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TMI Blog2024 (12) TMI 1034X X X X Extracts X X X X X X X X Extracts X X X X ..... ance with Section 45-IA of the RBI Act, 1934, and is recognised as a non-deposit vide certificate dated 20.04.1998. The Respondent Company, namely Brick and Mortar Realty Private Limited, is a real estate company. 3. It is contended by the Appellant that the Respondent approached the Appellant for seeking a loan of Rs.1,50,00,000/- (rupees one crores and fifty lakhs only) to meet its business expansion and working capital requirement in its usual course of business. This loan was mutually agreed in the form of an Inter Corporate Loan. It was agreed to be disbursed by the Appellant as and when required / demanded by the Respondent at an agreed upon rate of interest of 12% per annum. It was also mutually decided by the parties that the Inter Corporate Loan would become due and payable on demand and, thus, the Respondent will be liable to refund the same. 4. The loan was disbursed in five instalments as per details given below: Sl. No. Date of Disbursement Amount disbursed with (Rs.) 1. 24.05.2013 10,00,000 2. 24.05.2013 10,00,000 3. 28.06.2014 95,00,000 4. 29.07.2015 10,00,000 5. 05.09.2015 25,00,000 Total 1,50,00,000 5. Appellant also cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in the record (pages 74 to 78 of appeal paper book). 9. A demand notice was issued on 12.03.2022 by the Appellant to repay the entire loan amount along with interest @ 12% per annum totalling Rs.2,31,44,999/- (rupees two crores, thirty-one lakhs, forty-four thousand, nine hundred and ninety-nine only), which includes Rs 1.5 crores as the principal amount and Rs.81,44,999/- (rupees eighty-one lakhs, forty-four thousand, nine hundred and ninety-nine only) as the interest amount, within 15 days from the date of its receipt (page 79 of appeal paper book). 10. The Respondent failed to reply to the demand notice. Thereafter, a reminder was issued on 04.05.2022, which was also unanswered. Thereafter, a legal notice was issued by the Appellant on 26.05.2022, which was also unanswered. 11. Thereafter, the Appellant, being a Financial Creditor, filed an Application under Section 7 of the Code before the NCLT, Kolkata Bench. The Adjudicating Authority dismissed the Application on the following grounds: "a) The Appellant Financial Creditor being an NBFC is bound by the Master Circular on Fair Practices Code dated 01.07.2015 and that in light of the Ld. Adjudicating Authority's own dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isclosed any loan agreement executed between the parties. Further, there is no document that records the terms and conditions of the purported loan issued by the Appellant to the alleged Corporate Debtor. Therefore, the Petition before the Adjudicating Authority fails to satisfy the definition of a financial debt as per the Code. Therefore, no cognizance can be taken with respect to the purported bank statements disclosed in the Petition. Further, the bank statements do not indicate the nature of transactions between the parties. It also claims that not a single document has been produced to demonstrate that there has been loan transaction or that the purported loan amount was to be repaid after a particular period. There are no averments with respect to the loan tenure or when the purported loan amount was due. Therefore, it cannot be said that the alleged amount became due and payable by the Respondent. The Alleged loan amount of Rs 1.5 crores was disbursed in 5 tranches from 2013-2015 and the interest was paid till 31.03.2017. Despite this, the Appellant had not issued any notice of demand from April, 2017, to 12.03.2022. Therefore, this is ex-facie barred by limitation. 18. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, TDS deduction and other material on record? II. Whether the Appellant's Petition is barred by limitation? III. Whether the dismissal of the Section 7 Petition by the Adjudicating Authority is sustainable or not? 24. Issue (I) and (II) are examined together. With respect to the finding whether the amount advanced qualifies as a financial debt or not, it will be appropriate to look into the definition of debt under Section 5(8) of the IBC, which is reproduced as follows: "5. In this Part, unless the context otherwise requires,- ....... (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; .........." Section 5(8) defines financial debt as a debt i.e. disbursed against the consideration for time value of money including money borrowed against the payment of interest. 25. In the present case, we look into the materials on record to determine whether there is existence or otherwise of the financial debt: a) The loan was disbursed in 5 instalments from 24.05.2023 to 05.09.2015 aggregating to Rs.1.5 crores. Each dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an acknowledgement through the confirmation of accounts and tax on interest with deductions as per Form 26AS, the latest of which being in FY 2020-21. This provides an acknowledgement of debt and provides a fresh starting point for the limitation period and extends the limitation. The demand notice was issued on 12.03.2022 and Section 7 Application was filed on 02.12.2022, which is well within three years from the date of last acknowledgment in FY 2020-21. We find that Respondent's argument that the Petition was barred by limitation is untenable and needs to be rejected. 29. It is noted that the Adjudicating Authority has dismissed the Section 7 Petition, primarily due to the absence of formal written loan agreement as noted below in its order : "...... 10. As per the RBI guidelines on Fair Practices Code for NBFCs, dated 18 February 2013, the NBFCs should convey in writing to the borrower in the vernacular language as understood by the borrower by means of sanction letter or otherwise, the amount of loan sanctioned along with the terms and conditions including annualized rate of interest and method of application thereof and keep the acceptance of these terms and conditions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -Corporate Deposit', but it cannot be treated as the Financial Debt. In case the Inter-Corporate Deposit is made for a certain period, which was to be paid back with interest then such transaction will also fall in the definition of 'Financial Debt'. The interest is the product of instant transaction, which is undoubtedly the time value of money. Thus, such transaction of the inter-corporate deposit is fully covered by the definition of Financial debt as provided under Section 5(8) of the I&B Code. The written contract cannot be treated as an essential element to prove the Financial Debt if the transaction's nature is proved otherwise." Contrary to the conclusions of the Adjudicating Authority in the impugned order basis Narendra Kumar Aggarwal (supra), we find that this judgement comes to the support of the Appellant. In fact, this Tribunal has upheld that an oral agreement for inter-corporate loans could be considered valid for the purposes of the IBC, if the nature of the transaction is otherwise evident from the party's dealings. And in the facts of the case we notice that there is sufficient material otherwise which helps us to come to a conclusion that the Appellant had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rescribes that there should be a written agreement between the parties to prove the loan and its disbursement to be treated as financial debts. It is also observed that if there are acknowledgments by the 'Corporate Debtor' and where the statements of accounts of the 'Corporate Debtor' are in position to proof disbursement of loan and payment of interest, the absence of formal written agreement would not bar the 'Financial Creditor' (the Respondent No. 1 herein) from initiating the CIRP." Herein this Tribunal had clarified that a written agreement is not a condition precedent to proving the existence of a financial debt. Acknowledgments by the Corporate Debtor and supporting documents like ledger accounts can be sufficient to prove the debt. This also supports the case of the Appellant. 33. It is to be noted that the loan is also recorded in the balance sheet of the Appellant even though as "other liabilities" instead of "loan" and this does not negate the existence of a financial debt and therefore the conclusion of the Adjudicating Authority that this is not a financial debt cannot be sustained. Even if we don't rely on this material on record, there is sufficient other materia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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