Priyal Kantilal Patel vs Irep Credit Capital Private Limited & ...

IN THE MATTER OF: Priyal Kantilal Patel ...Appellant

Versus IREP Credit Capital Pvt. Ltd. & Anr. ...Respondents

Present: For Appellant: Mr. Abhijeet Sinha, Mr. Nitin Mishra and Mitali Gupta, Mr. Akash Chatterjee, Advocates For Respondent: Mr. Vikas Mohta, Mr. Pranav Sarthi, Advocates for R- 1 Mr. Pranjit Bhattacharya, Ms. Raj Sarit Khare, Advocates for R-2

ORDER

01.02.2023: Heard Learned Counsel for the parties.

2. This Appeal has been filed against the Order dated 10.10.2022 by which

order, the Adjudicating Authority has admitted Section 7 Application filed by the

Financial Creditor under I&B Code, 2016.

3. An application under Section 7 was filed by the Financial Creditor-

Debenture Holder on 20th December, 2019 being CP No.

45/IBC/NCLT/MB/MAH/2020. In the said Company Petition, a consent terms

was entered between the parties with other stakeholders. According to the 2

consent terms, the Financial Creditor-Respondent herein agreed to withdraw the

Company Petition. It was further contemplated in the consent terms that in

event, there is default of the terms of present consent terms on the part of the

corporate debtor in addition to the consequence provided in Clause 8(B)(a)(iv),

the Financial Creditor shall be entitled to claim the entire amount outstanding

and revive Company Petition 45/2020.

4. Subsequently, it appears that consent terms was defaulted, the cheques

which were issued by the Corporate Debtor were dishonored. The Financial

Creditor instead of reviving earlier company petition, filed a fresh company

petition CP (IB) No. 1029 of 2021. In the company petition, the Financial Creditor

has based his claim on the basis of the initial financial debt as was claimed in

the original application and in the application has also given the details of the

consent terms and the subsequent event which took place. The said company

petition has now been admitted by the Impugned Order passed the Adjudicating

Authority.

5. Aggrieved by the said order, this Appeal has been filed.

6. Mr. Abhijeet Sinha, Learned Counsel for the Appellant challenging the

Order impugned submits that there being breach of the consent terms, Section

7 application filed by the Financial Creditor was not maintainable since breach

of consent terms does not furnish any right to initiate Section 7 Application,

since breach of consent terms can not be treated to be financial debt. It is further

submitted that Adjudicating Authority committed error in admitting Section 7

Company Appeal (AT) Ins. No. 1423 of 2022 3

Application. Mr. Sinha has relied on two judgements of this Tribunal in support

of his submission that are Judgement in Amrit Kumar Agrawal Vs. Tempo

Appliances Pvt. Ltd. [2020 SCC OnLine NCLAT 1202] decided on 25.11.2020

as well as Judgement in Dr. Gopal Krishnan MS & Anr. Vs. Mr. Ravindra

Beleyur & Anr. [CA(AT)(CH)(INS) No. 316 of 2022]. It is further submitted that

there is no consensus for initiating Section 7 Application amongst the Debenture

Holders and Respondents were only 12% Debenture Holder.

7. Learned Counsel appearing for the Respondent-Mr. Vikas Mohta refuting

the submissions of Learned Counsel for the Appellant contends that nature of

debt which was claimed under Section 7 Application remains the financial debt

and by virtue of consent terms which was entered during earlier company

petition, the nature of debt shall not be changed and present is not a case where

the Financial Creditor was trying to enforce the settlement agreement between

the parties rather the Application was filed claiming as financial debt and the

application has rightly been admitted. Learned Counsel for the Respondent

further submitted that under the consent terms also, there was clear stipulation

that any default by Corporate Debtor in following terms, revival application could

have been filed, however under the legal advice, the fresh application was filed

which cannot be defeated on the said ground.

8. We have considered the submissions of Learned Counsel for the parties

and have perused the record.

Company Appeal (AT) Ins. No. 1423 of 2022 4

9. There is no dispute between the parties that on the consent terms which

was entered between the parties, the earlier company petitioner 45/2020 was

withdrawn. The same was clearly stipulated in paragraph 1.1(e). One more

clause which need to be noticed is clause 9 which is to the following effect:

"9. The Corporate Debtor undertakes to fully comply with the payment schedule set out in Annexure A and Annexure B and represents that it shall not commit any default in releasing of the amounts agreed under the present Consent Terms. It is agreed by the parties that in the event of default of the terms of the present Consent Terms on the part of the Corporate Debtor, in addition to the consequences provided in clause 8(B)(a)(iv) above, the Financial Creditor shall be entitled to claim the entire amount outstanding and revive Company Petition 45 of 2020. In the event of default committed by the Corporate Debtor, the Financial Creditor shall be entitled to claim the entire amount as may be due on the date of the default in terms of the Transaction Documents."

