Mohan Lal Dhakad vs Bng Global India Ltd

NATIONAL COMPANY LAW APPELLATE TRIBUNAL COMPANY APPEAL (AT)(Insolvency) No.684 of 2020 (Under Section 61 of the Insolvency and Bankruptcy Code, 2016 read with Section 421 of the Companies Act, 2013)

(Arising out of Order dated 12.3.2020 passed by the National Company Law Tribunal, New Delhi Bench in Company Petition No. (IB)2978(ND)/2019)

IN THE MATTER OF :

Mr.MOHANLAL DHAKAD R O 15, Vill : Sikhedi,Po Badwan ..... Appellant The & Dist, Mandsaur, Madhya Pradesh 458 667

Versus BNG GLOBAL INDIA LIMITED, Having its Registered Office at: GD ITL A-09, Northex Tower, 5th Floor, 504, Netaji Subhash Place, Pitambura, New Delhi 110034. ...Respondent

Present:

For Appellant: Ms. Ranjana Roy Gawai & Mr.Avinash Bhati, Advocates

For Respondent: None

JUDGEMENT

Venugopal M.J

Preface

The 'Appellant' has filed the present appeal being

dissatisfied with the order dated 12.3.2020 passed by the 'Adjudicating

Authority' (National Company Law Tribunal), New Delhi Bench-V in

(IB)2978(ND)/2019.

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Page | 1

2. The 'Adjudicating Authority' (National Company Law

Tribunal), New Delhi Bench-V, while passing the 'Impugned Order on

12.3.2020 in (IB)2978/ND/2019 filed by the 'Appellant'/'Financial

Creditor' and others (under Section 7 of the Insolvency & Bankruptcy

Code) read with Rule 4 of Insolvency & Bankruptcy (Application to the

'Adjudicating Authority' )Rules 2016, at Paragraphs 6 to 9, among other

things had observed the following:

...." If we shall read the provisions contained under

Section 73, 74 and 76 of the Companies Act along

with (Acceptance of Deposits) Rule, 2014, then it can

be said that all these provisions have come into force

with effect from 01st April, 2014 and in view of the

aforesaid provisions after commencement of this Act,

no company can in view, accept or renew deposit in

this Act from the public except in the manner

provided in this Chapter and a special provision is

made regarding the repayment of the deposited

amount which was deposited prior to the enforcement

of this Section and as per Section 74(1)(b), the

company is liable to repay the amount within 3 years

from such commencement on or before expiry of the

period from which the deposit is accepted, whichever

is earlier and if the company fails to repay the amount

then there is a penal provision U/S 74(3) of the

Companies Act, 2013. Here, in the case as we have

Company Appeal (AT)(Insolvency) No.684 of 2020

Page | 2 already held that the 'Financial Creditors'

everywhere mentioned the word 'deposit', therefore,

the amount which he has deposited with the

Corporate Debtor does not come within the purview

of the definition of Financial Debt rather the Financial

Creditors, admittedly, deposited the amount with the

Corporate Debtor and in lieu of that he was getting

interest from the Corporate Debtor, therefore, he can

claim the refund under Chapter V of the Companies

Act, read with Companies Act, read with Company

(Acceptance of Deposits) Rule, 2014.

So far, the initiation of proceedings under Section 7

of the Code is concerned, in our view, is not liable to

be accepted. At this juncture, we would also like to

refer the arguments of the applicants that there is a

default in payment of debt, therefore, Section 7

application is maintainable. At this juncture, we

would like to refer the definition of default as defined

in Section 3(12) of the Code:

Section 3(12)

(12) "default" means non-payment of debt when

whole or any part or instalment of the amount of

debt has become due and payable and is not

1[paid] by the debtor or the corporate debtor, as

the case may be"

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8. Mere plain reading of the provisions show

that default means non-payment of debt, whereas in

the aforementioned para, we held that the amount

which the applicants deposited does not come under

the definition of the debt. Therefore, we are unable

to accept the contention of the applicants that there

is a default in payment of debt.

