TMI Blog2023 (7) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... forthcoming. Whether the Adjudicating Authority committed any error in accepting the Financial Debt and Default on the part of the Corporate Debtor? - HELD THAT:- 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. It is well settled preposition that balance sheets and financial statement of the Corporate Debtor can be looked into for finding any acknowledgement - This Tribunal in Shailesh Sangani v. Joel Cardso, [ 2019 (3) TMI 1192 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ] laid down that when promoter, director or shareholder of the Corporate Debtor as a stakeholder to improve financial h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 permiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore 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 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Currency INR Sub Type Debt Credit Facility Funded Type Funded Principal Outstanding 27,68,81,000.00 Part-A Remarks Ex-Director of CD shared 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 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 Author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. 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 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 col ..... X X X X Extracts X X X X X X X X Extracts X X X X
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