Vipin Sharma vs Kaliber Associates Pvt. Ltd

[Arising out of Order dated 03.01.2023 passed by the Adjudicating Authority (National Company Law Tribunal), New Delhi Bench, Court-III in CP(IB) No. 1103/ND/2020]

IN THE MATTER OF:

Mr. Vipin Sharma, S/o Durga Dass Sharma Aged about 53 years, Having his office at C-1 0/3, 1st Floor, Vasant Vihar, New Delhi-11057 ...Appellant Email id: 1970vipin@gmail.com Versus 1. KALIBER ASSOCIATES PRIVATE LIMITED, (CIN: U74140DL2003PTC118931) A company incorporated and registered under the provisions of the Companies Act, 1956, Having its registered office at: E-20, Lajpat Nagar-III, New Delhi-110024. Through its official liquidator, Mr. Mohan Lal Jain, Having office at: B-1/12, 2nd Floor, Safdarjung Enclave, New Delhi-110029. Email: cirp.kaliberapl@gmail.com

2. Mr. Rajiv Bajaj, Interim Resolution Professional of M/s Diamond IT Infracon Pvt. Ltd., Having office at 4/180, Backside, Ground Floor, Subhash Nagar, New Delhi-27, Email: rbajajip@gmail.com ...Respondents

Cont'd.../ -2-

Present:

For Appellant: Mr. Krishnendu Datta, Sr. Advocate, with Mr. Vikas Mishra & Mr. Sanchit Gawri, Advocates. For Respondents: Mr. Anirban Bhattacharya and Mr. Rajeev Chowdhary, Advocates for R-1. Mr. Vinod K. Chaurasia & Mr. Shivam Pal, Advocates for R-2

JUDGMENT

ASHOK BHUSHAN, J.

1. This Appeal by a Shareholder and Suspended Director of the

Corporate Debtor has been filed challenging the order dated 03.01.2023

passed by National Company Law Tribunal, New Delhi Bench, Court-III

(hereinafter referred to as "The Adjudicating Authority") admitting

Section 7 Application of Insolvency and Bankruptcy Code, 2016

(hereinafter referred to as "The Code") filed by the Respondent No. 1.

2. Brief facts of the case necessary to be noticed for deciding this

Appeal are:-

a. Kaliber Associates Pvt. Ltd., the Financial Creditor has advanced

various amounts to the Corporate Debtor-Diamond IT Infracon Pvt.

Ltd. from the year December, 2013 to December, 2017. An

insolvency proceedings were initiated against the Financial

Creditor-Kaliber Associates Pvt. Ltd. by order dated 18.01.2019.

b. On 31st January, 2019, IRP of Respondent No. 1 wrote to the

Corporate Debtor praying for confirmation of balance of Rs.

17,47,50,000/- payable to Respondent No. 1. By further letter

Company Appeal (AT) (Insolvency) No. 113 of 2023 -3-

dated 10th May, 2019, Resolution Professional of Respondent No. 1

wrote to the Corporate Debtor for making payment of Rs.

27,69,14,300/-. Request was again repeated by Resolution

Professional on 18th July, 2019 and 09.03.2020 for payment of

aforesaid amount of Rs. 27,69,14,300/-.

c. Liquidation Proceedings were initiated against Respondent No. 1 by

Order of the Adjudicating Authority. The Liquidator filed an I.A. No.

4559 of 2020 before the Adjudicating Authority seeking approval for

initiation of proceedings under Section 7 against the Corporate

Debtor. The Adjudicating Authority vide Order dated 01.12.2020

allowed the I.A. and granted permission to the Liquidator to file

Section 7 Application of the Code.

d. Respondent No. 1 through Liquidator filed a Section 7 Application

against the Corporate Debtor being CP(IB) No. 1103/ND/2020

praying for initiation of Corporate Insolvency Resolution Process

against the Corporate Debtor for payable financial debt of Rs.

27,69,02,500/-. Along with Section 7 Application, the Respondent

No. 1 filed balance sheet of the Corporate Debtor as on 31st March,

2017, copy of the balance sheet of Respondent No. 1 as on 31st

March, 2018, the copy of financial statements of Respondent No. 1,

record of default of Corporate Debtor available with National e-

Governance Service Limited.

e. The Adjudicating Authority issued notice in Section 7 Application

filed by Respondent No. 1 vide Order dated 21st December, 2020.