9. As we have already held in the matter of

Satish Chand Gupta vs. Servel India Private Limited

(IB) 1886 (ND)/2019 and the present case is also

covered with this decision, therefore, we are of the

considered view that though the applicants have

some other remedy under the law to recover the

amount which they have deposited with the

Corporate Debtor but so far initiation of the Section 7

of the IBC is concerned for the reasons discussed

above, the present application is not maintainable,

accordingly, we hereby, reject the prayer of the

applicants to initiate the proceedings under Section 7

of the Code."

and ultimately dismissed the Application, granting

liberty to the Appellant to file an appropriate

Application under Chapter V of the Companies Act,

2013.

Company Appeal (AT)(Insolvency) No.684 of 2020

Page | 4 APPELLANT'S SUBMISSIONS:

3. According to the 'Appellant'/Financial Creditors' of the

'Respondent/Corporate Debtor', and Application for initiation of

'Corporate Insolvency Resolution Process' (herein after referred to

'CIRP') under Section 7 of the 'Insolvency & Bankruptcy Code, 2016

(herein after referred to IBC 2016) was filed against the

'Respondent/Corporate Debtor' by the 'Appellant' & other 'Financial

Creditors' for a default of Rs.16,28,300/-(Rupees Sixteen Lakhs Twenty

Eight Thousand Three Hundred only) which includes a sum of

Rs.13,70,000/-(Rupees Thirteen Lakh Seventy Thousand only) towards

the amount payable by the 'Corporate Debtor' to the 'Financial Creditors'

at the time of expiry of the various schemes floated by the 'Corporate

Debtor' along with Rs.2,58,300/- (Rupees Two Lakhs Fifty Eight

Thousand and Three Hundred only) towards the interest at the rate of

12% per annum payable by the 'Corporate Debtor' to the 'Financial

Creditors' which was calculated from the 'Date of Registration'/'Date of

Investment' by the 'Financial Creditors' in the schemes of 'Corporate

Debtor' till October,2019.

4. The Learned Counsel for the 'Appellant'/Financial Creditors' points

out that the 'Respondent'/'Corporate Debtor' floated 2 'Investment

Schemes' under the plans entitled the 'Recurring Investment Plan' and

the 'Lumpsum Investment Plan' to collect investments from individual

Investors hailing from small towns and villages in India and these

schemes were floated after the incorporation of the

'Respondent'/'Corporate Debtor' 'in 'the' year 2011. The schemes were

Company Appeal (AT)(Insolvency) No.684 of 2020

Page | 5 floated carrying a term period of 3 years to 10 years under the

'Recurring Investment Plan scheme' as under the 'Lump Sum

Investment Plan', scheme. The 'Respondent/'Corporate Debtor' had

promised to provide return on the 'Investment sum' along with the

'Principal sum' payable at the time of maturity of the term. Resultantly,

under the 'Recurring Investment Plan' the 'Respondent'/'Corporate

Debtor' had assured to provide the Investor's interest on their

investment amount at the time of expiry or of the term along with the

Investment amount.

5. The Learned Counsel for the 'Appellant'/Financial Creditors'

submits that the 'Respondent'/'Corporate Debtor' had assured the

Investors that at the maturity of the particular scheme, the Investors

will 'either be allotted agricultural land or be paid multi-fold returns on

their investments. Also that the 'Respondent/'Corporate Debtor' was

committed to pay the Investors, a return on the Investment for the 'time

value of money' based on the amount of investments made by the

Investors. In fact, the monies were collected in the year 2012 to 2013

and the plans opted by the 'Investors' matured in the year 2018 and

that the 'Respondent/'Corporate Debtor' had not only failed to allot the

land in favour of the 'Investors', but also failed to pay the amount

payable on maturity together with 'interest' and 'Assured return'.

Because of the failure of the 'Respondent'/'Corporate Debtor' to offer

allotment of land or pay the principal amount along with interest,

resulted in default, thus leading to the filing of the Application before

the 'Adjudicating Authority' (National Company Law Tribunal), New

Delhi. Besides this, the refusal of the 'Respondent'/'Corporate Debtor'

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Page | 6 to honour the 'Promissory Notes' issued by it in lieu of 'Assured' returns'

clearly demonstrates the 'Respondent'/'Corporate Debtor's inability to

repay its admitted debts.

