Abhishek Agarwal & Ors vs Manasadevi Bakers Pvt Ltd

[Arising out of Order dated 22.08.2019 passed by National Company Law Tribunal, Hyderabad Bench, Hyderabad in CP(IB)No.30/7/HDB/2019]

IN THE MATTER OF: Before NCLT Before NCLAT 1. Abhishek Agarwal, Financial Creditor Appellant No.1 S/o Shri Suresh Chand Agarwal, Aged about 35 years, OCC: Business

2. Ashish Kumar Agarwal Financial Creditor Appellant No.2 S/o Sri Suresh Chand Agarwal, Aged about 36 years, OCC: Business

3. Neha Agarwal Financial Creditor Appellant No.3 W/o Sri Abhishek Agarwal Aged about 32 years

(All Appellants are R/o. H.No. 1-2-50, Domalguda, Opp. Gagan Mahal Nursing Home, Himayathnagar, Hyderabad - 500029)

Vs.

M/s. Manasadevi Bakers Corporate Debtor Respondent Pvt. Ltd. Rep by Authorized person Ajay Kumar Agarwal, Occ: Chairman Cum M.D., O/o 6-3-855/10/A, 4A, Sampathji Apartments, Nr Niraj Public School, 2

Lane Opp to Greenpark hotel, Ameerpet, Hyderabad

For Appellant: Mr. Anil Kumar, Advocate

For Respondent: Mr. Satendra K. Rai, Advocate Mr. Ajay Jain and Mr. Kishore Soni, Advocates for Intervenor

JUDGEMENT

(08.06.2020) A.I.S. Cheema, J. :

1. The Appellants - original Applicants filed Application under Section

7 of Insolvency and Bankruptcy Code, 2016 (IBC - in short) before the

National Company Law Tribunal, Hyderabad Bench, Hyderabad

(Adjudicating Authority) having CP(IB)No.30/7/HDB/2019 claiming to be

Financial Creditors against Respondent - Manasadevi Bakers Pvt. Ltd. -

Corporate Debtor. In the Application, one Vishnu Dutt Gupta, Director of

the Corporate Debtor filed counter, claiming to be MD of the Respondent

- Corporate Debtor. One Ajay Kumar Agarwal also filed counter

statement claiming to be MD and stating that Vishnu Dutt Gupta was

not authorized. Vishnu Dutt Gupta has in the Appeal also filed

Interlocutory Application for intervention - impleadment. He claims that

he is still Director of the Corporate Debtor and has opposed the

Application before Adjudicating Authority and this Appeal.

2. The Appellants claim that Vishnu Dutt Gupta had appeared before

the Adjudicating Authority without authority and he should not have

been heard. Ajay Agarwal, the MD of Respondent has appeared and

Company Appeal (AT) (Ins) No.1012 of 2019 3

admitted the dues of the Appellants and default and thus according to

the Appellants, their Application should have been admitted.

3. The Appellants claim that they had disbursed unsecured loan on

different dates to the extent of Rs.66,75,000/- which reflected in the

Annual Financial Statements of the Corporate Debtor from 2006 - 2007

to 2015 - 2016. Appellants claim that with interest the amount due was

Rs.1,47,881,477/-. According to the Appellants, they are individuals and

the Corporate Debtor is independent person. They accept that father,

father-in-law and brother, brother-in-law of the Appellants are the

Directors and 50% shareholders of the Corporate Debtor. According to

them, due to relations they had extended unsecured loan. They had sent

Demand Notice on 10th June, 2016 and 10th August, 2017. The Corporate

Debtor had by Reply dated 18th December, 2017 accepted that the

Corporate Debtor owns the money and sought time of six months. After

six months, they sent another Notice dated 26th June, 2018 and when

there was default, the Application was filed. According to the Appellants,

they had nothing to do with Corporate Debtor as individuals and

Subordination Agreement of Canara Bank relied on by Vishnu Dutt

Gupta should have been ignored.

4. Vishnu Dutt Gupta had filed counter before Adjudicating Authority

(Annexure P3) and with the same, filed extract of minutes of meeting

dated 7th December, 2009 which shows Vishnu Dutt Gupta as Managing

Director and authorized person. Vishnu Dutt Gupta filed Subordination

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Agreement (Page - 202) dated 26.08.2014 executed by the Appellants as

well as Directors of the Corporate Debtor which states that the

Appellants will not claim their dues without first dues of Canara Bank

being paid. For this and other reasons, Vishnu Dutt Gupta opposed the

Application.

5. Ajay Kumar Agarwal had also filed counter (Annexure P-8 Page

272) before the Adjudicating Authority and claimed that Petitioners had

not executed Subordination Agreement with Canara Bank but he himself

has executed the same as Director. He admitted the dues of the

Appellants and that the same were in default.

6. The Adjudicating Authority heard the parties and after considering

the record, concluded that the loan was unsecured loan which was

interest free. The Adjudicating Authority referred to MOU dated

29.04.2007 and Agreement dated 8th February, 2012 to find that it was

interest free unsecured loan and equity shares were to be allotted to both

the parties and both the MOU and the Agreement never discussed about

the time of repayment. Thus, it found that the unsecured loan was

interest free and the claim of interest in the Application was not tenable.

