Anil Nanda vs Hari Kishan Sharma & Ors

(Arising out of Order dated 17th April, 2018 passed by the Adjudicating Authority (National Company Law Tribunal), New Delhi, Court-II in C.P. No. IB-55(ND)/2018)

IN THE MATTER OF:

Anil Nanda ...Appellant

Vs

Hari Kishan Sharma & Ors. ....Respondents

Present:

For Appellant: Mr. Arjun Syal and Mr. Shreyan Das, Advocates.

For Respondents: Mr. Apoorv Gupta, Mr. Amit Prasad and Mr. Kunal Seth, Advocates for R-3.

Mr. Ashwini Mata, Senior Advocate assisted by Mr. Yugank Goel, Advocates for Phoenix ARC. Mr. Achal Gupta and Mr. Suresh Dobhal, Advocates.

Mr. Sunil Kumar, Advocate.

Mr. Sudhir Sud, one of the employees of the 'Corporate Debtor'

J U D G M E N T

SUDHANSU JYOTI MUKHOPADHAYA, J.

The Appellant- 'Mr. Anil Nanda', Shareholder of 'M/s. AKME Projects

Limited'- ('Corporate Debtor') has challenged the order dated 17th April,

2018 passed by the Adjudicating Authority (National Company Law

Company Appeal (AT) (Insolvency) No. 167 of 2018 2

Tribunal), Court-II, New Delhi, whereby and whereunder, the application

preferred by the Respondent- 'Mr. Hari Kishan Sharma'- ('Operational

Creditor') under Section 9 of the Insolvency and Bankruptcy Code, 2016

('I&B Code' for short) has been admitted, order of 'Moratorium' has been

passed and 'Interim Resolution Professional' has been appointed.

2. Learned counsel appearing on behalf of the Appellant submitted that

there is an existence of dispute. Apart from that the 'Operational Creditor'

wrongly claimed interest @ 18% per annum from the due date i.e. 1st June,

2015, which has not been appreciated by the Adjudicating Authority.

3. Learned counsel for the Appellant also submitted that the application

under Section 9 filed by the Respondents for an amount of default of Rs.

12,22,146/- (Rupees Twelve Lakhs Twenty-Two Thousand One Hundred

Forty-Six Only) along with 18% interest is nor based on record. According

to the Appellant, there was no admission made by the 'Corporate Debtor'

with regards to the differential amount of Rs. 6,11,937/- (Rupees Six Lakhs

Eleven Thousand Nine Hundred Thirty-Seven Only) and the interest as

sought for.

4. We have heard the parties and perused the records.

5. The 'Corporate Debtor' had taken following plea before the

Adjudicating Authority:

a) That the Company underwent a serious financial crisis because

of fraud played by ex-employees i.e. Mr. Arun Anand, Mr. Sonal

Company Appeal (AT) (Insolvency) No. 167 of 2018 3

Anand etc. it resulted in filing an FIR. It was pleaded that the

'Operational Creditor' was employed at the behest of Mr. Sonal

Anand. It was also pleaded that "it is believed that several

employees such as the Applicant, one Mr. Sudhir Sood and Mr.

Jitendra Pandey have been hand in glove with the aforesaid

accused ex-employees".

b) The notice issued under Section 8 of the 'I&B Code' does not

bear the signature or sign on receipt by any person or employee

at the registered office of the Respondent Company.

c) The full and final settlement is fabricated and false and there is

bonafide dispute over the final settlement between the parties.

6. There is nothing on the record to suggest that there is a pre-existence

(bonafide) dispute raised by the 'Corporate Debtor'.

7. In "Innoventive Industries Limited Vs. ICICI Bank and Another−

(2018) 1 SCC 407", the Hon'ble Supreme Court explaining Sections 7 & 9

of the 'I&B Code' observed and held as follows:

