Mukesh Kumar Aggarwal vs Anurag Gupta & Anr

[Arising out of Impugned Order dated 10th October 2019 passed by the Hon'ble National Company Law Tribunal, Principal Bench, New Delhi, in C.P. No. IB-422(P.B.)/2018]

IN THE MATTER OF:

Mukesh Kumar Aggarwal 117, Ram Vihar Delhi - 110092 ...Appellant

Versus

1. Anurag Gupta 209-Ram Vihar Near Anand Vihar Delhi - 110092 ...Respondent No.1

2. B.K. Educational Services, Pvt. Ltd. Shop No.123, First Floor Vardhaman Market, C.S.C Ram Vihar, Delhi - 110092 ...Respondent No.2

Present:

For Appellant : Mr Swapnil Gupta and Mr Rudrajit Ghosh, Advocates For Respondent : Mr Rohan Chawla, Advocate for R-1 Mr Syed Sarfaraz Karim, Advocate for R-2

[Per; V. P. Singh, Member (T)]

This Appeal emanates from the order passed by the Adjudicating

Authority/National Company Law Tribunal, Principal Bench, New Delhi, in

C.P. No. IB-422(P.B.)/2018, dated 10th October 2019, whereby the

Adjudicating Authority has admitted the Application filed under Section 7 of

the Insolvency and Bankruptcy Code, 2016 (in short „I&B Code'), against

the „Corporate Debtor‟ M/s B.K. Educational Services Private Limited. The

Company Appeal (AT) (Insolvency) No. 1264 of 2019 1 of 8 parties are represented by their status in the Company Petition for the sake

of convenience.

2. Brief facts of the case are as follows:

The Appellant contends that the Respondent No.1 has filed the

present Insolvency Petition only to wriggle out of the repayment obligations

to the Appellant under the Memorandum of Understanding dated 27th

January 2016. The above mentioned MoU was entered into between the

Appellant and his wife on one side, and the Respondent No.1/his mother on

the other. The MoU provides that the Respondent No.1/his mother are

jointly liable to repay the aggregate amount of Rs.20.5 crores to the

Appellant and his wife. It further provides that the Appellant and his wife

were to hold 90% shares of Respondent No.2 as security for repayment of

the amount above.

It is submitted that the Petitioner had disbursed a total amount of

Rs.20,46,500/-to the Respondent Company in its capacity as the Director of

the said Company in pursuance of the Resolution passed by the Company in

the meeting of Board of Directors dated 01st September 2015. The said

Resolution provides that since the Company is in deep financial trouble,

because of non-availability of funds for payments to Greater Noida

Industrial Development Authority (in short 'GNIDA') and continuing

construction, hence the Directors of the Company are authorised to take

necessary unsecured loans from shareholders, Directors as well as

relatives/related parties. It was further resolved that the said loan shall be

Company Appeal (AT) (Insolvency) No. 1264 of 2019 2 of 8 used to clear the overdue amount of GNIDA and to continue construction of

school building. The amounts taken will be returned along with interest @

12%, which is lower than the rate of interest being charged by GNIDA. It was

further resolved that any amount of loans obtained by the Company shall be

returned soon after receiving loans from the Financial Institutions or by 30th

June 2016.

3. In Reply filed by one Mr Mukesh Aggarwal, the Director of the

Respondent-Corporate Debtor it contends that the amount claimed in

default is not a „financial debt‟ within the meaning of Section 5(8) of the

Code. The Adjudicating Authority erred in treating the amount claimed by

the Petitioner as a „financial debt‟, within the meaning of the Code. The

Adjudicating Authority has further observed that the Petitioner has also

placed on record the bank statements which show that the transactions

have been done by him in favour of GNIDA, on behalf of the Company, in

terms of the Resolution passed by the Board of Directors in its meeting

dated 01st September 2015.

4. There is other reliable evidence placed on record to show that amount

as claimed "due and payable", was disbursed by the Petitioner to the GNIDA

on behalf of the Respondent Company. It is further observed by the Learned

Adjudicating Authority that the Petitioner-Financial Creditor had paid

money to the Respondent-Corporate Debtor and the Corporate Debtor has

committed default in repayment of the outstanding „financial debt‟ which

exceeds the statutory limit of rupees one lakh. The Adjudicating Authority

further observed that since the Application under Section 7 is complete and

Company Appeal (AT) (Insolvency) No. 1264 of 2019 3 of 8 all the requirements of Section 7 of the Code for initiation of Corporate

Insolvency Resolution Process stands fulfilled accordingly, the petition got

admitted.

5. The Appeal is filed mainly on the ground that the Adjudicating

Authority erred in holding that the amount claimed from the Respondent

No.2 to the Respondent No.1 is in the nature of loan; the Adjudicating

Authority has failed to consider that these amounts were conveniently paid

at a time when the Respondent No.1/his family was in complete control of

the affairs of the Respondent No.2; the Adjudicating Authority has further

failed to consider that the purported Board Resolution dated 01st September

2015, which allegedly authorised the Board of the Appellant to secure loans

from the Respondent No.1 is a forged and fabricated document; the

Adjudicating Authority has failed to consider that the Respondent No.1 has

been unable to disclose any default whatsoever; the Adjudicating Authority

has further failed to find that the Respondent No.1 had entered into a

binding MoU dated 27th January 2016, whereunder the shares of the

Respondent No.2 were transferred to the present shareholders as security

for the repayment of Rs.20.5 Crores by the Respondent No.1 to the current

shareholders; the MoU is a conclusive record of all the repayment

obligations interse the parties, the said Rs.20.5 Crores is payable by the

Respondent No.1 and no amounts are due and payable to the Respondent

No.1; the Adjudicating Authority has failed to consider that the Respondent

No.1 has preferred the present petition for evidence of repayment obligations

under the MoU; the Respondent No.2 neither owes any amount to the

Company Appeal (AT) (Insolvency) No. 1264 of 2019 4 of 8 Respondent No.1 nor has defaulted in any manner in any repayment

obligations.