Copy of the Petition and all documents were served to the

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Corporate Debtor. Corporate Debtor appeared before the

Adjudicating Authority on 11.03.2021 and was directed to file Reply

within three weeks. On 02.11.2021, the Adjudicating Authority

noted that there was no representation on behalf of the Corporate

Debtor hence one more opportunity was given for three weeks time

to file Reply i.e. by 23.11.2021. On 02.12.2021, the Adjudicating

Authority directed to proceed ex-parte against the Corporate Debtor

since neither any Reply was filed nor there was any representation.

Corporate Debtor filed an I.A. No. 3106 of 2021 for setting aside

order dated 02.12.2021 which Application was withdrawn on 29th

August, 2022.

f. The Adjudicating Authority after granting ample opportunity to the

Corporate Debtor proceeded to hear the Section 7 Application and

by Impugned Order dated 03.01.2023 admitted Section 7

Application filed by the Respondent No. 1.

g. The Adjudicating Authority held that the balance sheet of the

Corporate Debtor shows that corporate debtor has availed loan

facility from Financial Creditor. Adjudicating Authority also relied

on record of default of NESL. The Adjudicating Authority finding a

financial debt and default admitted Section Application.

h. The Appellant being shareholder and suspended director of the

corporate debtor aggrieved by the Order dated 03.01.2023 has

come up in this Appeal.

3. We have heard Mr. Krishnendu Dutta, Sr. Advocate along with Mr.

Vikas Mishra for the Appellant and Mr. Anirban Bhattacharya, Advocate

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for Respondent No. 1 and Mr. Vinod Chaurasia, Advocate for Respondent

No. 2.

4. Learned Counsel for the Appellant submits that financial creditor

and the corporate debtor are related parties and family owned companies.

It is submitted that the Adjudicating Authority failed to consider the MoU

dated 27.09.2017 executed between the corporate debtor and under

which Respondent no. 1 agreed to pay amount as investment. Denial of

Respondent No.1 for want of knowledge to the MoU is no denial. There

was no financial debt due on the corporate debtor so as to admit the

Section 7 Application filed by Respondent No. 1. Erstwhile shareholders

of the corporate debtor did not prosecute the Company Petition resulting

ex-parte proceeding against the Corporate Debtor. Erstwhile director Lalit

Modi assured that he shall prosecute the Company Petition but he failed

to duly prosecute the Company Petition. Due to above reasons, Appellant

could not bring on record MOU dated 27.09.2017. The Adjudicating

Authority failed to consider that alleged loan disbursement was not made

for consideration of time value of money and does not qualify to be

financial debt within meaning of Section 5(8) of the Code. Appellant may

be given opportunity to defend the Company Petition especially due to

existence of MoU dated 27.09.2017. Appellant's further case is that

Appellant and other shareholders tookover the Corporate Debtor from its

erstwhile shareholders in June, 2018. Appellant also has admitted that

he received the letters from the Respondent No. 1 in the year 2019

demanding the alleged financial debt by the IRP/RP of Respondent No. 1.