6. The Learned Counsel for the 'Appellant' contends that the

'Adjudicating Authority' by the 'Impugned Order' dated 12.3.2020 had

rejected the 'Application'/'Petition' of the 'Appellant' on the basis that

the claim of the 'Appellant' does not come within the ambit of Sec.5(8)

of the Insolvency & Bankruptcy Code, 2016 or any Clause(a) to (i),

because of the fact that all the Applicants therein is that they deposited

the said amount under 'scheme' and they had not given 'Debt' to the

'Corporate Debtor', in as much as they are entitled to get refund under

the Companies Act, 2013.

7. The Learned Counsel for the 'Appellant' points out that

'Adjudicating Authority' in the 'Impugned Order' does not consider

Section 3(6) and 3(11) of the Code to give a finding whether or not the

investment made is a 'Debt' or not, and erroneously referred to the

'Companies (Acceptance of Debts) Rules, 2014', along with Section

73,74 and 76 of the 'Companies Act, 2013' to declare that since the

investment made was to be refunded as per 'Companies (Acceptance of

Debt) Rules', 2014 and as such the investments made by the 'Appellant'

is not a 'Financial Debt' under Section 5(8) of 'Insolvency & Bankruptcy'

Code.

8. The Learned Counsel for the 'Appellant' proceeds to point out that

the 'Adjudicating Authority' (National Company Law Tribunal) ignored

the fact that the 'Insolvency & Bankruptcy' Code is a complete code in

itself and the same overrides 'Companies (Acceptance of Debts) Rules,

2014'.

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9. It is represented on behalf of the 'Appellant' that the 'Adjudicating

Authority' (National Company Law Tribunal ) had failed to appreciate an

important fact that there was 'Disbursement of Money' against the 'time

value of money' in the present case. The other argument advanced on

behalf of the 'Appellant' is that in the instant case, there is a clear

'Financial Debt' and as such the 'Appellant' is a 'Financial Creditor' in

terms of the Code.

10. The Learned Counsel for the 'Appellant' projects an argument that

the case of 'alternate remedy' is not a defence u/s 7 of the Code, since

Section 7 Petition of the Code is maintainable during the pendency of

'Suit' or 'Arbitration', especially, the definition under Section 3 of the

Code, 'Claim' includes 'disputed claims'.

11. The Learned Counsel for the 'Appellant' refers to Section 129 of

Schedule III of the Companies Act, 2013, wherein, the 'Deposits' were

directed to be considered as 'Long Term Borrowings' at the time of

preparation of Balance sheet. Therefore, as per 'Insolvency &

Bankruptcy Code' and the 'Companies Act, 2013, the 'Deposits' made

by the 'Appellant' were 'Borrowing'/'Debt' upon the 'Corporate Debtor'.

12. The Learned counsel for the 'Appellant' adverts to the definition of

'Deposits' under Section 2(31) of the Companies Act, 2013 runs as

under:

"deposits includes any receipt of money by way of

deposit or loan or in any other form by a Company,

but it does not include such categories of amount

as may be prescribed in consultation with the RBI".

Company Appeal (AT)(Insolvency) No.684 of 2020

Page | 8 Appellant's Case Laws:

13. The Learned Counsel for the 'Appellant' cites the decision of

Hon'ble Supreme Court in Innoventive Industries Ltd. V ICICI Bank &

Another, reported in (2018) SCC 407, wherein it is observed that the

Insolvency & Bankruptcy Code over rides other Laws and the 'Claim'

included 'Disputed Claims' and the 'Insolvency Process' is triggered the

moment the 'default' is committed.

14. The Learned Counsel for the 'Appellant' refers to the judgement

of this Tribunal, in Nikhil Mehta & Sons V AMR Infrastructure Ltd. (2017

SCC Online NCLAT 377), wherein it is held that money disbursed against

'time value of money' is a 'Financial Debt'.

