that the Financial Debt can be proved from other documents as contemplated in Column 8 of Part-V of Form 1 of Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.
The Tribunal further observed that the respondents did not violate S. 22 of Banking Regulation Act, 1949 by advancing a loan to the Corporate Debtor as they are not carrying on any banking business.
Decision
In the light of facts of the case, arguments advanced, materials placed on record and authorities cited, the Tribunal dismissed the appeal and held that the Adjudicating Authority has correctly held that the ingredients of financial debt were fully proved in the facts of the present case.
[Pradeep Tayal v. Essbert Fashion (P) Ltd., 2023 SCC OnLine NCLAT 43, order dated 12-01-2023]
*Judgment by Justice Ashok Bhushan
Advocates who appeared in this case :
Nitesh Jain and Vatsal Chandra, Counsel for the Appellant
Abhishek Nahta (PCA), Raveena Panika and Rishabh Sachdeva, Counsel for the Respondents
*Ritu Singh, Editorial Assistant has put this report together
