TMI Blog2022 (2) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... is also an admitted fact that no evidence/records have been placed to satisfy the three essential ingredients namely a) Disbursal of loan amount. b) Such disbursal was for a consideration for time value of money. c) A default has arisen either in repayment of whole or in part. No mandatory information/ documents/ evidence required under Clause 3 to 8 of Part-V of Form-1 have been placed. No documents/evidence were placed to prove that the Respondent Company borrowed the alleged unsecured loan from the Appellant. It is also an admitted fact that there are no documents/records to prove that the Appellant is a Financial Creditor. The Appellant stated that the Audited Balance Sheets and other documents mentioned in para 8 of Part-V of the Application prove beyond doubt that two ingredients of IBC Application i.e. Debt and Default are fully stratified. Meaning thereby, there was no Financial Debt defined under Section 5(8) of IBC - the audited Balance Sheets also do not prove the existence of financial debt and default defined under Section 3(12) of IBC. These Balance Sheets do not prove that the whole loan or its instalment when became due and payable and the same is/are not repaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Process against the Corporate Debtor (Annexure-2 Colly at page 37 to 147 of the Appeal Paper Book). v) After hearing the parties the Ld. Adjudicating Authority had passed the following order: 25. The Respondent -Corporate Debtor in relation to the above assertion has placed reliance on the decision of NCLAT in the case titled Prayag Polytech Pvt. Ltd. Vs. Gem Batteries Pvt. Ltd. in (Company Appeal (AT) (Insolvency) No. 713 of 2019) wherein the Appellate Authority while confirming the decision of NCLT, New Delhi Bench has held that in the absence of the Financial Creditor between the parties, the Financial debt as described under Section 5 (8) of the code cannot be ascertained and merely pointing out that TDS was deducted by the Corporate Debtor would not be sufficient to conclude that there was any financial debt. 26. In view of the above discussion, we are of the view that the petitioner has failed to establish that the Unsecured Loan he has granted falls within the scope of Financial Debt in the absence of any Loan Agreement/board Resolution setting out the terms conditions of the agreement. Also, we shall not go into the question of whether any amount is du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial debt as defined under Section 5(8) of the I B Code, be it seen that the legal expression debt , defined under Section 3 (11) means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt. It is manifestly clear that the liability or obligation to pay must arise out of a claim due from a debtor/ borrower. The nature of obligation and from where it springs is immaterial. The obligation may be contractual or otherwise. Since, the legal expression debt includes a financial debt across the ambit of I B Code, it would be appropriate to refer to the definition of legal expression financial debt as engrafted in Section 5(8) of I B Code, which is reproduced hereinbelow: 5(8) financial debt means a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money and includes- (a) money borrowed against the payment of interest; (b) any amount raised by acceptance under any acceptance credit facility or its de-materialised equivalent; (c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding 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 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 . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leading/ contradictory information: The Appellant before the Ld. Adjudicating Authority (para 1 at page 38 of the Appeal Paper Book) has stated that he has been giving loans from time to time w.e.f. 07.09.2016. Whereas, para 7(i) at page 7 of the Appeal Paper Book, the Appellant has stated that he has been giving un-secured facility to the Respondent from the year 2007. The amount outstanding is stated before the Ld. Adjudicating Authority is ₹ 20 Lacs as on 20.04.2017. Whereas, at page 4 of the Appeal, he has stated that as on 20.04.2017, the amount of ₹ 1.95 Crores was outstanding. In fact, the Appellant has not placed any document neither before the Ld. Adjudicating Authority not before this Appellate Tribunal to show that the debt was due and payable over a period of time. 11. Incomplete Application: i) No information provided under Clause 3, 5 and 6 of Part I and Clause 5, 6 and 7 of Part V. Further information under Clause 1 of Part IV is wrong as no amount of debt has been granted. Even otherwise as per statement at page No. 59 60 of the Appeal, the total amount deposited is stated to be ₹ 3.85 Crores and not ₹ 1.95 Crore which is mentione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the speed within which the 'adjudicating authority is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor, is important'. 14. It is further submitted that the deduction of TDS is not sufficient to conclude the outstanding amount as Financial Debt. In this regard this Appellate Tribunal in the case of Company Appeal (AT) (Insolvency) No. 713 of 2019 Prayag Polytech Pvt. Ltd. Vs. Gem Batteries Pvtl Ltd. held that merely pointing out that TDS was deducted would not be sufficient to conclude that there was Financial Debt. TDS can be deducted for various reasons. 15. It is further submitted that the payment of surplus was interest as there was no over due to the Bank. No interest to be paid on unsecured loans in case of any over dues with the Bank. This Appellate Tribunal in the case of Company Appeal (AT) (Insolvency) No. 57 of 2018 Sanjay Kewalramani Vs. Sunil Parmanand Kewalramani Ors. held that the mere fact that the company paid interest @ 12% per annum, during certain period cannot be the ground to hold that the 'debt' comes with the meaning of 'Financi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Book). The Appellant has given contradictory information before the Ld. Adjudicating Authority (para 1 at page 38 of the Appeal) has stated that he has been giving loans from time to time w.e.f. 07.09.2016 and para 7(i) at page 7 of the Appeal Paper Book, the Appellant has stated that he has been giving unsecured facility to the Respondent from the year 2007. The amount outstanding is stated before the Ld. Adjudicating Authority is ₹ 20 Lacs as on 20.04.2017. Whereas, at page 4 of the Appeal, he has stated that as on 20.04.2017, the amount of ₹ 1.95 Crores was outstanding. The Appellant has not placed any document neither before the Ld. Adjudicating Authority not before this Appellate Tribunal to show that the debt was due and payable over a period of time. It is also an admitted fact that the Appellant has filed incomplete Application without information provided under Clause 3, 5 and 6 of Part I and Clause 5, 6 and 7 of Part V. Further information under Clause 1 of Part IV is wrong as no amount of debt has been granted. Even otherwise as per statement at page No. 59 60 of the Appeal, the total amount deposited is stated to be ₹ 3.85 Crores and not ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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