The Delhi bench of the National Company Law Appellate Tribunal ( NCLAT ) held that the Corporate Insolvency Resolution Professional ( CIRP ) process could be initiated when financial debt and default on part of a corporate debtor has successfully proved .
The present appeal was filed by the Arunkumar Jayantilal Muchhala ex-Director of the Corporate Debtor, Tarapur Textile Park Ltd arising out of the order passed by the Adjudicating Authority.
As per the order the Adjudicating Authority has admitted the Section 7 application filed by Awaita Properties Private Limited – Financial Creditor/Respondent No. 1 against Tarapur Textile Park Ltd. – Corporate Debtor for a default amount of Rs. 8,56,30,137/-.
Dhruba Mukherjee, Senior Counsel appearing for the Appellant argued that that Mr. Nikhil Gandhi, Director of Respondent No. 1 Company who exercised control over some other associated companies also had shown interest in the development of a land project, namely, ‘Boisar Project Land’ in which the land was owned by the Appellant.
Further contended by the Appellant that Respondent No. 1 has falsely treated the amount of Rs. 5 crore as a loan carrying an alleged interest of 15% p.a. The Counsel for the Appellant contended that there are no documents on record to either show that the amount of Rs. 5 crore given by Respondent No. 1 to the Corporate Debtor was a loan or that the said alleged loan was interest-bearing as has been claimed by Respondent No. 1.
Krishnendu Datta Counsel for Respondent No. 1 contended that the sum of Rs. 5 crore was advanced by Respondent No. 1 to Corporate Debtor by way of a loan on an understanding that the loan would be repayable on demand along with interest at the rate of 15% p.a. The said transaction was disbursed by RTGS transfer and the bank has certified the same. This clearly establishes the debt.
Hence the Corporate Debtor by advertising reference to an unexecuted MOU was trying to mislead the Adjudicating Authority by linking this transaction with some other purported transaction proposed to be entered into between the Corporate Debtor and SKIL
It was observed by the tribunal that for any debt to be treated as financial debt, the prerequisite is disbursal of money to the borrower for utilization by the borrower and that the disbursal must be against consideration for time value of money even if it is not interest bearing.
After analyzing the submission of both parties the bench comprising Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member) observed that the Adjudicating Authority has rightly come to the conclusion that the Respondent No.1 has successfully proved the financial debt and default on part of the Corporate Debtor in admitting the Section 7 application and initiating the CIRP process.
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