Company Appeal (AT) (Insolvency) No. 113 of 2023 -6-

5. Leaned Counsel appearing for Respondent No. 1 refuting the

submissions of Learned Counsel for the Appellant submits that ample

opportunity was given to the Corporate Debtor to file Reply, twice

Adjudicating Authority granted time to file a Reply but no reply was filed

and the Adjudicating Authority left with no option directed on 02.12.2021

to proceed ex-parte against the corporate debtor. Although an Application

I.A No. 3106 of 2021 was filed by the Corporate Debtor to set aside the

Order dated 02.12.2021 but the said application was also withdrawn by

the Corporate Debtor on 29.08.2022. The Appellant cannot be heard in

saying that Corporate Debtor was not granted ample opportunity by the

Adjudicating Authority. MoU dated 27.09.2017 relied on by Corporate

Debtor is not available on record of the Respondent No. 1 hence is not

admitted. It is submitted that amount advanced by Respondent No. 1 to

the Corporate Debtor is reflected in the balance sheet of the Corporate

Debtor as well as financial statement of the Financial Creditor. Balance

sheet of the Corporate Debtor as on 31st March, 2017 reflects the amount

as short term borrowing. Appellant cannot be permitted to challenge the

financial statement relying on unregistered MoU. It is submitted that

IRP/RP of the Respondent No. 1 has written several letters in 2019 to the

Corporate Debtor for refunding the amount which was not responded by

the directors of the Corporate Debtor. NESL report itself indicates the

financial debt owed by Corporate Debtor to the Financial Creditor which

has rightly been relied by Adjudicating Authority. Between 14.12.2013 to

28.12.2017, Respondent No. 1 had disbursed total sum of Rs

27,69,02,500/-. Loan was demanded back by the IRP/RP of Respondent

Company Appeal (AT) (Insolvency) No. 113 of 2023 -7-

No. 1 vide various letters issued in 2019 and 2020 which having not been

complied, with the permission of the Adjudicating Authority Section 7

Application was filed by the Liquidator of Respondent No. 1 before the

Adjudicating Authority.

6. We have considered the submissions of Learned Counsel for the

parties and have perused the record.

7. We need to first notice submission of the Appellant that Appellant

is entitled for an opportunity by the Adjudicating Authority especially in

view of the fact that MoU dated 27.09.2017 could not be brought on

record before the Adjudicating Authority.

8. Respondent No. 1 in its Reply has given the details where various

orders passed by the Adjudicating Authority by which opportunity was

given to Corporate Debtor to file a Reply. Learned Counsel for the

Corporate Debtor appeared before the Adjudicating Authority on

11.03.2021 and was directed to file Reply within three weeks. By a

further order dated 02.11.2021, three weeks further time was allowed to

file a Reply and when no Reply was filed, the Adjudicating Authority

having no option, directed on 02.12.2021 to proceed ex-parte against the

corporate debtor. Although corporate debtor filed an I.A. No. 3106 of 2021

to recall the order dated 02.12.2021 but the said application was

withdrawn on 29th August, 2022. The Corporate Debtor having not filed

any Reply in spite of ample opportunity being granted by the Adjudicating

Authority and the Application to recall the order proceeding ex-parte

having also been dismissed, Appellant cannot be allowed to contend that

one more opportunity be given to the Appellant.

Company Appeal (AT) (Insolvency) No. 113 of 2023 -8-

9. Now we come to the MoU dated 27.09.2017 which is relied on by

the Appellant in the Appeal.

10. The said MoU was not before the Adjudicating Authority to enable

the Adjudicating Authority to consider the said MoU. MoU has been

brought on record by Appellant in the present Appeal for the first time.

The Respondent No. 1 in its Reply has submitted that MoU is not

available on record of the Respondent No. 1 hence the same cannot be

admitted. It is relevant to notice that amounts which was advanced by the

Financial Creditor to the Corporate Debtor were amounts advanced from

the year December, 2013 to December, 2017. The reasons by the

Corporate Debtor not filing the Reply and placing any reliance on the

MoU before the Adjudicating Authority are not forthcoming.

11. The main submission of the Appellant is that as per MoU, amount

advanced was only an investment by Respondent No. 1 in the Corporate

Debtor and hence is not a financial debt.

12. We need to consider as to whether the Adjudicating Authority

committed any error in accepting the Financial Debt and Default on the

part of the Corporate Debtor.

13. As noted above along with Section 7 Application, record of default

was filed by the Respondent No. 1 where in the remarks following

statement has been made under heading "other party information":

Debt Information Financial Type of Debt 7 Debt Reference No. 31.03.2018 Debt Start Date

Company Appeal (AT) (Insolvency) No. 113 of 2023 -9-

INR Debt Currency 27,68,81,000.00 Sanctioned Debt Amount Credit Facility Facility Name 27,68,81,000.0 Total Outstanding Amount 27,68,81,000.00 Amount Overdue 596 Days past due (DPD) No Account Closed Flag 12 Rate of Interest INR Sanction Currency Credit Facility Sub Type - Debt Funded Funded Type 27,68,81,000.00 Principal Outstanding Ex-Director of CD shared Part-A Remarks Financial Statement of CD with RP as on 18.01.2019 (CIRP Commencement Date) wherein amt of Rs.