"27. The scheme of the Code is to ensure that

when a default takes place, in the sense that a

debt becomes due and is not paid, the

insolvency resolution process begins. Default is

defined in Section 3(12) in very wide terms as

meaning non-payment of a debt once it

becomes due and payable, which includes non-

Company Appeal (AT) (Insolvency) No. 167 of 2018 4

payment of even part thereof or an instalment

amount. For the meaning of "debt", we have to

go to Section 3(11), which in turn tells us that a

debt means a liability of obligation in respect of

a "claim" and for the meaning of "claim", we

have to go back to Section 3(6) which defines

"claim" to mean a right to payment even if it is

disputed. The Code gets triggered the moment

default is of rupees one lakh or more (Section

4). The corporate insolvency resolution process

may be triggered by the corporate debtor itself

or a financial creditor or operational creditor. A

distinction is made by the Code between debts

owed to financial creditors and operational

creditors. A financial creditor has been defined

under Section 5(7) as a person to whom a

financial debt is owed and a financial debt is

defined in Section 5(8) to mean a debt which is

disbursed against consideration for the time

value of money. As opposed to this, an

operational creditor means a person to whom

an operational debt is owed and an operational

debt under Section 5(21) means a claim in

respect of provision of goods or services.

Company Appeal (AT) (Insolvency) No. 167 of 2018 5

28. When it comes to a financial creditor

triggering the process, Section 7 becomes

relevant. Under the explanation to Section 7(1),

a default is in respect of a financial debt owed

to any financial creditor of the corporate debtor-

it need not be a debt owed to the applicant

financial creditor. Under Section 7(2), an

application is to be made under sub-section (1)

in such form and manner as is prescribed,

which takes us to the Insolvency and

Bankruptcy (Application to Adjudicating

Authority) Rules, 2016. Under Rule 4, the

application is made by a financial creditor in

Form 1 accompanied by documents and records

required therein. Form 1 is a detailed form in 5

parts, which requires particulars of the

applicant in Part I, particulars of the corporate

debtor in Part II, particulars of the proposed

interim resolution professional in part III,

particulars of the financial debt in part IV and

documents, records and evidence of default in

part V. Under Rule 4(3), the applicant is to

dispatch a copy of the application filed with the

adjudicating authority by registered post or

Company Appeal (AT) (Insolvency) No. 167 of 2018 6

speed post to the registered office of the

corporate debtor. The speed, within which the

adjudicating authority is to ascertain the

existence of a default from the records of the

information utility or on the basis of evidence

furnished by the financial creditor, is important.

This it must do within 14 days of the receipt of

the application. It is at the stage of Section 7(5),

where the adjudicating authority is to be

satisfied that a default has occurred, that the

corporate debtor is entitled to point out that a

default has not occurred in the sense that the

"debt", which may also include a disputed

claim, is not due. A debt may not be due if it is

not payable in law or in fact. The moment the

adjudicating authority is satisfied that a default

has occurred, the application must be admitted

unless it is incomplete, in which case it may

give notice to the applicant to rectify the defect

within 7 days of receipt of a notice from the

adjudicating authority. Under sub-section (7),

the adjudicating authority shall then

communicate the order passed to the financial

creditor and corporate debtor within 7 days of

Company Appeal (AT) (Insolvency) No. 167 of 2018 7

admission or rejection of such application, as

the case may be.

"29. The scheme of Section 7 stands in

contrast with the scheme under Section 8

where an operational creditor is, on the

occurrence of a default, to first deliver a

demand notice of the unpaid debt to the

operational debtor in the manner provided in

Section 8(1) of the Code. Under Section 8(2), the

corporate debtor can, within a period of 10

days of receipt of the demand notice or copy of

the invoice mentioned of a dispute or the record

of the pendency of a suit or arbitration

proceedings, which is pre-existing- i.e. before

such notice or invoice was received by the

corporate debtor. The moment there is existence

of such a dispute, the operational creditor gets

out of the clutches of the Code."

8. From the aforesaid decision, it is clear that even part of the dues,

once becomes payable comes within the meaning of 'debt' and if not paid it

will amount to default.

9. In the present case, the 'Corporate Debtor' has not disputed the

existence of 'debt', nor there is anything on record of the pendency of a suit

Company Appeal (AT) (Insolvency) No. 167 of 2018 8

or arbitration proceedings, or any pre-existing dispute raised prior to

issuance of demand notice under Section 8(1). Therefore, no relief can be

granted on the plea of so-called existence of dispute.

10. In absence of any merit, the appeal is dismissed. No costs.

[Justice S.J. Mukhopadhaya] Chairperson

[Justice Bansi Lal Bhat] Member (Judicial)

NEW DELHI

29th November, 2018

AR

Company Appeal (AT) (Insolvency) No. 167 of 2018