National Company Law Appellate Tribunal, New Delhi: The bench of Rakesh Kumar Jain*, J. and Dr. Alok Srivastava (Technical Member) held that establishing the debt and default is a sine-qua-non and the only condition for the purpose of admitting S. 7 IBC application.
In the present matter, the appellant, Shrem Residency Private Limited (Financial Creditor) entered into a collaboration agreement dated 31-08-2012 with the respondent, Shraman Estates Private Limited (Corporate Debtor) and GRG Estates Private Limited as a developer to develop agriculture land measuring 21 acres at village Jhatikar and village Shikarpur in District Najafgarh, New Delhi. Via an addendum to the agreement dated 31-12-2012, both the parties agreed to treat the amount of Rs. 8 crores as a non-refundable deposit of Rs. 1 crores, refundable deposit of Rs. 1 crores with interest @ 18% per annum payable monthly and Rs. 6 crores towards loan with interest @ 24% per annum payable monthly. The appellant sends a notice dated 05-09-2017 and another notice dated 02-04-2019 alleging that the respondent has stopped making payment of interest on the principal loan amount.
The applicant filed an application before the Adjudicating Authority (NCLT, New Delhi) under S. 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) against the respondent for initiation of Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor since the appellant had advanced a loan of Rs. 6 crores to be repaid with interest and Rs. 1 crores as refundable deposit which to be repaid with interest by the respondent.
The Adjudicating Authority vide order dated 01-10-2019 dismissed the application on the grounds that the appellant has failed to establish the terms of advancing the money, the repayment of money and default by the respondent. Aggrieved by the impugned order passed by the Adjudicating Authority, the appellant preferred an appeal before this Tribunal challenging the same.
The appellant contended that the appellant has submitted all the evidence which collectively shows that Rs. 6 crores were advanced as loan with interest and by rejecting of S. 7 IBC application the Adjudicating Authority has committed a patent error. The appellant further contended that establishing the debt as well as default is a sine-quo-non for the purpose of admitting S. 7 IBC application.
The respondent contended that the term sheet submitted by the appellant cannot be investigated isolation but should be read alongwith the collaboration agreement and the Adjudicating Authority has rightly held that there is difference between the term sheet and the collaboration agreement and appellant had failed to establish the terms of advancing the money, its repayment and default.
The Tribunal observed that it is clear from the facts and circumstances that S. 7 IBC application was filed for resolution of the amount of Rs. 6 crores advanced as a loan and Rs. 1 crore as refundable security which satisfies the definition of debt and default. The Tribunal further observed that existence of debt and default is the only thing required for the purpose of maintaining the application under S. 7 IBC.
“The aforesaid facts and circumstances, satisfies the definition of debt and default which is the only thing required for the purpose of maintaining the application under Section 7 of the Code.”
The Tribunal observed that the Adjudicating Authority has committed a patent error in misreading and mis-appreciating the evidence available on record while dismissing the application, filed by the Appellant for the initiation of CIRP of the Corporate Debtor/Respondent.
While allowing the appeal, the Tribunal directed the Adjudicating Authority to admit the application filed under S. 7 IBC and proceed in accordance with the law.
[Shrem Residency (P) Ltd. v. Shraman Estates (P) Ltd., 2023 SCC OnLine NCLAT 70, decided on 11-01-2023]
*Judgment by Justice Rakesh Kumar Jain.
Advocates who appeared in this case :
Mr. Anand Chhibbar (Senior Advocate), Mr. Pulkit Deora, Mr. Ayushmaan Bhutani, Mr. Deep Prabhu, Mr. Manju Nagrath and Mr. Aphune Keto, Counsel for the Appellant;
Mr. P Nagesh (Senior Advocate), Mr. Vishesh Issar and Mr. Akshay Sharma, Counsel for the Respondent.
*Ritu Singh, Editorial Assistant has put this report together.