CIRP plea filed u/s 7 was maintainable as both agreement b/w parties and financials of CD acknowledged the debt

Case Details: Amit Rajput v. Reckon Industries Ltd. - [2022] 145 taxmann.com 98 (NCLAT-New Delhi)

Judiciary and Counsel Details

• • Justice Ashok Bhushan, Chairperson & Shreesha Merla, Technical Member
  • Maninder Singh, Sr. Adv., Shiv Mangal Sharma, Shashank Khurana, Janamejaya Upadhyay, Santosh Kumar & Shrinjan Khosla, Advs. for the Appellant.
  • Mukul Rohatgi, Shahrukh Khan, Ravi Chirania & Pramod Dattaram Rassam, Advs. for the Respondent.

Facts of the Case

In the present case, the corporate debtor asked the financial creditor to extend 50 per cent of total purchase price for the purpose of acquisition of a US company and the financial creditor were assured a 50 per cent equity share in the US Co. for its financial assistance.

Later, corporate insolvency resolution process was initiated as financial creditor had filed an application under section 7 against corporate debtor on ground that corporate debtor defaulted in repayment after NCLT admitted the said application.

Later, on appeal, appellant-director of corporate debtor contended that amount given by financial creditor to corporate debtor was not a financial debt and was only given towards 50 per cent equity shares for investment in a US company. Further, it was noted that agreement entered between parties unequivocally contained acknowledgement of corporate debtor towards liability to refund said amount to financial creditor.

It was also noted that an e-mail dated 28-5-2018 sent by corporate debtor, in which he mentioned that amount of Rs. 3.5 crores was a ‘short term loan’ given to corporate debtor, also in balance sheet for year 2017-18 of corporate debtor, amount of Rs. 3.5 crores was mentioned under classification of ‘borrowing’ as ‘unsecured borrowings’.

NCLAT Held

Hon’ble NCLAT held that where an agreement between parties, an e-mail as well as balance sheet of corporate debtor clearly acknowledged that outstanding amount disbursed by financial creditor was a financial debt, application filed under section 7 by financial creditor was fully maintainable.

Also, where financial creditor was not a part of agreement between corporate debtor and third parties, question of non-payment by corporate debtor to financial creditor on basis of such agreement could not arise and liability to pay debt due to financial creditor could not be diluted.

List of Cases Reviewed

• • Order of NCLT (New Delhi) in Reckon Industries Ltd. v. Warm Forging (P.) Ltd. [C.P. (IB) No. 313/7/JPR/2019, dated 7-2-2022] (para 24) affirmed.