It also held that there was no time fixed to repay the loan. The

Adjudicating Authority referred to Financial Statements for 2015 - 2016

and 2016 - 2017 and observed that the same do not reflect any provision

for interest against unsecured loans given by the Petitioners. The

Adjudicating Authority thus held that the loan does not have

Company Appeal (AT) (Ins) No.1012 of 2019 5

consideration for time value of money and cannot be said to be financial

debt. As such, it was found that there was no default under the

provisions of IBC. The Adjudicating Authority referred to Subordination

Agreement and found that the Petitioners were signatories to the

Agreement and that the Petitioners and other signatories had undertaken

that they will not issue or collect, assign or receive payment of their

claims until claims of the Canara bank are settled. The Adjudicating

Authority held the Agreement to be binding on Petitioners and rejected

the claim of Petitioners that they had not signed the Agreement. For such

reasons, the Application came to be rejected.

7. We have heard the parties and perused the record. At the time of

oral arguments, the counsel for Appellants after making oral submissions

also filed written submissions across the Bar on 12th March, 2020. With

the written submissions, certified copy of counter filed before

Adjudicating Authority by Canara Bank as I.A. 432 of 2019 has also been

filed. The counter filed by the Officer of Canara Bank shows that when

Corporate Debtor availed loan facilities from Canara Bank, the Corporate

Debtor was called upon to execute necessary documents and charge of

Canara Bank was registered with ROC on 25th September, 2014. The

loan facility granted was against security and hypothecation deed was

also executed. The counter of the Officer of Canara Bank shows that the

Appellant No.1 - Abhishek Agarwal and 11 others executed

Subordination Agreement dated 26th August, 2014 in favour of the Bank

Company Appeal (AT) (Ins) No.1012 of 2019 6

accepting the liability of the Corporate Debtor and had also agreed that

their claims shall be subordinate to the claim of Canara Bank and that

they shall not collect, assign or receive payment from the Corporate

Debtor until the claim of Canara Bank is settled. In the certified copy of

the counter, there is copy of the Subordination Agreement (Pages - 462

and 463) which shows names of the three Appellants and others and

includes their signatures (Page 463). At other places of the Subordination

Agreement also, there are signatures appearing to be of the Appellants.

8. All this material was brought before the Adjudicating Authority at

the instance of Vishnu Dutt Gupta. The Appeal claims that Vishnu Dutt

Gupta was not authorized and the list of dates states that Vishnu Dutt

Gupta was removed as MD from the Board on 6th February, 2019. This

action was taken against Vishnu Dutt Gupta after the filing of the

Application under Section 7 of IBC on 17.12.2018. Considering the

counter filed by Vishnu Dutt Gupta and the counter filed by Ajay

Agarwal, the record shows that the Directors have differences between

themselves and there are groups in the Corporate Debtor. In proceedings

under Section 7 of IBC, the Adjudicating Authority need not reconcile the

different stands taken by rival groups. While admitting Application under

Section 7 if it appears to the Adjudicating Authority that the object is not

resolution but object is different, the Adjudicating Authority would have

discretion not to act upon the Application and leave the parties to other

remedies available. In the present mater, the Appellants have tried to

Company Appeal (AT) (Ins) No.1012 of 2019 7

block Vishnu Dutt Gupta from bringing on record material relevant to the

Application claiming that he had no authority or that after filing of the

Application under Section 7 of IBC, the said Vishnu Dutt Gupta has been

removed from the post of MD. The fact remains that Vishnu Dutt Gupta

still appears to be Director of the Corporate Debtor and the Adjudicating

Authority, accepted the material pointed out by the said Director, which

was found to be relevant. We do not intend to interfere. The Appellants

may deny that they were not signatories to the Subordination Agreement

but in the face of Affidavit of the Officer of Canara Bank and

Subordination Agreement pointed out by the Officer, it can be said that

the Appellants cannot maintain the Application under Section 7. The

Adjudicating Authority need not settle and decide the claim of the

Appellants denying the signatures in the Subordination Agreement of

2014. That is not necessary for the Adjudicating Authority to decide in

proceeding under Section 7 of IBC. Considering the documents executed

in favour of Canara Bank in ordinary course of business which is

admitted by Ajay Kumar Agarwal, it must be said that the Appellants

failed to establish that the loan extended by them is payable and hence

there is "default". In the absence of settling dues of Canara Bank,

Appellants cannot claim that their dues have become payable, and thus

there is "default".

9. Apart from above, the Adjudicating Authority has after considering

the record, found that there was material in the form of MOU dated

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29.04.2007 and Agreement dated 8th February, 2012 which dealt with

interest free unsecured loan and equity shares to be allotted to both the

parties and concluded that there was no time value of money and that it

was not financial debt. Keeping in view the relationships between the

parties and record, we find no reason to interfere with such findings

recorded by the Adjudicating Authority.

10. For the above reasons, we do not find any substance in the Appeal.

The Appeal is dismissed. No Orders as to costs.

[Justice A.I.S. Cheema] Member (Judicial)

(Justice A.B. Singh) Member (Judicial)

[Kanthi Narahari] Member (Technical) rs

Company Appeal (AT) (Ins) No.1012 of 2019