FC’s CIRP Plea Was Admitted as Cheques Issued by CD for Repayment Were Returned with Endorsement ‘Stopped by Drawer’

Case Details: Apurva Jain v. Adaptio Facility Management (P.) Ltd. - [2024] 167 taxmann.com 562 (NCLT-Chennai)

Judiciary and Counsel Details

• Sanjiv Jain, Member Judicial & Venkataraman Subramaniam, Member Technical
• V. Kamalakumar & K.R.Harin, Ld Counsel, for the Petitioner. 
• James Victor, Ld Counsel & A.S. Satish Kumar, Ld PCS for the Respondent.

Facts of the Case

In the instant case, the applicant-financial creditors had cumulatively advanced a loan to corporate debtor as part of a bill discounting arrangement through an online bill discounting portal.

Later, the corporate debtor provided goods and services to an ‘enterprise’ and accordingly raised an invoice on said enterprise for invoice discounting. Based on representation from enterprise that said sale transactions and invoices were genuine, financial creditors offered to pay to corporate debtor on such discounted terms.

The corporate debtor received money due to it at a discounted price, whereas enterprise secured time for meeting its debts due to corporate debtor. However, when deadline for repayment of maturity amount arrived, enterprise failed to pay monies due to financial creditors.

Accordingly, as per agreement of Transfer of Rights and following recourse method on corporate debtor, corporate debtor was liable to refund consideration to financial creditors. Corporate debtor in order to effect restitution had provided cheques.

Consequently, the cheques when presented for collection, were returned by corporate debtor’s bankers with endorsement “stopped by drawer”. The financial creditors submitted that though corporate debtor was served with a notice under section 138 of Negotiable Instruments Act, 1881, same was neither complied with nor did corporate debtor reply to same.

Subsequently, the financial creditors filed an application under section 7 against corporate debtor on ground that corporate debtor had massive liabilities and did not appear to have sufficient liquidity to meet its debts.

NCLT Held

The NCLT held that since there was a debt and default on part of corporate debtor, application filed by financial creditor under section 7 was to be admitted.

List of Cases Referred to

• Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. (2018) 1 SCC 353 (para 15).