Mr.Manoj Kumar Agarwal vs M/S. Mehndipur Balaji Infra Developers ...

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI Company Appeal (AT) (Ins) No. 577 of 2018 IN THE MATTER OF: Manoj Kumar Agarwal X-1/135, Krishna Puram GT Road, Kanpur- 208 007 ...Appellant

Versus M/s. Mehndipur Balaji Infra Developers Pvt. Ltd. CIN -U45300DL2008PTC183677 7/108-A, IInd Floor, Swaroop Nagar Kanpur Uttar Pradesh - 208 002 ...Respondent

Present: For Appellant : Mr. Ayush Sharma, Ms. Soumy Dhankani, Advocates. For Respondents : Mr. Surjan Singh Shekhawat, Advocates. JUDGMENT

DR. ASHOK KUMAR MISHRA, TECHNICAL MEMBER

1. The present appeal has been filed by the 'Appellant' - 'Manoj Kumar

Agarwal,'/ Financial Creditor, under Section 61 of the 'Insolvency and

Bankruptcy Code, 2016' (in short 'Code') against the impugned order dated

05.04.2018 passed by the 'Adjudicating Authority' (National Company Law

Tribunal), Allahabad Bench in CP(IB) 88/ALD/2018, wherein the

Adjudicating Authority has rejected the Petition for initiation of 'Corporate

Insolvency Resolution Process' (CIRP) against the Respondent / Corporate

Debtor(CD) - Mehndipur Balaji Infra Developers Pvt. Ltd on the ground that

the Appellant is not able to justify that there is an existence of "default" as

1 Company Appeal (AT)(Ins) No.577 of 2018 also when the amount become due and payable as also no evidence to

substantiate that the date of the repayment was fixed when the amount will

become payable.

2. The Appellant is a 'Director' of the CD/ Respondent and has submitted that

he has advanced loan to the CD on various occasions from September, 2014

till April, 2016 amounting to Rs.4,69,66,293/-. The Appellant has issued

'Demand Notice' dated 04.01.2018 to the Corporate Debtor and on

failure of repayment of loan by the CD has filed the present petition

under Section 7 of the Code. As per the submission of the Appellant, there

was no written agreement for the loan agreement. He has corroborated by the

'Balance Sheet' of the CD as on 31.03.2016 that accumulated loan exits in

the 'Books of CD'. He has cited the judgment of this Tribunal in 'Mack Soft

Tech v Quinn Logistics Company Appeal (AT)(Insolvency) No. 143 of 2017' to

supplement his case that the amount will become due as soon as 'Demand

Notice' issued even there is no written agreement. The CD has also admitted

the liability through 'Settlement Agreement' dated 06.02.2019 and had

submitted that the business of CD has already been closed. Accordingly, the

Appellant has filed the present application for setting aside the impugned

order of the Adjudicating Authority and to initiate the CIRP under Section 7

of the Code etc.

3. The Respondent has submitted that the Appellant is a 'Promoter'/'Director' of

the Corporate Debtor and the debt is not due and payable. The Appellant

was managing the CD till the year 2017. There are no bank borrowing in

2 Company Appeal (AT)(Ins) No.577 of 2018 the CD. The Appellant was required to infuse additional funds to pay of

inter corporate loans and to provide exit of equity investors. However,

the Appellant has back tracked from providing the additional funds but

also demanded its unsecured loan which was deposited in the Company

alongwith other promoters loan to purchase the 'immovable property'

for business purpose, particular, for development of the property and the

funds were provided from time to time for the project work for undefined

period. The repayment was to happen only upon sale of property after

construction and development. As far as the unsecured loan of the

Appellant is concerned, it is not due and payable at this stage as per the

internal understanding of the internal Promoters/Directors. The Appellant

promoter wants to withdraw from the business of the CD in breach of internal

understanding among the 'Promoters'/'Directors' because of the inaction of

this 'Promoter' / 'Director', the CD is facing hardship.