276881000 is appearing that Diamond IT infracon Pvt. Ltd. owed to CD and the amount is also being acknowledged in Financial Statement as on 31.03.2018 of Diamond ITinfracon Pvt. Ltd.

14. In Section 7 Application, balance sheet of the Corporate Debtor as

on 31st March, 2017 acknowledges loan advanced from body corporate

(Kaliber Associates Pvt. Ltd.) as on 31st March, 2017 amounts of Rs.

17,47,50,000/-. Financial Statement of the Respondent No. 1 was also

filed along with Section 7 Application where under the heading short-term

Company Appeal (AT) (Insolvency) No. 113 of 2023 -10-

loan and advance against the name of Corporate Debtor Diamond IT

Infracon Pvt. Ltd. amount about 27,69,14,300/- was shown as on 31st

March, 2018 and an amount of Rs. 17,47,50,000/- as on 31st March

2017. The Adjudicating Authority has rightly placed reliance on the

financial statement of the Corporate Debtor as well as those of

Respondent No. 1 both reflecting the amount as short term loan. When

balance sheet and financial statement as on 31st March, 2017 and 31st

March, 2018 was filed along with Section 7 Application which statements

were prepared in due course and are not subject of any dispute, we are of

the view that acknowledgment as contained in the Financial Statements

cannot be wished away by the Appellant relying on unregistered MoU

dated 27.09.2017 which was never brought on record before the

Adjudicating Authority.

15. Learned Counsel for the Respondent No. 1 rightly placed reliance

on judgment of this Tribunal in C.A. (AT) Ins. No. 470 of 2022, Vipul

Himatlal Shah vs. Teco Industries & Anr. where two-member bench of

this Tribunal has laid down that when the record of the information

utility shows that there is a debt which is in default, the Adjudicating

Authority and this Appellate Tribunal are not required to further examine

the record maintained by the Information Utility more so when the record

of the information utility is deemed authenticated and no dispute or

refutation of said record has been done by the Corporate Debtor earlier.

In paragraph 16 of the Judgment, following has been laid down:

"16. In the light of the detailed discussion as above, it is clear that in case the record of information utility shows

Company Appeal (AT) (Insolvency) No. 113 of 2023 -11-

that there is a debt which is in default, the Adjudicating Authority and this Appellate Authority are not required to further examine the record maintained by the Information Utility, moreso when the record of the information utility is deemed authenticated and no dispute or refutation of said record has been done by the Corporate Debtor earlier. We also note that in the judgment of Rushabh Civil Contractors Pvt. Ltd. Vs. Centrio Lifespaces Ltd. (supra), which has been cited by the Learned Counsel for Appellant, the record that formed the basis for financial debt and default was found to be forged and fabricated, which is not the case in the present appeal. Therefore, this judgment does not come to the rescue of the Appellant."

16. It is well settled preposition that balance sheets and financial

statement of the Corporate Debtor can be looked into for finding any

acknowledgement. We may refer to the Judgment of the Hon'ble Supreme

Court in Asset Reconstruction Company (India) Ltd. Vs. Bishal

Jaiswal, 2021 6 SCC 366. The amount advanced to the Corporate

Debtor by associates company to improve the financial health of the

Corporate Debtor is a disbursement for time value of money. Ex-directors

of the Financial Creditor were holding 100% share of the Corporate

Debtor. This Tribunal in Shailesh Sangani v. Joel Cardso, C.A. (AT) Ins.

