Mukesh Kumar vs Ambrane India Private Limited & Anr

For Appellant:Mr. Abhishek Anand, Mr. Nipun Gautam, Advocates. For Respondent: Mr. Ashok Juneja, advocate for R1. Mr. Durga Das Agrawal, R2 in person.

JUDGEMENT

(5th JULY, 2023)

JUSTICE RAKESH KUMAR, MEMBER (JUDICIAL)

The present appeal has been preferred under Section 61(1) of

the Insolvency & Bankruptcy Code, 2016 (hereinafter referred to 2

as 'IBC') against an order dated 06.04.2022 passed by the

Adjudicating Authority, National Company Law Tribunal, Principal

Bench, New Delhi (hereinafter referred to as 'Adjudicating

Authority') in CP(IB) No.2607/OB/2019. By the said order the

learned Adjudicating Authority on the basis of an application filed

by M/s Ambrane India Pvt Ltd-financial creditor has admitted the

application filed under Section 7 of the IBC and thereby Corporate

Insolvency Resolution Process (CIRP) has been initiated against MP

Promoters Pvt Ltd-Corporate Debtor.

2. The short fact of the case as is evident from the materials

available on record is that the financial creditor which is a private

limited company registered under the provisions of the Companies

Act, 1956 filed an application under Section 7 of the IBC against

the Corporate Debtor in the year 2019. In the month of April, 2017

the Corporate Debtor approached the Financial Creditor through

its Directly namely Mr. Mukesh Kumar, appellant herein, for

obtaining financial assistance for a short span of time. On the

request of the appellant herein the Board of Directors of financial

creditor on 20th May, 2017 resolved to grant a loan of

Rs.1,01,00,000/- (Rupees One crore one lakh only) to the

Corporate Debtor alongwith interest @ 9% per annum to be 3

compounded on 31st March, 2018 which was to be disbursed in

one or more tranches. As per Board Resolution the loan was to be

repaid alongwith interest on or before 31st March, 2018. As per

case of the financial creditor on 26th May, 2017 first tranche of the

loan amount of Rs.51 lakh was disbursed by the financial creditor

vide Cheque No.000036 drawn on HDFC Bank, West Punjabi Bagh

in favour of Corporate Debtor. Subsequently on 3rd June, 2017

the second tranche of loan amount of Rs.50 lakhs was disbursed

to the Corporate Debtor by financial creditor through RTGS-HDFC

Bank.

3. The financial creditor in a petition filed under Section 7 of the

IBC before the Adjudicating Authority claimed that since the loan

amount with interest was not paid despite terms and conditions

put for payment by 31st March, 2018, the Financial creditor

requested the Corporate Debtor for payment and since payment

was not made the Financial Creditor on 06.08.2019 sent legal

notice through its counsel to the Corporate Debtor and finally due

to non-payment of the financial debt the Financial

Creditor/Respondent No.1 was constrained to file application

under Section 7 of the IBC for initiation of the CIRP. The Financial

creditor claimed that on the date of the filing of the application the 4

Corporate Debtor was liable to pay Rs.1,21,95,953/- (Rupees One

crore twenty one lakh ninety five thousand nine hundred fifty three

only) which includes interest calculated till 31.07.2019.

4. In the said application on behalf of the Corporate Debtor,

reply was also filed and one way or the other the matter delayed

for considerable period and finally by the impugned order dated

06.04.2022 CIRP was initiated against the Corporate Debtor

against which the present appeal has been preferred. It would be

apt to reproduce the impugned order hereinbelow:-

This application has been filed on 26.09.2019, under

Section 7 of Insolvency and Bankruptcy Code, 2016 by M/s.

Ambrane India Pvt. Ltd. as financial Creditor seeking to initiate

Corporate Insolvency Resolution Process in the matter of M/s.

MP Promoters Pvt. Ltd., the Corporate Debtor (CD).

2.The Financial Creditor (FC) has submitted that it had granted

a loan of Rs. 1,01,00,000/- (Rupees One Crore One Lakhs Only)

@ 9% per annum to be compounded on 31.03.2018 and an

amount of Rs. 51,00,000/- (Rupees Fifty One Lakh Only) was

disbursed to the Corporate Debtor (CD) on 26.05.2017 vide

cheque and subsequently on 03.06.2017 additional amount of

Rs. 50,00,000/- (Rupees Fifty Lakh Only) was disbursed

through RTGS.