15. The Learned Counsel for the 'Appellant' refers to the judgement

of this Tribunal, in Ms.Anju Aggarwal V Bombay Stock Exchange &

Others reported in (2019 SCC Online NCLAT P 789) wherein it is

observed and held that Section 28A of the 'SEBI Act, 1992', being

inconsistent with Section 14 of the 'Insolvency & Bankruptcy Code' will

prevail over Section 28A of the 'SEBI Act, 1992' etc.

16. In support of the proposition that collective investments schemes

are 'Financial Debt' and further that the 'Insolvency & Bankruptcy' Code

overrides 'SEBI', the Learned Counsel for the 'Appellant' seeks in aid of

the decision of this 'Tribunal' in Bohar Singh Dhillon V Rohit Sehgal

reported in 2019 SCC online NCLAT 233.

17. The Learned counsel for the 'Appellant' refers to the decision of

this 'Tribunal' in Encore Asset Reconstruction Company Pvt. Ltd. V.

Charu Sandeep Desai & Others reported in 2019 SCC online NCLAT 284

to the effect that 'Insolvency & Bankruptcy' Code overrides SARFAESI

Act.

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18. The Learned Counsel for the 'Appellant' refers to the decision of

the Hon'ble Supreme court in Embassy Property Developments Pvt.Ltd.

V. State of Karnataka and Ors (Civil Appeal No.9170 of 220 dated

3.12.2019) in regard to the jurisdiction of 'National Company Law

Tribunal' V. Debt Recovery Tribunal' under the Code.

ASSESSMENT :

19. It is to be pointed that before the 'Adjudicating Authority'(National

Company Law Tribunal) New Delhi Bench, the 'Appellant'/'Financial

Creditors' had filed the 'Application' under Section 7 of the 'Insolvency

& Bankruptcy' Code read with Rule 4 of the 'Insolvency and Bankruptcy'

Code (Application to 'Adjudicating Authority') Rules, 2016 (through the

'Appellant', who was authorised by other 'Financial Creditors' to submit

the Application jointly) and against the default committed by the

'Corporate Debtor' in respect of them under Part IV of the Application of

'Particulars of Financial Debt', it is mentioned that the total amount of

'Financial Debt' in regard to the 'Financial Creditors' was Rs.16,28,300/-

(Rupees Sixteen Lakhs Twenty Thousand and Three Hundred only)

which includes a sum of Rs.13,70,000/- (Rupees Thirteen Lakhs and

Seventy Thousand only) towards the sum payable by the

'Respondent'/'Corporate Debtor' to the 'Financial Creditors' at the time

of expiry of the various schemes floated by the 'Corporate Debtor'

together with Rs.2,58,300/- (Rupees Two Lakhs Fifty Thousand Three

Hundred only) towards interest @ 12% per annum payable by the

'Respondent'/'Corporate Debtor' which was included from the 'Date of

Registration'/'Date of Investment' by the 'Financial Creditors' in the

schemes of 'Corporate Debtors' till October 2019.

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20. It is the case of the 'Appellant' that the investments made by the

'Financial Creditors' mentioned in the 'Application' before the 'Tribunal'

that the investments made by them under the 'Schemes of the

Corporate Debtor' matured in the year 2017-2018. But the

'Respondent'/'Corporate Debtor' failed in its commitment to offer the

allotment and/ or the possession of the plots of land as promised by it

or pay the 'Assured Returns' or repay the amounts collected by it along

with interest on the maturity of the schemes. Hence, Joint Application

under Section 7 was filed by the 'Financial Creditors' before the

'Tribunal'.

21. According to the 'Appellant, the total amount claimed to be due

was Rs.16,28,300/- (Rupees Sixteen Lakhs Twenty Eight Thousand and

Three Hundred only) which includes a sum of Rs.13,70,000/- (Rupees

Thirteen Lakhs Seventy Thousand only) towards the amount payable by

the 'Corporate Debtor' at the maturity of the schemes invested in by the

'Financial Creditors' and Rs.2,58,300/- (Rupees Two Lakh Fifty Eight

Thousand Three Hundred only), towards interest at the rate of 12% per

annum from the date of expiry of the term under the Certificates till

October 2019.