10. Now we come to the Section 7 Application which was filed by the Financial

Creditor. Part-IV of the Application under which 'Particulars of Financial Debt'

has been given is as follows:

PARTICUALRS OF FINANCIAL DEBT

1. TOTAL AMOUNT OF DEBT A SUM OF RS. 26,96,49,413 (RUPEE GRANTED DATE(S) OF TWENTY SIX CRORES NINETY SIX LAKH DISBURSEMENT FORTY NINE THOUSAND FOUR HUNDRED AND THIRTEEN ONLY) WITH FURTHER INTEREST THEREON TILL

Company Appeal (AT) Ins. No. 1423 of 2022 5

PAYMENT AND/OR REALIZATION (DUE AS ON 8TH OCTOBER, 2021) WHICH INCLUDES THE FOLLOWING:

i. RS. 18,00,00,000/- (RUPEES EIGHTEEN CRORES ONLY) BEING THE REDEMPTION (FACE VALUE) OF 18 FULLY PAID UP UNRATED, UNLISTED, SECURED, REDEEMABLE, NON- CONVERTIBLE DEBENTURES ("SERIES DEBENTURES") ISSUED BY THE CORPORATE DEBTOR; i. RS. 3,64,31,833/- (RUPEES THREE CRORES SIXTY FOUR LAKHS THIRTY ONE THOUSAND EIGHT HUNDRED AND THIRTY THREE ONLY) BEING THE REDEMPTION PREMIUM ACCRUED; ii. RS. 64,71,708 (RUPEES SIXTY FOUR LAKH SEVENTY ONE THOUSNAD SEVEN HUNDRED NAD EIGHT ONLY) BEING THE PENAL INTEREST; iii. RS. 4,67,45,872 (RUPEES FOUR CRORES SIXTY SEVEN LAKH FORTY FIVE EIGHT HUNDRED AND SEVENTY TWO ONLY) BEING THE INTEREST

11. When we look into the Part-IV of Section 7 Application, in the Application

the Financial Debt as was originally claimed in the earlier application has been

claimed. The Application is not founded only on the default of the consent terms

rather application is founded on the original financial debt which was extended

by the financial creditor to the corporate debtor.

Company Appeal (AT) Ins. No. 1423 of 2022 6

12. The judgement which has been relied by Learned Counsel for the Appellant

"Amrit Kumar Agrawal" (supra) was a case where section 7 application was filed

on the ground of default in payment of settlement agreement where the court

held that default in payment of settlement agreement does not constitute a

financial debt. The facts of the present case are clearly distinguishable. Present

is not a case where Section 7 Application has been filed only on the ground of

default in the settlement agreement rather section 7 application has been filed

on the basis of original financial debt which was extended by the Financial

Creditor to the Corporate Debtor. The mere fact that in earlier company petition,

consent terms was arrived, which consent terms was breached by the corporate

debtor, the financial debt which was claimed by the financial creditor would not

be wiped out nor the nature and character of financial debt shall be changed on

account of breach of the consent terms. Permitting such interpretation shall be

giving premium to the corporate debtor who breach the consent terms. Another

judgement which has been relied on by Learned Counsel for the Appellant is "Dr.

Gopal Krishnan MS", (supra) which is also judgement relying on "Amrit Kumar

Agrawal". The court in the facts of the said case came to the conclusion that debt

is not a financial debt. The above judgement is also clearly distinguishable.

13. It is relevant to notice that in clause 9 of the consent terms there was clear

stipulation that financial creditor shall be entitled to revive the company petition,

the mere fact that instead of reviving company petition, a fresh company petition

has been filed under section 7 shall not be reason to reject the company petition

and not to entertain the said company petition.

Company Appeal (AT) Ins. No. 1423 of 2022 7

14. No coming to the second submission of Learned Counsel for the appellant

that the application could not have been filed under section 7 by the financial

creditor, there is no dispute that financial creditor has extended financial

benefits to the corporate debtor. The mere fact that the majority debenture

holders have not initiated any section 7 application shall not preclude the

financial creditor who was entitled to initiate section 7 application on its own

right. We thus do not find any substance in the submission of learned counsel

for the Appellant.

15. It shall be open for the appellant, in event, settlement is entered between

the parties, to file Application under Section 12-A of the I&B Code, 2016.

In view of the aforesaid, we do not find any error in the impugned order,

the Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

Basant/nn

Company Appeal (AT) Ins. No. 1423 of 2022