5

3.The applicant has submitted an authenticated copy of bank

account statement at Annexure-6 of which pages 62 & 67 are

relevant for showing the amount and the dates of disbursement

to the CD. It is submitted that the CD is liable to pay to FC a

total sum of Rs. 1,21,95,953/- (Rupees One Crore Twenty One

Lakhs Ninety Five Thousand Nine Hundred Fifty Three Only)

which includes interest calculated till 31.07.2019. In addition,

the interest @ 9 per annum calculated from 01.08.2019 till the

actual date of realization of the outstanding amount is to be

charged from the CD. The FC has enclosed a copy of the Board

Resolution passed on 20.05.2017 vide which the Board of

Directors of the FC have accorded consent to grant a loan not

exceeding Rs. 1,01,00,000/- (Rupees One Crore One Lakhs

Only) to MP Promoters Pvt. Ltd. along with interest @ 9% per

annum to be compounded on 31.03.2018 which shall be

disbursed in one or more tranches. The loan is to be repaid on

or before 31.03.2018 along with interest thereon (Annexure-5;

Page No. 54). Further, there is no specific agreement between

the parties specifying the date of payment of the debt.

4.The CD has placed on record the balance sheet ending

31.03.2018 of M/s. MP Promoters Pvt. Ltd. in which an amount

of Rs. 1,01,00,000/- (Rupees One Crore One Lakhs Only) been

shown as other current liability payable to M/s. Ambrane India

Pvt. Ltd. (pages 273, 278 of the application).

6

5.Further the applicant has filed certificate dated 04.02.2022

issued by the information utility NeSL with respect to the debt

of the CD amounting to Rs. 1,21,95,953/- (Rupees One Crore

Twenty One Lakhs Ninety Five Thousand Nine Hundred Fifty

Three Only) "Deemed to be Authenticated". Earlier, vide order

dated 07.04.2021 a cost of Rs. 50,000/- was imposed on the

CD to file reply within seven days as a last chance. Today, the

CD was not present, however his reply dated 20.07.2021 has

been perused. The main ground taken by the CD in his reply is

that there is no agreement annexed by the applicant to prove

that there was any interest payable @ 9% per annum as

claimed by the applicant.

6.We have heard the Ld. Counsel for the applicant and perused

the documents placed on file. The amount of Rs. 1,01,00,000/-

(Rupees One Crore One Lakhs Only) has been disbursed for

which bank statements have been annexed. Further, as per the

certificate issued by NeSL the debt of the corporate debtor is

deemed to be authenticated. The CD has not presented himself

to assist the Court. We are inclined to accept the petition to

initiate CIRP against the M/s. MP Promoters Pvt. Ltd.

7.The petition is admitted.

8.The applicant has proposed the name of interim resolution

professional (IRP) Mr. Durga Das Agrawal having address:

KBL Agrawal & C., 413, Vikasdeep Building, Laxmi,

District Centre, New Delhi-110092, Registration No: 7

IBBI/IPA-001/IP P00557/2017-2018/10987, contact no.

9811075092 and email: cadda.ip@gmail.com. The consent of

the IRP as well as self-declaration that no disciplinary

proceedings are pending against him in the Insolvency and

Bankruptcy Board of India or ICAI have been submitted. In

addition, further necessary disclosures have been made by Mr.

Durga Das Agrawal as per the requirement of the IBBI

Regulations. Accordingly, he satisfies the requirement of

Section 7 (3)(b) of the Code. Hence, we appoint Mr. Durga Das

Agrawal, as the IRP of the Corporate Debtor.

9.In pursuance of Section 13(2) of the Code, we direct the IRP to

make public announcement immediately with regard to

admission of this application under Section 7 of IBC. The

expression 'immediately' means within three days as clarified

by Explanation to Regulation 6 (1) of the IBBI (Insolvency

Resolution Process for Corporate Persons) Regulations, 2016.

10.As a consequence of the application being admitted in terms

of Section 7 of IBC, 2016, moratorium as envisaged under the

provisions of Section 14(1) of IBC shall follow in relation to the

Corporate Guarantor as per proviso (a) to (d) of section 14(1) of

the IBC. However, during the pendency of the moratorium

period, terms of Section 14(2) to 14(3) of the IBC shall come in

force.

11.We direct the Applicant to deposit a sum of Rs. 2,00,000,

with the Interim Resolution Professional Mr. Durga Das 8

Agrawal, to meet out the expenses to perform the functions

assigned to him in accordance with Regulation 6 of Insolvency

and Bankruptcy Board of India (Insolvency Resolution Process

for Corporate Person) Regulations, 2016. The needful shall be

done my Law within three days from the date of receipt of this

order by the Applicant. The amount however, will be subject to

adjustment by the Committee of Creditors as accounted for by

Interim Resolution Professional and shall be paid back to the

Applicant.

12.The registry is directed to communicate a copy of the Order

to the Applicant, the Corporate Debtor, Interim Resolution

Professional and the Registrar of Companies, NCR, New Delhi,

at the earliest, but not later than seven days from today. The

Registrar of Companies shall update his website by updating

the status of 'Corporate Debtor' and specific mention regarding

admission of this petition must be notified.