22. The clear-cut stand of the 'Appellant' is that the 'Adjudicating

Authority' (National Company Law Tribunal) had failed to take into

consideration that the amount paid by the 'Applicants' to the

'Respondent' was clearly of 'Financial Debt'. The other contention of the

'Appellant' is that in terms of the 'Insolvency & Bankruptcy Code' and

the 'Companies Act,' 2013 the 'Deposits' made by the 'Appellants' were

'Debts'/'Borrowings' upon the 'Corporate Debtor'.

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23. It is to be pointed out that Section 3(11) of the Code defines 'Debt'

meaning, a liability or obligation in respect of 'claim' which is due from

any person and includes a 'financial debt' and 'operational debt'. Section

3(12) of the Code defines 'default meaning, non-payment of debt when

whole of any part or instalment of the amount of debt has become due

and payable and is not (paid) by the debtor or the corporate debtor, as

the case may be.

24. It is to be remembered that for a 'default', there must be a

subsisting debt. After all, the word 'default' is like not doing something

which one should do. In fact, the term 'default' refers to an 'omission'

or 'failure' to perform a legal or contractual duty. Suffice it to point that

the word 'default', applies to a sum of money which was promised at a

future date as against a sum now due and payable.

25. Section 3(6) of the Code defines 'claim' meaning

a) a right to payment, whether or not such right is reduced to

judgement, fixed, disputed, undisputed, legal, equitable, secured

or unsecured.

b) right to remedy for breach of contract under any law for the time

being in force, if such breach gives rise to a right to payment,

whether or not such right is reduced to judgement, fixed,

matured, unmatured disputed, undisputed, secured or unsecured.

26. Section 3(8) of the Code defines 'Corporate Debtor' meaning a

'Corporate person who owes a debt to any person.

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27. Section 3(7) of the code defines a 'Corporate Person' as a

company as defined in clause (20) of section 2 of the Companies Act,

2013, (18 of 2013), a limited liability partnership, as defined in clause

(n) of sub-section (1) of section 2 of the 'Limited Liability Partnership

Act,' 2008 (6 of 2009), or any other person incorporated with limited

liability under any law for the time being in force but shall not include

any financial service provider. The term 'Corporate Person' has a wider

meaning than a 'Company' as defined under the 'Companies Act, 2013'.

28. It cannot be forgotten that Section 5(8) of the 'Insolvency &

Bankruptcy' Code speaks of 'time value' and these words are interpreted

to mean 'compensation' or the 'price paid for the length of time for which

the money was disbursed. An existing obligation to pay a sum of money

is the sine qua non of a 'financial debt'. The 'Financial Creditor' has a

right to 'financial debt'. Thus, the essence of any debt to be mentioned

as 'financial debt' is the 'time value of money', as borrowing money is

for monetary transaction.

29. To determine the plea of 'occurrence of default' is the debt which

must be due and become payable. An existence of 'debt' and 'default'

are to be met for 'admission' of an 'Application' under section 7 of the

'Insolvency and Bankruptcy' Code. A 'Debt' is/was recoverable from the

'Corporate Debtor'.

30. It is relevant to point out that a 'deposit' is more than a loan of

money. Significantly, 'deposit' is given at the instance of an individual

who is making a deposit. Under the Companies Act, 2013, the powers

Company Appeal (AT)(Insolvency) No.684 of 2020

Page | 13 of 'Tribunal' are of wide amplitude. Rule 17 of 'Companies (Acceptance

of Deposits) Rules, 2014' provides that a Company shall be liable to pay

penal interest' at 18% p.a. to the 'depositor', if there is any failure to

repay 'Deposits' within due date. In fact, the 'penal interest' is payable

when the payment was overdue after maturity of the 'deposits'.