No. 616 of 2018 decided on 30th January, 2019 laid down that when

promoter, director or shareholder of the Corporate Debtor as a

stakeholder to improve financial health of the company and to boost its

economic prospects, advance an amount, the same would have the

commercial effect of borrowing on the part of the corporate debtor

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notwithstanding the fact that no provision is made for interest thereon. In

paragraph 6 of the Judgment, following was held:

"6. A plain look at the definition of 'financial debt' brings it to fore that the debt alongwith interest, if any, should have been disbursed against the consideration for the time value of money. Use of expression 'if any' as suffix to 'interest' leaves no room for doubt that the component of interest is not a sine qua non for bringing the debt within the fold of 'financial debt'. The amount disbursed as debt against the consideration for time value of money may or may not be interest bearing. What is material is that the disbursement of debt should be against consideration for the time value of money. Clauses (a) to (i) of Section 5(8) embody the nature of transactions which are included in the definition of 'financial debt'. It includes money borrowed against the payment of interest. Clause (f) of Section 5(8) specifically deals with amount raised under any other transaction having the commercial effect of a borrowing which also includes a forward sale or purchase agreement. It is manifestly clear that money advanced by a Promoter, Director or a Shareholder of the Corporate Debtor as a stakeholder to improve financial health of the Company and boost its economic prospects, would have the commercial effect of borrowing on the part of Corporate Debtor notwithstanding the fact that no provision is made for interest thereon. Due to fluctuations in market and the risks to which it is exposed, a Company may at times feel the heat of resource crunch and the stakeholders like Promoter, Director or a Shareholder may, in order to protect their legitimate interests be called upon to

Company Appeal (AT) (Insolvency) No. 113 of 2023 -13-

respond to the crisis and in order to save the company they may infuse funds without claiming interest. In such situation such funds may be treated as long term borrowings. Once it is so, it cannot be said that the debt has not been disbursed against the consideration for the time value of the money. The interests of such stakeholders cannot be said to be in conflict with the interests of the Company. Enhancement of assets, increase in production and the growth in profits, share value or equity enures to the benefit of such stakeholders and that is the time value of the money constituting the consideration for disbursement of such amount raised as debt with obligation on the part of Company to discharge the same. Viewed thus, it can be said without any amount of contradiction that in such cases the amount taken by the Company is in the nature of a 'financial debt'."

17. The findings recorded by the Adjudicating Authority that financial

debt and default is proved is supported by the financial statements and

balance sheets of the Corporate Debtor and Financial Creditor which were

brought on record along with Section 7 Application. There is no infirmity

in the findings of the Adjudicating Authority that debt and default is

proved.

18. Learned Counsel for the Appellant has also referred to the grounds

taken in the Appeal and also relied on ground taken in the Appeal that

the Application Under Section 7 has been initiated by the Liquidator of

Respondent No. 1 in collusion with the current stakeholders of

Respondent No.1 including Stakeholder Consultation Committee with a

sole view to drag into insolvency. We do not find any substance in the

Company Appeal (AT) (Insolvency) No. 113 of 2023 -14-

said ground raised in the Appeal, in paragraph 7.21. The Appellant

themselves has brought on record letters dated 31st January, 2019, 10th

May, 2019, 18.07.2019 and 09.03.2020 issued by the IRP/RP of

Respondent No.1 to the Corporate Debtor demanding the amount due to

the Financial Creditor by Corporate Debtor. The Liquidator filed Section 7

Application after obtaining order by the Adjudicating Authority permitting

the Liquidator to file Section 7 Application. Section 7 Application was filed

by the Respondent No. 1 and the Corporate Debtor failed to discharge its

financial debt due to the Financial Creditor. We thus reject the allegations

of the Appellant that in collusion with current stakeholders, Section 7

Application was filed by Respondent No. 1/Liquidator.

19. We thus are of the view that Adjudicating Authority has rightly

come to the conclusion that financial creditor has successfully proved the

financial debt and default on the part of the Corporate Debtor in initiation

of Section 7 Application. In view of the finding and in view of the

principles as laid down by Hon'ble Supreme Court in Innoventive

Industries Pvt. Ltd. Vs. ICICI Bank, 2018 1 SCC 407 where Supreme

Court laid down following in paragraph 30:

"30. On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is "due" i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is

Company Appeal (AT) (Insolvency) No. 113 of 2023 -15-

only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise."

20. We do not find any error in the order impugned passed by the

Adjudicating Authority admitting Section 7 Application, there is no merit

in the Appeal, the Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Naresh Salecha] Member (Technical)

NEW DELHI 04th July, 2023

Basant B.

Company Appeal (AT) (Insolvency) No. 113 of 2023