5. Against the said order the present appeal was presented on

17.05.2022.

6. After the appeal was filed for the first time it was taken up on

06.06.2022 by two Members Bench of this Tribunal. On first date

Respondent was represented by its counsel. However, notice was

directed to be issued to Respondent No.2. This Tribunal also

recorded as follows:-

9

"Heard Mr. Abhishek Anand, the Learned Counsel appearing for

the Appellant.

At this stage, Mr. Ashok Juneja, the Learned Counsel appearing

for the Respondent No. 1 and prays for time to file 'Vakalat' and

'Reply/Response' (through 'E-filing' as well as through 'Hard

Copy') of R1 before the 'Office of the Registry' and to serve a copy

of the same to the other side before the next date of 'Hearing'.

The Learned Counsel for the Appellant is required to serve

'Appeal Paper Book(s) / Material Paper Book(s) (through 'E-mail

as well as through 'Hard Copy') to the 1st Respondent within one

week from today and, in this regard, the Learned Counsel for the

Respondent No. 1 is required to furnish the 'E-mail' address to

the Learned Counsel for the Appellant during course of the day.

On receipt of 'Reply/Response' from the Respondent No.1 side,

it is open to the Learned Counsel for the Appellant to file

'Rejoinder' if any, (through 'E-filing' as well as through 'Hard

Copy') before the 'Office of the Registry' and to serve a copy of

the same to the other side within one week, thereafter.

In respect of the 2nd Respondent, Let 'Notice' be issued through

'Speed Post' returnable by 13.07.2022.

The Appellant is directed to furnish the 'requisite' along with the

'Process Fee' be filed / paid within 'two working days from

today' before the 'Office of the Registry' without fail. If the 10

Appellant provides the 'Mobile Number' and 'E-Mail' Address of

the Respondent No.2, then in that 'Mode' also the 'Office of the

Registry' may issue 'Notice' to the Respondent No.2.

The 'Office of the Registry' is directed to 'List' the matter on 13th

July, 2022.

Since it is brought to the notice of this Tribunal on behalf of the

1st Respondent by its Learned Counsel that the first meeting of

CoC had taken place on 16th May, 2022, the CoC shall proceed

with the matter. However, it is open to the Appellant side to bring

it to the notice of CoC that the instant Appeal is pending on the

file of this Tribunal."

Thereafter reply and rejoinder were filed.

7. However, it appears that IA application i.e. IA No.1807/2022

filed for condonation of delay went un-noticed and even without

condonation of delay we heard the matter and finally on

28.04.2023 Judgement was reserved. At the time of dictating

judgement we noticed that IA application for condonation of delay

and perused the application and after satisfying with the grounds

stated in the said IA we condoned the delay.

8. Since 10 days delay had occurred in filing the appeal from

the date of the impugned order an IA No.1807/2022 was filed for

condonation of delay in filing the filed. Reasons for delay has been 11

explained and we are satisfied with the same. Accordingly delay

in filing the appeal is condoned and IA No.1807/2022 is allowed.

9. Mr. Abhishek Anand, learned counsel for the appellant has

mainly assailed the impugned order on the plea that there was no

written agreement regarding loan and as such there was no

financial debt. According to Mr. Anand in absence of financial debt

the application filed under Section 7 was required to be rejected

outrightly. He has specifically referred to Page 29 para 2 of Volume

1 of Memo of Appeal and has shown para 2 of the impugned order

to substantiate that though Learned Adjudicating Authority had

noticed the submission on behalf of the financial creditor that the

loan of Rs.1,01,00,000/- @ 9% per annum to be compounded on

31.03.2018 and an amount of Rs.51 lakhs was disbursed to the

Corporate Debtor on 26.05.2017 by cheque and subsequently on

03.06.2017 additional amount of Rs.50 lakh was disbursed

through RTGM, the Learned Adjudicating Authority was not

apprised with any written agreement to show as to whether the

aforesaid amount was given as loan or not. However, it was

contended by Mr. Anand that the said amount was an investment

by the financial creditor in respect of the immovable property of

the Corporate Debtor. Mr. Anand, learned counsel has also 12

referred to para 4 of the impugned order at Page 30 to show that

the amount of Rs.1,01,00,000/- has been shown as current

liability in the balance sheet of the corporate debtor to M/s

Ambrane India Pvt Ltd/Financial Creditor. Learned counsel for

the appellant has taken us to running page 64 which is part of the

balance sheet of the Corporate Debtor for the period commencing

from 31st March, 2017 to 31st March, 2018. He has drawn our

attention to Note 7(a) at Page 64 which reflects as other current

liabilities-advance against property 13/13. The name of the

financial creditor/R1 appears at Serial No.5 of the said column and

on 31st March, 2018 liabilities have been shown as

Rs.1,01,00,000/- pertaining to the present financial creditor. He

has argued that for the first time financial creditor came out with

a case thorugh its legal notice dated 06.08.2019 as if the said

amount was given as loan with interest @ 9% per annum to be

compounded on 31.03.2018. He has also placed para 6 of the legal

notice dated 06.08.2019 which is at running page 385 in Volume

2 of the Memo of appeal.

