Kalpesh Ramniklal Shah vs Mundara Estate Developers Limited
CA (AT) Ins 71 of 2023
Facts:
1.Corporate Debtor entered into an Agreement dated 27.01.2011 with Metrochem Industries Ltd. (now Metroglobal Ltd.). For repayment of principal amount of Rs.24 crores, 11 post-dated cheques were given, while the interest amount of Rs.13.50 crores was to be paid through issuance of 05 post-dated cheques under the Agreement. Shares of Corporate Debtor and one M/s Parag Kunj Finvest Private Ltd. were also pledged to the Financial Creditor as security.
2.Further Agreement dated 28.12.2012 was entered between Financial Creditor and the Corporate Debtor for a payment of Rs.46 crores. As per the terms of the Settlement Agreement, two properties in Vadodara and Gujarat., amounting to Rs.21.35 crores were assigned through Sale Deed in favour of Mr. Gautam M. Jain and the remaining Rs.24.65 crores were to be settled through the Loan Agreement security at Mumbai for the two properties as security.
3.Section 7 Application was filed by the Financial Creditor in June 2021 seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor for default of an amount of Rs.89,76,41,443/- with outstanding principal amount being Rs.19,63,71,657/- and interest of Rs.70,12,69,786 which was admitted vide order dated 12.01.2023.
4.Appellant being the suspended director of the Corporate Debtor filed this appeal challenging the order of admission.
Issue: Whether the order passed by the Hon’ble Tribunal is correct in law?
Arguments:
For Appellant:
1.Counsel for the Appellant in support of the Appeal submits that key managerial personnel of Financial Creditor, holds majority shareholding in the Corporate Debtor and is a ‘related party’. The Financial Creditor exercises substantial control in the Corporate Debtor, hence, the Financial Creditor could not have filed Section 7 Application.
2.Counsel submitted that Adjudicating Authority ignored the settlement, which was entered between the parties and by payment of Rs.46 crores the matter stood settled in the year 2012 itself. The alleged loan transaction was in contravention of Section 295 of the Companies Act.
For Respondent:
1.Counsel submitted that the Corporate Debtor has admitted the liability in all Balance Sheets signed by the Corporate Debtor under the Companies Act from Financial Year 2010-11 till Financial Year 2019-20. The Balance Sheets acknowledges the debt owed to the Financial Creditor. The Balance Sheets have been signed by the Directors of the Corporate Debtor and few of them have been signed by Kalpesh Shah, who has filed the present Appeal.
2.The Balance Sheets further indicate that there are no revenues from operations/sales and the Corporate Debtor is not a going concern, but is only incurring liabilities. The total amount of Rs.24 cores was transferred by the Financial Creditor in favour of the Corporate Debtor. The debt towards the Financial Creditor having been acknowledged by the Corporate Debtor, Section 7 Application has rightly been admitted by the Adjudicating Authority.
Decision: NCLAT uphold the order of the NCLT and dismissed the appeal.
Rationale:
1.NCLAT noted that In the Balance Sheet of Financial Year 2012-13 under the heading “Short Term Borrowing” against Metroglobal Ltd., Ahmedabad an amount of Rs.23,55,72,087/- has been mentioned as on 31.03.2013. The Balance Sheets thereafter continuously acknowledges the debt and Balance Sheet for the year 2018-19, which is stated to be signed by the Appellant as Director, also contains acknowledgment against the Metroglobal Ltd., Ahmedabad under the heading “Long Term Borrowings” an amount of Rs.27,34,34,765/-, which is again acknowledgment.
2.It further noted that The Balance Sheets further indicate that there are no revenues generated. The Corporate Debtor, which is not generating any revenue for the last 10 years and the acknowledgement of debt against the Financial Creditor is continuously recorded in the Balance Sheets.
3.Counsel for the Appellant that loan transaction was in violation of Section 295 of the Companies Act, 1956, does not help the Appellant to deny the loan transaction and the disbursement of the amount. Even if, the allegation of violation of Section 295 of the Companies Act, 1956 may be there, that does not in any manner inhibit filing of Section 7 Application and take appropriate proceedings under the IBC.
Order Copy:
