Prakash Kumar Raj vs Shriram City Union Finance Limited
- CitationCompany Appeal (AT) (Insolvency) No.1706 of 2023
Ratio decidendi
The rule this decision rests on
The payment of instalments by the corporate debtor under a loan is itself evidence of the existence of a financial debt, and a subsequent dispute by the corporate debtor founded on alleged fraud in inducing the loan or on pending police complaints against the financial creditor and developer does not negate the financial debt or the default for the purposes of an application under Section 7 of the Insolvency and Bankruptcy Code, 2016. A claim the corporate debtor may have against the financial creditor or a third party does not, by its mere existence, affect the admission of a Section 7 application where debt and default are shown; such claims are left open to be pursued in separate proceedings. A discretionary power of the Adjudicating Authority to reject a Section 7 application, as referred to in Vidarbha Industries Power Ltd. v. Axis Bank Ltd., is not attracted where the facts of the case differ from those of that decision, and the Supreme Court's ruling there does not govern a case on different facts.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
Prakash Kumar Raj (Suspended) Director. Mountain Edge Tours ...Appellant
Versus
Shriram City Union Finance Ltd. & Anr. ...Respondents
Present: For Appellant: Mr. Siddhesh Shirish Kotwal, Ms. Ana Upadhyay, Ms. Manya Hasija and Mr. Tejasvi Gupta, Advocates. For Respondents:
ORDER
(Hybrid Mode)
06.02.2024: Heard learned counsel for the Appellant. This Appeal has
been filed against order dated 10.11.2023 by which the Adjudicating Authority
has admitted Section 7 application filed by the Respondent.
2. Learned counsel for the Appellant submits that although initially the
Corporate Debtor started paying EMI, later it realized that some fraud has
been played in inducing the Corporate Debtor to take loan and police
complaints were filed against the Financial Creditor and the Developer. The
Adjudicating Authority has given finding the debt and default is proved, in this
regard the submission of the Appellant is that the debt and default could not
be held to be proved since it is disputed by the Appellant.
3. We have heard the learned counsel for the Appellant and perused the
record.
Cont'd.../ -2-
4. It was proceedings under Section 7 and the fact that Appellant started
paying EMI itself proves that there was financial debt. The reason for not
continuing to pay EMI and reason for filing police complaint cannot negate the
financial debt or default. With regard to claim of the Appellant against the
Financial Creditor and the Developer, it is always open for the Appellant to
pursue such claim but it shall not have any impact on the Section 7
application which has been admitted by the Adjudicating Authority there being
debt and default. We are of the view that no error has been committed by the
Adjudicating Authority in admitting Section 7 application.
5. Learned counsel for the Appellant placing reliance on the judgment of
Hon'ble Supreme Court in "Vidarbha Industries Power Ltd. vs. Axis Bank Ltd.,
Civil Appeal No.4633 of 2021" submits that the Adjudicating Authority has
discretionary power, which should have been used in rejecting the application.
We are of the view that the judgment of Hon'ble Supreme Court in Vidarbha
was on its own facts and the said judgment does not apply in the present case.
6. We do not find any merit in the Appeal. Appeal is dismissed.
[Justice Ashok Bhushan] Chairperson
[Arun Baroka] Member (Technical) Archana/nn
Company Appeal (AT) (Insolvency) No.1706 of 2023
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