10. Mr. Anand, learned counsel for the appellant to substantiate

his argument on amount of Rs.1,01,00,000/- loan amount rather

it was the booking amount in respect of property 13/13 of the 13

Corporate Debtor, has drawn our attention to certificate issued by

National E-Governance Services Ltd (hereinafter referred to as

NeSL) and he has referred to certificate and submits that this

certificate also shows that the debt is not a financial debt but

rather an operational debt. He has also taken us to running page

106 of Volume 1 of Memo of Appeal to show that in the application

filed by the financial creditor date of default has been mentioned

as 1st April, 2018. However, prior to legal notice dated 06.08.2019

no document has been brought on record by the financial creditor

to show that corporate debtor was intimated regarding the default.

He has emphatically argued that there was no loan transaction

and in absence of loan agreement and also no reliable document,

it is a specific case that there was financial debt and in absence of

financial debt the learned Adjudicating Authority was not entitled

to admit the application filed under Section 7 of the IBC. Learned

counsel for the appellant has placed heavy reliance on a judgement

of this Appellate Tribunal reported in 2022 SCC OnLine NCLAT

316 in the matter of S. Chandriah Vs Sunil Kumar Agarwal. He

has specifically relied on para 17 to 20 which are quoted

hereinbelow:-

14

17. The precise question to be answered is as to whether the payment of Earnest Money even if it is accepted as disbursement whether disbursement is against the consideration for the time value of money.

18. The disbursement made by the Appellant to the Corporate Debtor was only a payment of Earnest Money which was to be adjusted in sale of the land. The disbursement was not in consideration for the time value of money. We may refer a Judgement of this Tribunal in Company Appeal (AT) Ins. No. 180 of 2021 "Sach Marketing Pvt. Ltd. Vs. Resolution Professional of Mount Shivalik Industries Ltd" where dealing with Section 5(8) in paragraph 17 and 18 following was observed by this Appellate Tribunal:

"17. For a debt to be termed as 'Financial Debt', the basic elements that are to be seen is whether (a) there is disbursal against consideration for time value of money and (b) whether it has a commercial effect of borrowing. The definitions provided in Section 5(7) and 5(8) show that a 'Financial Creditor' refers to a person to whom 'Financial Debt' is owed and includes even a person to whom such a debt has been legally assigned or transferred to. A 'Financial Debt' is a debt alongwith interest which is disbursed against the consideration for the time value of money and it may include any of the events specified in sub-Clause (a) to (i). The Legislature has included any financial transaction in the definition of 'Financial Debt' which are usually for a sum of money received today to be paid over a period of time in instalments, or in a single payment in future.

18. The expression time value has been defined in Black's Law Dictionary as 'the price associated with the length of time that an investor must wait until an investment matures or the related income is earned'. To reiterate, any of the transactions specified in Clauses (a) to (i) of Section 5(8) would fall within the ambit of the definition of 'Financial Debt' only in the event if they include the essential elements stated in the principal clause that is element of disbursal, against the consideration for time value of money and has the commercial effect of borrowing. For a person to be defined as a Financial Creditor of the 'Corporate Debtor', it has to be shown that the 'Corporate Debtor' owes such a 'Financial Debt' to such a person."

19. Essential condition for accepting a debt to be financial debt being absent, we are of the view that Adjudicating Authority has 15

not committed any error in rejecting the claim of the Appellant as Financial Creditor. The claim of the Appellant of Earnest Money of Rs. 7 Crores has been admitted by the Resolution Professional as under the category of other creditors. We thus do not find any error in the Order passed by the Adjudicating Authority dated 07.02.2020 and the Company Appeal (AT) Ins. No. 22 of 2022 deserves to be dismissed.

20. Learned Counsel for the Appellant has also relied on Annual Return for the Financial Year 2018-19 and 2019-20, where the earnest money liability of the Corporate Debtor has been classified as a "Financial Liability". Acknowledging the Liability of earnest money as a Financial Liability is not akin to admitting as a "Financial Debt". A debt of "other Creditors" is also a Financial Liability. Thus on the strength of Annul return of Financial Year 2018-19 and 2019-20, it can not be held that payment of earnest money by the Appellant was "Financial Debt".

