Actioncor Consultant Ltd. Vs. Viprah Technologies Limited - (NATIONAL COMPANY LAW APPELLATE TRIBUNAL) (01 Jun 2023)

For the amount to be construed as a 'Financial Debt', there should be a direct disbursal of the amount owed

MANU/NL/0511/2023

Insolvency

Present Appeal under Section 61 of the 'Insolvency and Bankruptcy Code, 2016' (IBC) is against Impugned Order, where by the Adjudicating Authority, has dismissed Section 7 Application filed by the Appellant, seeking to initiate 'CIRP' against the Respondent. The brief point which falls for consideration in present Appeal is whether the amount lent by the Appellant to Mr. Subramanian and his wife Mrs. Sujatha representing the Corporate Debtor Company, can be construed as 'Financial Debt' as defined under Section 5 (8) of the IBC.

There should be a direct disbursal of the amount owed, Financial Creditor to the Corporate Debtor for the amount to be construed as a 'Financial Debt'. The transaction should be a direct transaction between the Financial Creditor and the Corporate Debtor.

The submission of the Learned Counsel for the Appellant is that amount was paid to M/s BFI Factoring Services Limited and other Secured Creditors, under the Instructions of the Corporate Debtor and therefore, the amount should be construed as 'Financial Debt', is untenable. There is no evidence on Record substantiating that the amounts were paid by the Appellant directly to the Corporate Debtor and the same was acknowledged by the Corporate Debtor in their balance sheet as a 'Promise to pay'. The Investment Receipt relied upon by the Appellant has to be construed together with the Investment Agreement which clearly stipulates that the Agreement is between Mr. Subramanian and his wife Mrs. Sujatha with Mr. KKM and the Corporate Debtor is not in the picture, as far as a direct Transaction between the Appellant and the Corporate Debtor is concerned.

Though it is not in dispute that the amounts were taken as loan by the Managing Director and Director, the fact remains that the Transactions were never directly with the Corporate Debtor Company. Recently, this Tribunal while dealing with the similar issue has held that amounts taken by their Directors in their personal capacity, though used for the business purposes of the Company, will not fall within the ambit of the definition of 'Financial Debt' as defined under Section 5(8) of the IBC. This ratio is squarely applicable to the facts of this case. Therefore, the e-mails relied upon by the Appellant, is of no significance. Needless to add, the Appellant is at Liberty to recover the dues from the sale of the Property.

Present Tribunal, is of the considered view that the amount is not a 'Financial Debt' as there is no evidence on Record to establish that the amount was directly lent to the Corporate Debtor. Appeal dismissed.

Tags : CIRP INITIATION FINANCIAL DEBT