6. Heard the arguments of the Learned Counsel for the parties and

perused the records.

7. The Adjudicating Authority has admitted the petition filed U/S 7 of

the Insolvency and Bankruptcy Code 2016 by treating the alleged debt as

financial debt based on the judgment of this Tribunal in case of Shailesh

Sangani Vs. Joel Cardoso and Another 2019 SCC OnLine NCLAT 52 and

noted that the Promoter/Shareholder/Director of the Company could also

be its Creditor. The Petitioner, as Director has a status different than that of

the Creditor. In the instant case, the Petitioner has invoked the provision of

the Code as one of the Creditors of the Respondent Company, and the

amount claimed by the Petitioner is a „financial debt‟ within the meaning of

the Code. The Petitioner contends that the bank statements reveal that the

transactions have been made by him in favour of GNIDA on behalf of the

Company, given the Resolution Plan passed by the Board of Directors in its

meeting dated 01st September 2015. The copies of the balance sheets filed

for the years ending 2015, 2016 and 2017 depict the borrowings from

Directors, Shareholders and related parties under the heading „Short Term

Borrowings‟ to the tune of Rs.9 crore. The record is sufficient to show that

the amount as claimed by the Applicant is „due and payable‟, which was

disbursed by the Petitioner to GNIDA on behalf of the Respondent Company

and based on the above the Adjudicating Authority has admitted the

petition.

Company Appeal (AT) (Insolvency) No. 1264 of 2019 5 of 8

8. The Appellant has assailed the impugned order passed by the

Adjudicating Authority on the basis that the alleged debt does not fall under

the definition of „financial debt‟ as defined under Section 5(8)(f) of the Code.

The Appellant has placed reliance on the order passed by this Appellate

Tribunal passed in Company Appeal No. 38 of 2017 Dr B.V.S. Lakshmi Vs.

Geometrix Laser Solutions Private Limited.

9. In the case mentioned above, the three Member‟s Bench of this

Tribunal has noted that:

"15........the amount as reflected in the earlier balance sheet of the company merely describes certain „unsecured loan‟ being payable to the Appellant as on 31st March 2014. The respondent company has already placed on record the auditor certificate, which categorically states that no amount is due and payable to the Appellant. Further, the auditor balance sheet of the Respondent Company as on 31st March 2017 also nowhere reflects any amount being due and payable to the Appellant either as a „financial debt‟ or as an unsecured loan. The qualification of the auditor in the balance sheet of the Respondent Company as on 31stMarch 2016, also categorically states that in absence of any document pertaining to approval of any loan taken, interest erroneously paid on account of an alleged loan given by the Appellant herein is not to be provided and accounted for.

16. Learned Counsel for the Respondent relied on decision of the Hon‟ble Supreme Court in "M/s. Innoventive Industries Ltd. Vs. ICICI Bank & Anr. - 2017 SCC OnLine SC 1025", and submitted that the Adjudicating Authority has to be satisfied as to existence of a default. The term „default‟ has been defined in Section 3(12) of the „I&B Code‟. For the purpose of ascertainment of default, it is imperative to point out the date and time when the alleged debt has become due and payable.

Company Appeal (AT) (Insolvency) No. 1264 of 2019 6 of 8 A debt may not be due, if it is not payable in law or in fact. In the instant case, no debt is due as nothing is payable to the Appellant in law or in fact. Admittedly, the Appellant has not stated any date on which the alleged debt became due and payable."

10. In the case mentioned above, this Tribunal has noticed that the

Appellant has failed to establish that there has been disbursement against

consideration of time value and money. The amount, as reflected in the

balance sheet of the Company merely describes certain „unsecured loans‟

being payable to the Appellant whereas the Auditor certificate states that no

amount is due and payable to the Appellants. In the circumstances, this

Tribunal has rejected the contention of the Appellant and held that

Appellant has failed to show that the amount has been raised by the

Respondent under any other transaction, such as sale or purchase

agreement, having the commercial effect of borrowing.

11. Thus, the above case law does not apply to the facts of the present

case. In the instant case, the Respondent No.1 has advanced various sums

to the Corporate Debtor B.K. Educational Society to ease its liquidity

crunch, thereby improving its economic prospects and to save the

allotments by making direct payment to the GNIDA for the plot allotted in

the name of Corporate Debtor. The para 6 of the judgment in Shailesh

Sanganiv (supra) of this Tribunal it is held that the monies advanced by a

Director to improve the financial health of the Company would have the

commercial effect of borrowing even if no interest is claimed on the same.

Company Appeal (AT) (Insolvency) No. 1264 of 2019 7 of 8

12. Thus the amount deposited by the respondent No.1 in the account of

GNIDA to save the corporate debtor on account of financial crunch to save

the allotment made in the name of corporate debtor falls within the ambit of

„financial debt‟. Admittedly, the amount has not been paid back, and there is

a default. Consequently, the adjudicating authority had admitted the

petition filed under Section 7 of the Insolvency & Bankruptcy Code, 2016. In

the circumstance, as stated above, we do not find any justification for

interfering with the impugned order. Therefore the Appeal is dismissed. No

order as to costs.

[Justice Venugopal M.] Member (Judicial)

[V. P. Singh] Member (Technical)

[Shreesha Merla] Member (Technical) NEW DELHI 08th JUNE, 2020

pks/nn

Company Appeal (AT) (Insolvency) No. 1264 of 2019 8 of 8