11. Similarly Mr. Anand, learned counsel for the appellant has

referred to un reported judgement of this Tribunal passed in

Company Appeal (AT)(Ins) No.251 of 2020 dated 3rd August, 2021

in Pawan Kumar Vs Utsav Securities Pvt Ltd and referred to para

21, 22, 26 and 27 which are reproduced hereinbelow:-

"21. We have considered the submissions, the Financial Creditor

has not furnished any document to show that the transaction in

question is a loan transaction. So far as the section 10 of Indian

Contract Act and Rule 3 (1) (d) of the Rules is concerned we again

refer the Prayag Polytech (Supra) in which this Tribunal held that:

"7. As regard relying on Section 10 of the Contract Act,

1872, in our view IBC is a complete code in itself. Section

238 of IBC has overriding effect on provisions inconsistent

with IBC. The 'Financial contract' is defined in "Insolvency 16

and Bankruptcy (Application to Adjudicating Authority)

Rules, 2016" Rule 3(1)(d) requires setting out the terms of

the financial debt including tenure etc. We find that

Appellant has failed to show any record showing financial

debt to be there. As such, we are unable to find any fault in

the impugned order while rejecting Section 7 application."

22. With the aforesaid, we are of the view that the Financial

Contract as per the Rule 3(1) (d) is must between the corporate

Debtor and the Financial Creditor for setting out the terms of a

Financial Debt including the tenure of the Debt, interest payable

and the date of repayment. In the absence of such Financial

Contract, the Financial Creditor has failed to satisfy that when the

debt and interest become due and payable.

26. With the aforesaid, we are of the view that the Respondent

No. 1 (Financial Creditor) failed to establish when the debt become

due and payable and the Corporate Debtor has committed default.

27. Apart from the aforesaid, we have considered the other

circumstances. Admittedly, there is no agreement of loan and

interest and no document is to stipulate the period of repayment

even from the demand notice and the Application under Section 7

of the IBC. The terms of the loan agreement and other factors are

not clear. The Corporate Debtor Company is having authorized

and paid up capital Rs. 1 Lacs whereas the Financial Creditor

between 16.02.2017 to 22.02.2017 advanced loan of Rs. 6.10 Cr. 17

From the pleadings it is not clear that at relevant time the

Corporate Debtor was need of such huge amount and the

Financial Creditor agreed to advance unsecured loan for such a

huge amount. It is nowhere disclosed that the Corporate Debtor is

engaged in which business and the loan and finances was

required for which business requirements. The Financial Creditor

has not filed copy of their balance sheet for relevant years and

also balance sheet of the Corporate Debtor Company."

12. Taking clue from aforesaid judgement the learned counsel for

the appellant has argued that the financial creditor though has

failed to establish financial debt of any written agreement, learned

Adjudicating Authority incorrectly admitted the application and

initiated CIRP which is required to be interfered with.

13. Heard.

14. Mr. Ashok Juneja, learned counsel has appeared for

Respondent No.1/Financial Creditor. A detailed reply has been

filed by the Respondent No.1. Similarly Respondent No.2 who is

Resolution Professional (RP) has filed status report dated

06.05.2023. Mr. Ashok Juneja, learned counsel for the

Respondent No.1 has emphatically argued that there is no reason

for interference with the impugned order particularly in view of the

fact that in the present case default has taken in the month of 18

April, 2018 and petition for initiation of CIRP has been filed in the

year 2019 itself. However, due to many reasons including Covid

2019 delay had occurred and finally by the impugned order dated

06.04.2022 the application filed under Section 7 was admitted.

After admission since there was no stay order passed by this

Tribunal several development has taken place which has been

reflected from the Status Report submitted by R2. It was argued

by Shri Ashok Juneja, learned counsel for Respondent No.1 that

Board Resolution of the Financial Creditor dated 25.05.2017 gives

a vivid picture that for financial assistance the Corporate Debtor

through its director who is appellant in the present appeal had

approached financial creditor for loan of Rs.1,01,00,000/- and as

such the Board of Directors resolved to sanction the loan on terms

of charging 9% interest per annum and it was to be compounded

on 31.03.2018. Only after the Board Resolution on 26.05.2017 a

cheque for the amount of Rs.51 lakhs was disbursed by the

financial creditor in favour of the corporate debtor and second

instalment of loan was given to the Corporate Debtor on

03.06.2017 i.e. an amount of Rs.50 lakhs which was disbursed to

the corporate debtor by the financial creditor through RTGS. 19

15. Learned counsel for Respondent No.1 has taken us to

running page 33 (Annexure 2 Colly) of its reply which was filed on

11.07.2022. The said document has been issued by NeSL Part I

i.e. Part A showing record of default of Party M/s MP Promotors

Pvt Ltd. This information is dated 05.08.2021. This document

shows the name of financial creditor and also name of debtor.

