Prayag Polytech Pvt. Ltd vs I World Digital Solution Pvt. Ltd

[Arising out of Order dated 16.05.2019 passed by National Company Law Tribunal, New Delhi Bench - III in C.P. No. IB-189/(ND)/2019]

IN THE MATTER OF: Before NCLT Before NCLAT

Prayag Polytech Private Applicant Appellant Limited Through Mr. Milan Aggarwal, Director C-587, Industrial Area, Phase - 1, Bhiwadi - 301 019, Rajasthan, India

Versus

Iworld Digital Solution Respondent Respondent Private Limited 79, First Floor, Paschimi Marg, Vasant Vihar, New Delhi 110 057

For Appellant: Shri Vipul Ganda, Ms. Shreya Jain, Shri Amar Choudhary and Ms. Alexandra Celestine, Advocates

For Respondent: Shri Nikhil Kohli, Shri Anupam Singh, Shri Sushmit Mishra and Mrs. Ritika Kohli, Advocates

ORDER

03.03.2020 Heard Counsel for the Appellant and Respondent. This

Appeal has been filed by the Financial Creditor who had moved the

Adjudicating Authority (National Company Law Tribunal, New Delhi Bench -

III) in C.P. No. IB-189/(ND)/2019 and the Application of the Appellant under 2

Section 7 of Insolvency and Bankruptcy Code, 2016 (IBC - in short) came to

be rejected. The Appellant - Financial Creditor has moved this Appeal against

dismissal of the said Application against the Respondent - Corporate Debtor.

2. The Appellant claims that the Appellant had provided loan amounts to

the Corporate Debtor from time to time by way of an oral Agreement. The

amounts were disbursed in between 20th August, 2015 to 1st March, 2016 and

the dues outstanding were of Rs.3,51,00,000/-. It is the case of the Appellant

that the amounts transferred to the Corporate Debtor were reflected in the

bank accounts and the Corporate Debtor has paid interest and TDS was also

deducted. Counsel states that there were dues and consequently, the

Appellant sent Notice on 2nd January, 2019 (Page - 107) recalling the loan of

Rs.3,51,00,000/- along with interest of Rs.1,85,12,378/-. It is the case that

Respondent instead of clearing the dues of the Appellant, sent a Notice (Page

- 138) dated 18th January, 2019 claiming that there were dues with regard to

a loan Agreement dated 19th December, 2014 (Page - 170) and there was also

an MOU (Memorandum of Understanding) dated 3rd April, 2017 (Page -175).

The Corporate Debtor relying on such documents claimed that the matter is

being referred to the Arbitrator.

3. Learned Counsel for the Appellant states that these documents were

fabricated documents as one of the Managing Directors who had entered into

these documents namely, Mr. Devendra Kumar Aggarwal had disputes with

the other Managing Director - Mr. Ravindra Kumar Aggarwal who is his

brother and the disputes had started in 2017 and proceedings under the

Companies Act were pending between them since 2018. The learned Counsel

Company Appeal (AT) (Ins) No.625 of 2019 3

for the Appellant is claiming that actions of such Director - Mr. Devender

Kumar Aggarwal were not binding on the Financial Creditor.

4. It is also claimed that the Impugned Order in Para - 3 of the Judgement

(Page - 25 at Page - 34) rejected the Application on surmise that there could

be a breach of Clause 1.3 of the MOU and there is possibility of forfeiture.

Counsel states that the loan Agreement dated 19th December, 2014 did not

specify any amount and the subsequent MOU dated 3rd April, 2017 stated

that there were dues of Rs.4,31,97,115/- which was outstanding amounts

against the unsecured loan of the Company and this MOU purported to be

Agreement between the parties whereby the lender was treated as Investor for

CCD (Compulsory Convertible Debentures) adding provision that the

Appellant would further invest to the extent of Rs.3,25,00,000/- within a

period of 18 months effective 1st April, 2017 which was treated as interest free

period and in default, there was provision for the Respondent to forfeit the

amount. The learned Counsel states that such document was unconscionable

and the Respondent could not rely on the same.

5. The Counsel for Appellant has further submitted that before the

Adjudicating Authority in the Reply, a reference was made by the Respondent

that it has a right to forfeit under the MOU. Counsel states that the amount

was not actually forfeited and thus, the Adjudicating Authority observed in

the Impugned Order regarding existence of such right.

6. The learned Counsel for the Respondent refers to the Reply filed before

the Adjudicating Authority (Page - 152 at 164) to submit that the Respondent

Company Appeal (AT) (Ins) No.625 of 2019 4

had even before Adjudicating Authority claimed that it has forfeited the

amount in terms of Para - 1.4 of the MOU dated 3rd April, 2017. Counsel

states that the Respondent has moved the Arbitrator because of the provision

of right to move the Arbitrator under the Agreement read with the MOU as the

Respondent has suffered losses due to the non-investment promised by the

Appellant and the Respondent has to recover monies from the Appellant.

7. Going through the material on record and the submissions made, we

are not much impressed by the claim of the Appellant that in an oral

arrangement such huge amounts were lent to the Respondent. The Learned

Counsel for the Respondent is rightly raising questions and surprise to say

that a Company like the Appellant could not have lent such huge amounts

without there being any document in the form of Resolution; or any

Agreement; or without taking security. In the circumstances, we are not ready

to discard the loan Agreement pointed out by the Respondent and the MOU

only because the Appellant now turns around to brand one of its Directors as

not good Director with whom the other Director, his brother subsequently

claims to have developed disputes. Calling a document as forged is not enough

to throw out the document unless there is, prima facie, evidence to show that

the document is a false creation by the opposite party.

8. The record shows that when the Appellant sent the recall Notice, the

Respondent immediately by way of another Notice which is at Page - 138

referred to the documents executed between the parties and claimed that for

want of the investment, it had suffered damages. In the Reply before the

Adjudicating Authority, the forfeiture was also claimed. We are not entering

Company Appeal (AT) (Ins) No.625 of 2019 5

into the dispute relating to these documents which are stated to be before the

Arbitrator. What we hold from the record is that the Appellant - Financial

Creditor fails to make out case that there is debt which is admitted and

enforceable and that it is in default.

9. In this view of the matter, we do not find any reason to interfere with

the Impugned Order.

10. The observations made by us in this Judgement will not come in the

way of the rights of the parties to pursue their claims before the Arbitrator or

before any other Forum considering the summary nature of proceedings

under Sections 7 of IBC and the limited sphere in which such matters are

dealt with. The Arbitrator/Forum can deal with the Rights claimed

uninfluenced by our observations.

11. The Appeal is dismissed. No Orders as to costs.

[Justice A.I.S. Cheema] Member (Judicial)

(Justice A.B. Singh) Member (Judicial)

[Kanthi Narahari] Member (Technical)

/rs/md

Company Appeal (AT) (Ins) No.625 of 2019