NCLT rightly admitted CIRP plea as forensic audit report of corporate debtor confirmed acknowledgment of debt

Case Details: Avneesh Kumar Singh v. Indian Delco (P.) Ltd. - [2022] 138 taxmann.com 211 (NCLAT- New Delhi)

Judiciary and Counsel Details

• • Anant Bijay Singh, Judicial Member & Ms Shreesha Merla, Technical Member
  • Anish Guptafor the Applicant.
  • Pallav for the Respondent.

Facts of the Case

In the instant case, the financial creditor had extended a loan facility to the corporate debtor in the year 2013 at 12% interest per annum for a period of six years under a loan agreement. The Corporate debtor had made some payments to the respondent towards the principal amount along with an interest and thereafter stopped making payments.

In the year 2019, the corporate debtor issued confirmation of the outstanding balance to the respondent. Since the loan was given for a period of six years from the date of the agreement, and the said period had already expired, the respondent issued a demand notice to the corporate debtor.

Despite several reminders as well as a legal notice, the corporate debtor failed to clear the outstanding payments of the respondent. Therefore, the respondent filed an application under section 7 of the IBC, 2016 against the corporate debtor.

The respondent submitted that the corporate debtor had issued confirmation acknowledging the debt of the respondent. Further, in the Forensic Audit Report of the corporate debtor its auditor had admitted this fact that funds were received from the respondent and were properly utilized by the corporate debtor.

The Adjudicating Authority(AA) considered the above submissions made by the respondent and admitted the CIRP application filed by the respondent.

The Corporate Debtor filed an appeal before the Hon’ble National Company Law Appellate Tribunal against the order of the Hon’ble NCLT.

The appellant submitted that the AA has to ascertain the existence of a default from the records of the Information Utility or on the basis of other evidence furnished by the Financial Creditor. In the present case, there is neither any record of default recorded with Information Utility nor evidence of any other default furnished by the Financial Creditor. The appellant further raised questions on the validity of the loan agreement.

NCLAT Held

The NCLAT held that the Appellant has duly acknowledged the debt of the Respondent by countersigning the audited balance sheet of the financial year 2015-16 of the Corporate Debtor. Further the Forensic Audit Report, the Auditor has admitted this fact that the funds were received and it was also admitted that amount was properly utilized in the Company. Therefore, NCLAT upheld the decision of the NCLT and dismissed the plea of the appellant. NCLAT held that there was no illegality committed by Adjudicating Authority while passing impugned order.

List of Cases Reviewed

• • Indian Delco (P.) Ltd. v. SN Jee Build Well (P.) Ltd. [2022] 138 taxmann.com 210 (NCLT – New Delhi) (para 21) affirmed [See Annex]