Financial creditor name is M/s Ambrane India Pvt Ltd and debtors

name is M/s MP Promoters Pvt Ltd. Page 34 gives the date of

contract as 26.05.2017 and debt start date is 26.05.2017, sanction

debt amount Rs.1,01,00,000/-, facility name is unsecured loan

and total outstanding amount has been shown as

Rs.1,21,95,953/- and interest rate has also been shown as 9% per

annum. It reflects the default date as 01.04.2018. He has also

taken us to Page 312 i.e. Notes forming part of the balance sheet

as on 31.03.2018. According to Learned Counsel for R1 as on

31.03.2018 the outstanding debt was Rs.1,08,62,169/-.

According to learned counsel for R1 since all the ingredients as

contemplated under Section 7 of the IBC was complete the learned

Adjudicating Authority has rightly passed the order of admission

for initiation of CIRP.

20

16. The RP/Respondent No.2 Mr. Durga Das Agarwal had

appeared in person and submitted regarding filing of the status

report dated 06.05.2023.

17. Besides hearing learned counsel for the parties we have

perused the material available on record and after going through

the same prima facie we are of the opinion that the learned

Adjudicating Authority has rightly passed the impugned order

which requires no interference. It is true that on the record there

is no written agreement regarding claim of sanctioning loan to the

corporate debtor. However, there are number of circumstances

which in unequivocal term shows that financial creditor had been

approached by the appellant for a loan of Rs.1,01,00,000/- and

the loan was given to the corporate debtor in two tranches. 1 st

tranche was paid through cheque for an amount of Rs.51 lakh on

26.05.2017 and second amount i.e. Rs.50 lakh was given to the

corporate debtor by financial creditor through RTGS and through

RTGS it was paid on 03.06.2017 which has not been disputed by

the either side. However, since there was no written agreement for

sanctioning loan with interest the appellant has taken a futile

stand that in absence of any written agreement it cannot be said

that there was a financial debt. The circumstances and documents 21

which have been brought on record suggest that impliedly there

was an agreement for providing loan to the corporate debtor for

time value and also with interest.

18. Before proceeding it would be necessary to reproduce Board

Resolution of the financial creditor which has been brought on

record in the Memo of Appeal Volume II at Page 138. The Board

Resolution dated 20.05.2017 is reproduced hereinbelow:

CERTIFIED TRUE COPY OF THE BOARD RESOLUTION PASSED

AT THE MEETING OF THE BOARD OF DIRECTORS OF

AMBRANE INDIA PRIVATE LIMITED HELD ON SATURDAY, THE

20TH DAY OF MAY, 2017 AT 11.00 A.M. AT THE REGISTERED

OFFICE OF THE COMPANY AT C 91/7, WAZIRPUR INDUSTRIAL

AREA, DELHI-110052

To make loans or investments and to give guarantees or to

provide security in connection with a loan made under Section

186 of the Companies Act, 2013

"RESOLVED THAT pursuant to section 186 and all other

applicable provisions, if any, of the Companies Act, 2013, read

with the relevant Rules made thereunder (including any

statutory modification(s) or re-enactment(s) thereof for the time

being in force), the consent of the Board of Directors of the

Company be and hereby accorded to grant a loan not exceeding

Rs. 1,01,00,000 (Rupees One Crore One Lakh Only) to MP 22

Promoters Private Limited along with the interest at the rate of

9% per annum to be compounded on 31st March 2018 which shall

be disbursed in one or more tranches. The loan is to be repaid on

or, before 31st March 2018 along with interest thereon.

RESOLVED FURTHER THAT Mr. Ashok Rajpal, Whole Time

Director of the company be and is hereby authorized to take all

necessary steps relating to grant of loan to MP Promoters Private

Limited and to make, sign and execute, on behalf of the

Company, such deeds, documents, agreements, undertaking

and all other necessary papers as may be required; to accept

modifications to same as may be necessary and to do all such

acts, deeds and things that may be required or considered

necessary or incidental for the same."

19. The aforesaid Board Resolution makes it clear that one Mr.

Ashok Rajpal whole time director of the company Ambrane India

Pvt Ltd was authorised to take all the necessary steps regarding

sanctioning and disbursement of the loan amount of

Rs.1,01,00,000/- alongwith interest @ 9% per annum which was

to be compounded on 31.03.2018. It was also clarified that loan

shall be disbursed in one or more tranches and the loan amount

was to be repaid on or before 31.03.2018 alongwith interest

thereto. Subsequently it is not in dispute that the aforesaid loan 23

i.e. Rs.1,01,00,000/- was disbursed in two tranches; one by way

of payment of Rs.51 lakh through cheque and another Rs.50 lakh

through RTGS. The said fact is explicit that it was financial debt.

