Lotus Three Development Ltd vs Axis Bank Ltd. & Anr

Lotus Three Development Ltd. ...Appellant

Vs.

Axis Bank Ltd. & Anr. ...Respondents

Present: For Appellant: - Mr. P.P. Hegde, Mr. Pai Amit and Mr. Rahat Bansal, Advocates.

For Respondents: - Mr. Ramji Srinivasan, Senior Advocate with Ms. Gauri Rastogi, Mr. Karan Khanna, Ms. Ananya Choudhary, Mr. Siddhant Sharma, Mr. Bunmeet Singh Grover and Ms. Sylona Mohpatra, Advocates.

ORDER

22.10.2018─ This appeal has been preferred by a Shareholder of

'Lotus Shopping Centres Private Limited'- ('Corporate Debtor') against an

order dated 30th August, 2018 passed by the Adjudicating Authority

(National Company Law Tribunal), Bengaluru Bench, whereby and

whereunder, the application preferred by the Respondent- 'Axis Bank

Limited'- ('Financial Creditor') under Section 7 of the Insolvency and

Bankruptcy Code, 2016 ('I&B Code' for short) has been admitted and

allegation of the Appellant that the Respondents have played fraud in

filing the application has been rejected.

Contd/-.............

-2-

2. The Adjudicating Authority noticed that there is a debt payable in

the law and in the fact to the 'Financial Creditor' and being satisfied that

the default has occurred, admitted the application being complete. The

Adjudicating Authority while passing such order also noticed the decision

of the Hon'ble Supreme Court in "Innoventive Industries Ltd. v. ICICI

Bank and Anr.─ (2018) 1 SCC 407" which reads as follows:

"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

Company Appeal (AT) (Insolvency) No. 624 of 2018 -3-

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

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

Company Appeal (AT) (Insolvency) No. 624 of 2018 -4-

"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

admission or rejection of such application, as

the case may be."

3. Learned counsel appearing on behalf of the Appellant submits that

there is a malafide on the part of the Bank as the account become NPA

on 15th January, 2016 but the Bank did not classify the account with

malafide intention to charge interest and make profit.

4. It is alleged that on 19th March, 2016, they thrusted a loan from

Shriram Finance and a sum of Rs. 12.28 Crores was credited to the

account of the Applicant which was adjusted against all other debits

Company Appeal (AT) (Insolvency) No. 624 of 2018 -5-

towards interest and penal interest accrued prior to that date. Therefore,

on 21st March, 2016, the Bank released Rs. 23.97 Crores only to adjust

it against all further interest including penal interest. However, such

submissions cannot be accepted while admitting an application under

Section 7 of the 'I&B Code', once it is found that there is a debt due to

the 'Financial Creditor' and the 'Corporate Debtor' has defaulted in

paying the dues. This is also evident from the satisfaction recorded by the

Adjudicating Authority while discussing the case of the Appellant at

paragraphs 13 and 15 of the impugned order.

4. Having heard learned counsel for the Appellant and learned Senior

Counsel appearing on behalf of the Respondents- 'Axis Bank Ltd.', we

find no ground to interfere with the impugned order in absence of any

illegality. There is no merit in the appeal. It is accordingly dismissed. I.A.

also stands disposed of.

(Justice S.J. Mukhopadhaya) Chairperson

(Justice Bansi Lal Bhat) Member(Judicial) Ar/uk

Company Appeal (AT) (Insolvency) No. 624 of 2018