31. At the stage of 'Admission', the 'Adjudicating Authority' (National

Company Law Tribunal) is to be satisfied that a 'Default' had occurred

and the 'Corporate Debtor' is entitled to point out that the 'Default' had

not occurred. No other person has the right to be heard at the state of

'Admission'.

32. There is no second opinion of an important fact that distinction

between 'Deposits' and 'Loans' may not be a significant factor for

interpreting the word, 'Deposit'. One cannot ignore a candid fact that

'maturity of claim', 'default of claim' or 'invocation of guarantee' has no

nexus in regard to the filing of claim before the 'Interim Resolution

Professional' under section 18(1)(b) of the 'Insolvency & Bankruptcy

Code' and the 'Resolution Professional' under section 25(2)(e) of the

Code.

33. As per the 'Companies (Acceptance of Deposits) Rules, 2014', the

term 'deposit' is defined under rule 2(1) (c ) in an inclusive fashion. The

meaning of 'deposit' is elongated by covering receipts of money in any

other form. For approaching the jurisdiction of the 'Tribunal' as per

Section 74(2) of the 'Companies Act, 2013', even a partial failure by the

Company to repay the deposit was sufficient.

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34. Be that, as it may, in the light of detailed qualitative and

quantitative discussions, resting on the fact that the

'Respondent'/'Corporate Debtor' under the 'Recurring Investment Plan'

had assured to provide the Investors' interest on their investment sum

along with the Investment amount, for the 'time value of money' (of

course based on the amounts of investments made by the Investors)

and in view of the fact that the 'Respondent'/'Corporate Debtor' failed

in its commitment to offer the allotment and/or the possession of the

'Plots of Land' as promised by it or pay the assured returns, or repay

the sums collected by it along with interest on the maturity of the

schemes etc, this 'Tribunal' comes to a consequent conclusion that the

'Appellant's' position is that of a 'Financial Creditor' as per Section 5(7)

read with Section 5(8) of the 'Insolvency & Bankruptcy Code' and that

there is default in payment of the accepted amounts by the

'Respondent'/'Corporate Debtor'. In short, the 'Respondent/'Corporate

Debtor' squarely comes within the ambit of definition of 'Financial Debt'

and the contra conclusions arrived at by the 'Adjudicating Authority'

(National Company Law Tribunal, New Delhi Bench-V) to the effect that

'the amount which the applicants deposited does not come under the

definition of 'Debt' and further that it was unable to accept the

contention of the applicants that there was a default in payment of debt,

are incorrect, invalid and the same is set aside by this 'Tribunal' to

secure the ends of justice. Likewise, the other observation made by the

'Adjudicating Authority' in the impugned order that the applicants are at

liberty to file an appropriate application under Chapter V of the

Companies Act, 2013 is also set aside. Resultantly, the 'Appeal'

succeeds.

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35. In fine, the present 'Appeal' is allowed. However, there shall be

no order as to costs. The 'Impugned Order' of the 'Adjudicating

Authority' (National Company Law Tribunal, New Delhi, Bench-V) dated

12.3.2020 passed in C.P.No.(IB)2978/(ND)/2019 is set aside by this

'Tribunal' for the reasons ascribed in the instant 'Appeal'.

36. As a logical corollary, the 'Adjudicating Authority' (National

Company Law Tribunal, New Delhi Bench-V) is directed to restore the

Company Petition in C.P.No.(IB)2978/(ND)/2019 filed by the

'Appellants'/'Financial Creditors'/'Petitioner' (under Section 7 of the

'Insolvency & Bankruptcy Code') to its file and admit the same and to

proceed further in accordance with Law. IA No.1842/2020 filed by the

'Appellant' seeking exemption to file the certified copy of the 'Impugned

Order' dated 12.3.2020 passed by the 'Adjudicating Authority' (National

Company Law Tribunal, New Delhi Bench) is closed with a direction to

the 'Appellant' to file the certified copy of the 'Impugned Order' within

two weeks from Today.

[Justice Venugopal M] Member(Judicial)

[Kanthi Narahari] Member (Technical)

22nd February, 2021 HR

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