Similarly the said debt was owed to the Respondent No.1. There

is no doubt on the credibility of his being a financial creditor. The

aforesaid facts meets with the provisions contained in Section 5(vii)

and 5(viii) of the IBC. In the Board Resolution referred to aforesaid,

specifies that the loan was to be repaid on or before 31.03.2018

with interest. It is not case of the appellant or corporate debtor

that the said amount was repaid by the appellant and as such

default is not in dispute. Further the ledger of the corporate debtor

for the period 1.4.2017 to 28.05.2019 which is at running page

223 Volume I of the Memo of Appeal reflects that on 25.05.2017

Rs.51 lakh was remitted from the account of financial creditor to

the account of corporate debtor and on 3rd June, 2017 Rs.50 lakhs

was debited from the account of the financial creditor to the

account of MP Promoters Pvt Ltd CD through RTGS and as on

31.07.2019 the total amount comes to Rs.1,21,95,953 which

includes the interest amount.

20. So far as plea taken by the learned counsel for the appellant

and reliance placed on the balance sheet of the corporate debtor 24

at running page 64 Volume 1 of the appeal is concerned, we are of

the opinion that such defence which has been taken on behalf of

the appellant that it was advance against the property is required

to be noticed only for its rejection. Before proceeding it would be

necessary to reproduce running page 64 of the Memo of Appeal

particularly which deals Note 7(a) other current liabilities -

advance against property 13/13:-

"Note No.7(a) Other current liabilities Advance Against Property

13/13 W.E.A

IN RUPEES

Particulars 31st March, 2018 As at 31st March, 2017 Om Shakti Enterprises Pvt Ltd 26,00,000.00 27,00,000.00

Padampati Goyal Krishna 35,00,000.00 35,00,000.00

Rama Pati Miraco Ltd

Prakash AAP 9,00,000.00 9,00,000.00

Rakesh Bachan Ag 13/13 50,00,000.00

Ambrane India Pvt Ltd 1,01,00.000.00

Priti Kedia and Uttam Kumar 11,00,000.00

Kedia

Ram Mehar and saroj 10,00,000.00

Sheetal gupta 50,00,000.00 25

Total 2,42,00,000.00 1,21,00,000.00

21. A bare perusal of the aforesaid fact creates serious doubt on

the advance against one property i.e. 13/13. In the aforesaid table

(i) against the same property total advance amount has been

shown as Rs.2,42,00,000/- and the advance has been taken from

7 other entities besides the present financial creditor. Accordingly

we are of the opinion that only on such document it cannot be

inferred that Rs.1,01,00,000/- was taken as advance against one

property and not loan. Whereas other documents which we have

already discussed hereinabove reflects that it was loan amount for

time value with interest.

22. So far as reliance placed by the learned counsel for the

appellant on S. Chandriah Vs Sunil Kumar Agarwal-2022 SCC

Online NCLAT 316 and also in the matter of Pawan Kumar Vs

Utsav Securities Pvt Ltd-Company Appeal(AT)(Ins) No.251 of 2020

are concerned we are of the opinion that in view of the facts and

circumstances of the present case those judgements have got no

relevance in adjudicating the present issue.

23. In S. Chandriah case (Supra) payment was mentioned as

earnest money whereas in the present case Board Resolution dated 26

20.05.2017 of the financial creditor which we have referred

hereinabove makes it clear that on being approached by the

corporate debtor a full time director of the company was

authorised to disburse loan of Rs.1,01,00,000/- with 9% interest

and loan amount was to be finally repaid by 31.03.2018. So far as

Pawan Kumar case (supra) is concerned in the said case the

financial creditor had not filed any evidence of default alongwith

application under Section 7 nor financial creditor had filed copy of

their balance sheet for the relevant years. However, in the present

case the balance sheet of the Corporate Debtor has been brought

on record which reflects the loan amount and also interest

amount. Accordingly we are of the opinion that the appellant may

not get any assistance from aforesaid two judgements on which

reliance was placed by learned counsel for the appellant.

24. We have also perused the status report dated 8.05.2023

submitted by the RP/Respondent No.2. The para 5 of the status

report is necessary to be reproduced hereinbelow:

"5.That it is humbly submitted that the present status of the

CIRP of CD is as follows:

27

i) In response to the publication for inviting the claims the

COC was constituted with a sole member of CoC that is

Financial Creditor in the month of May, 2022

ii) In the last one year of the CIRP five meetings of CoC has

been conducted by the RP.

iii) The RR has already published the COI in form G on

15.03.2023 in the newspaper of Financial Express

(English) and Jansatta (Hindi), Delhi NCR Edition.

iv) In response to the publication of Form G an EOI with EMD

has been received from the prospective Resolution

Applicant.

v) The RP has already issued IM, RFRP & Evaluation Matrix

to the Prospective Resolution Applicant.

vi) The Last date of submission of Resolution Plan is

17.05.2023."