4. As far as the 'Settlement Agreement' is concerned, he himself is creating

hindrances in the 'Board Meeting' and is derailing the process of generating

fund through 'sale of assets'. The Respondent has also stated that the object

and purpose of the Code is not closure of the CD, when the 'Promoters' /

'Directors'/ 'Investors' have invested in the Company to develop properties,

the Appellant is creating unnecessary problems and wants to liquidate the

CD and is misusing the law of insolvency which is meant for bonafide

creditors but certainly not for disgruntled 'Director' / 'Promoter' like the

Appellant and accordingly, the Adjudicating Authority has rejected the

3 Company Appeal (AT)(Ins) No.577 of 2018 Petition filed under Section 7 of the Code holding in para 14 of the order dated

05.04.2018 "..... he is not able to justify that there is existence of default when

the amount in question become due and payable. There no evidence to

substantiate that the date of repayment was fixed, when the amount will

become payable....",

5. We have gone through the submissions made by the learned counsels for the

parties and are observing as follows:

a. It is observed that both the Appellant and 'Mr. Jai Prakash Sharma',

the other 'Promoters'/Promoter-Directors' incorporated the CD with the

broad understanding to engage in the 'real estate business' and both

promoters infused funds (5,000 equity shares each) to invest and

develop 'real estate projects' in Kanpur / Lucknow. These funds were

internal loan to the CD. There was no bank loan, both the

Promoters/Directors subscribe 50% of the capital of the CD which was

incorporated on 23.09.2010. In January, 2012, Mr. Virendra Sharma

was inducted as third partner and subscribed 15,000 equity shares and

he was appointed on the Board.

b. The Respondent Company purchase 'real estate property'' in the

Financial Year 2011-12 in Kanpur /Lucknow to pursue its business of

development of real estate projects and the Appellant himself took the

lead and applied for a group housing plot in Lucknow from 'Uttar

Pradesh Housing and Development Corporation' (UPHDC) which

allotted a plot in 2011 on an application fee of Rs.76,80,000/-. The CD

4 Company Appeal (AT)(Ins) No.577 of 2018 has so far made the payment of Rs.6.55 Crore to 'UPHDC' and balance

payment has yet to be made to UPHDC so that UPHDC can executed

the sale deed in favour of CD. The Appellant Promoter/Director is

creating problems for the CD as also between the members of this CD.

He has created a deadlock in the Company.

c. This appears to be a case of 'Section 241 & 242 of the Companies Act',

2013 of 'Oppression' and 'Mismanagement' between the 'Members' /

'Shareholders of the Company' and requires resolution under 'Chapter

XVI of the 'Companies Act, 2013'. However, taking clue from provision

of the Code vide Section 7 of the Code has filed the Petition before the

Adjudicating Authority. The fact of the case 'Mack Soft Tech vs. Quinn

Logistics' as stated supra is totally different as that was a case of a

'Group of Companies' controlled by an 'Irish Businessman' who

acquired the entirety /majority of the shareholding of the CD and

wanted to grant loan and to get benefit of development. There was a

clarity in the above case on the terms of 'Debt' and 'Default'. While in

the present case the Appellant is unable to substantiate the existence

of 'Default' when the amount in question become due and payable.

Simply, a 'Demand Notice' cannot build a term for 'Default'. If it is so

admitted, there will be no end to such vexatious application and putting

lot of companies into unwanted operational difficulties. Hence, there is

a need to go by the 'Object of the Code' relating to genuine cases of

reorganization and insolvency resolution of corporate persons for

5 Company Appeal (AT)(Ins) No.577 of 2018 maximation of value of assets in a time bound manner and to promote

entrepreneurship and balance the interest of stakeholders. The 'Object

of the Code' is not going into 'Oppression and Mismanagement' which

are to be dealt with under the Companies Act, 2013 vide Section 241 &

242 of the Companies Act, 2013.

d. The 'Adjudicating Authority' and this 'Appellate Tribunal' is unable to

find the 'existence of default' when the amount in question claimed by

the Appellant became due and payable and no evidence to substantiate

the due date of repayment. This does not comply with the requirements

of Section 7 of the Code for initiation of CIRP as far as "default" is

concerned.

e. Hence, we do not find any merit in the appeal. We are unable to disagree

with the Adjudicating Authority. The Appeal deserves to be dismissed

and is dismissed. No order as to costs.

Interim order, if any, passed by this Tribunal, stands vacated.

Pending application, if any, stands disposed of.

[Justice M. Venugopal] Member (Judicial)

(Dr. Ashok Kumar Mishra) Member (Technical)

29th November, 2021 New Delhi Raushan.K

6 Company Appeal (AT)(Ins) No.577 of 2018