25. Before proceeding it would be necessary to reproduce Section

7 of the IBC which is as follows:-

"7.Initiation of corporate insolvency resolution process by

financial process- (1) A financial creditor either by itself or

jointly with other financial creditors, or any other person on

behalf of the financial creditor, as may be notified by the Central 28

Government, may file an application for initiating corporate

insolvency resolution process against a corporate debtor before

the Adjudicating Authority when a default has occurred.

Provided that for the financial creditors, referred to in clauses (a)

and (b) of sub-section (6-A) of Section 21, an application for

initiating corporate insolvency resolution process against the

corporate debtor shall be filed jointly by not less than one

hundred of such creditors in the same class or not less than ten

per cent of the total number of such creditors in the same class,

whichever is less.

Provided further that for financial creditors who are allottees

under a real estate project, an application for initiating corporate

insolvency resolution process against the corporate debtor shall

be filed jointly by not less than one hundred of such allottees

under the same real estate project or not less than ten percent of

the total number of such allottees under the same real estate

project, whichever is less:

Provided also that where an application for initiating the

corporate insolvency resolution process against a corporate

debtor has been filed by a financial creditor referred to in the first

and second provisos and has not been admitted by the

Adjudicating Authority before the commencement of the

Insolvency and Bankruptcy Code (Amendment) Act, 2020, such

application shall be modified to comply with the requirements of 29

the first or second provisos within thirty days of the

commencement of the said Act, failing which the application shall

be deemed to be withdrawn before its amendment.

Explanation.--For the purposes of this sub-section, a default

includes a default in respect of a financial debt owed not only to

the applicant financial creditor but to any other financial creditor

of the corporate debtor.

(2) The financial creditor shall make an application under sub-

section (1) in such form and manner and accompanied with such

fee as may be prescribed.

(3) The financial creditor shall, along with the application

furnish--

(a) record of the default recorded with the information

utility or such other record or evidence of default as may

be specified;

(b) the name of the resolution professional proposed to act

as an interim resolution professional; and

(c) any other information as may be specified by the Board.

(4) The Adjudicating Authority shall, within fourteen days of the

receipt of the application under sub-section (2), ascertain the

existence of a default from the records of an information utility or

on the basis of other evidence furnished by the financial creditor

under sub-section (3).

30

Provided that if the Adjudicating Authority has not ascertained

the existence of default and passed an order under sub-section

(5) within such time, it shall record its reasons in writing for the

same.

(5) Where the Adjudicating Authority is satisfied that--

(a) a default has occurred and the application under sub-

section (2) is complete, and there is no disciplinary proceedings

pending against the proposed resolution professional, it may, by

order, admit such application; or

(b) default has not occurred or the application under sub-

section (2) is incomplete or any disciplinary proceeding is

pending against the proposed resolution professional, it may, by

order, reject such application:

Provided that the Adjudicating Authority shall, before

rejecting the application under clause (b) of sub-section (5), give

a notice to the applicant to rectify the defect in his application

within seven days of receipt of such notice from the Adjudicating

Authority.

(6) The corporate insolvency resolution process shall

commence from the date of admission of the application under

sub-section (5).

(7) The Adjudicating Authority shall communicate-- 31

(a) the order under clause (a) of sub-section (5) to the

financial creditor and the corporate debtor;

(b) the order under clause (b) of sub-section (5) to the

financial creditor, within seven days of admission or rejection of

such application, as the case may be".

26. In view of aforesaid provisions for the admission of a petition

under Section 7 of the IBC there are certain relevant criteria. There

must be debt and default. If an application fulfils the said criteria,

the Adjudicating Authority is to admit such application. However,

proviso 1st to Section 7 (5) speaks that only for rejection of an

application reasons are required to be assigned. Meaning thereby

if an application fulfils certain criteria, the Adjudicating Authority

is to admit the said application and while admitting there is no

requirement for assigning detailed reasons. However, if the

Adjudicating Authority is going to dismiss the application as per

provisions contained Section 7 of the IBC reasons are mandatory.

Accordingly it is evident that admission of an application under

Section 7, if fulfils certain criteria is a rule, however, rejection of

such application is an exception.

27. In view of aforesaid facts and circumstances we are of the

opinion that the Learned Adjudicating Authority has not 32

committed any error in passing the impugned order. There is no

reason to interfere with the impugned order. The Appeal stands

dismissed. However, no cost is imposed.

(Justice Rakesh Kumar) Member (Judicial)

(Dr. Alok Srivastava) Member (Technical) bm