w w w . L a w y e r S e r v i c e s . i n



M.G. Mohan Kumar & Others v/s American Road Technology & Solutions Private Limited, Bengalore


Company & Directors' Information:- E 2 E SOLUTIONS PRIVATE LIMITED [Active] CIN = U72200DL2000PTC107313

Company & Directors' Information:- E-SOLUTIONS PRIVATE LIMITED [Active] CIN = U30007TN1999PTC043325

Company & Directors' Information:- AMERICAN SOLUTIONS PRIVATE LIMITED [Active] CIN = U72200TG2006PTC050408

Company & Directors' Information:- D S R SOLUTIONS LIMITED [Active] CIN = U72200TG1999PLC032008

Company & Directors' Information:- J. K. SOLUTIONS PRIVATE LIMITED [Active] CIN = U74999MH2014PTC257168

Company & Directors' Information:- E-3 SOLUTIONS INDIA PRIVATE LIMITED [Active] CIN = U74910DL1998PTC096512

Company & Directors' Information:- AMERICAN ROAD TECHNOLOGY & SOLUTIONS PRIVATE LIMITED [Active] CIN = U45203KA2012PTC063868

Company & Directors' Information:- V A SOLUTIONS PRIVATE LIMITED [Active] CIN = U72200TG2006PTC049266

Company & Directors' Information:- D P SOLUTIONS (INDIA) PRIVATE LIMITED [Strike Off] CIN = U22221DL2000PTC107837

Company & Directors' Information:- N Q SOLUTIONS INDIA PRIVATE LIMITED [Active] CIN = U51909OR2009PTC011136

Company & Directors' Information:- MG AND CO. PRIVATE LIMITED [Active] CIN = U40101DL2002PTC114029

Company & Directors' Information:- I. S. SOLUTIONS PRIVATE LIMITED [Active] CIN = U30007TG1997PTC028047

Company & Directors' Information:- L T SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U72200TG2000PTC033248

Company & Directors' Information:- L D SOLUTIONS PRIVATE LIMITED [Active] CIN = U51109DL2015PTC286921

Company & Directors' Information:- A S SOLUTIONS PRIVATE LIMITED [Active] CIN = U74140DL2010PTC202208

Company & Directors' Information:- I S P SOLUTIONS INDIA PRIVATE LIMITED [Active] CIN = U72200TZ2001PTC009755

Company & Directors' Information:- S P E-SOLUTIONS PRIVATE LIMITED [Active] CIN = U72300DL2006PTC155569

Company & Directors' Information:- T X G SOLUTIONS PRIVATE LIMITED [Converted to LLP and Dissolved] CIN = U72200DL2006PTC150671

Company & Directors' Information:- H D SOLUTIONS PRIVATE LIMITED [Active] CIN = U72900DL2009PTC194392

Company & Directors' Information:- H & K SOLUTIONS PRIVATE LIMITED [Active] CIN = U63040GJ2009PTC059027

Company & Directors' Information:- F A S T SOLUTIONS (INDIA) PRIVATE LIMITED [Active] CIN = U22100MH1989PTC052935

Company & Directors' Information:- J & I SOLUTIONS PRIVATE LIMITED [Active] CIN = U74140DL2012PTC236993

Company & Directors' Information:- N AND S SOLUTIONS PRIVATE LIMITED [Active] CIN = U74210KA1999PTC025555

Company & Directors' Information:- U-TO SOLUTIONS (INDIA) PRIVATE LIMITED [Active] CIN = U72100MH2000PTC130052

Company & Directors' Information:- Z D SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U72900TN2007PTC062584

Company & Directors' Information:- P I T SOLUTIONS PRIVATE LIMITED [Active] CIN = U72200KL2000PTC014018

Company & Directors' Information:- O AND M SOLUTIONS PRIVATE LIMITED [Active] CIN = U74210OR2005PTC008166

Company & Directors' Information:- R P A S SOLUTIONS PRIVATE LIMITED [Active] CIN = U72200TG2008PTC057538

Company & Directors' Information:- G L F SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U67190KL2013PTC035455

Company & Directors' Information:- S P SOLUTIONS PRIVATE LIMITED [Amalgamated] CIN = U72200DL2011PTC213318

Company & Directors' Information:- S. S. G. SOLUTIONS PRIVATE LIMITED [Active] CIN = U72200TG1996PTC023719

Company & Directors' Information:- I T SOLUTIONS INDIA PRIVATE LIMITED [Active] CIN = U72200DL1996PTC076426

Company & Directors' Information:- KUMAR TECHNOLOGY PRIVATE LIMITED [Strike Off] CIN = U72300DL1998PTC096213

Company & Directors' Information:- K B SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U74140PB2011PTC035055

Company & Directors' Information:- H A SOLUTIONS (INDIA) PRIVATE LIMITED [Active] CIN = U72900DL2000PTC104116

Company & Directors' Information:- V. J. L. SOLUTIONS PRIVATE LIMITED [Active] CIN = U74999UP2018PTC109127

Company & Directors' Information:- 1 TO 5 SOLUTIONS PRIVATE LIMITED [Not available for efiling] CIN = U74999AS2020PTC020427

Company & Directors' Information:- Q AND Q SOLUTIONS INDIA PRIVATE LIMITED [Active] CIN = U27320TZ2021PTC036376

Company & Directors' Information:- S A B M SOLUTIONS PRIVATE LIMITED [Active] CIN = U72900OR2021PTC035771

Company & Directors' Information:- C AND C SOLUTIONS (INDIA) LIMITED [Strike Off] CIN = U93000PY1995PLC001144

Company & Directors' Information:- D V M SOLUTIONS LIMITED [Converted to LLP] CIN = U74140DL1999PLC102362

Company & Directors' Information:- T S SOLUTIONS PRIVATE LIMITED [Active] CIN = U72200UP2000PTC025406

Company & Directors' Information:- U & F SOLUTIONS PRIVATE LIMITED [Active] CIN = U74999TN2013PTC089891

Company & Directors' Information:- R R SOLUTIONS PRIVATE LIMITED [Active] CIN = U45309BR2008PTC013387

Company & Directors' Information:- B A SOLUTIONS INDIA PRIVATE LIMITED [Active] CIN = U74999DL2006PTC155492

Company & Directors' Information:- C A AND S SOLUTIONS PRIVATE LIMITED [Active] CIN = U72200AP2000PTC034546

Company & Directors' Information:- U AND U SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U67200OR2004PTC007651

Company & Directors' Information:- R A SOLUTIONS PRIVATE LIMITED [Active] CIN = U51101MH2013PTC249132

Company & Directors' Information:- R T W SOLUTIONS PRIVATE LIMITED [Active] CIN = U72200MH2004PTC145773

Company & Directors' Information:- A E T SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U72200TG2004PTC036640

Company & Directors' Information:- K N P SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U72300TG2011PTC076036

Company & Directors' Information:- I SOLUTIONS(INDIA) PRIVATE LIMITED [Strike Off] CIN = U72900TN2004PTC052692

Company & Directors' Information:- R V I T SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U72200DL2005PTC137434

Company & Directors' Information:- R M T SOLUTIONS INDIA PRIVATE LIMITED [Strike Off] CIN = U74210KA2011PTC056861

Company & Directors' Information:- F & K SOLUTIONS PRIVATE LIMITED [Active] CIN = U72900OR2021PTC035846

Company & Directors' Information:- E M C SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U72200KA1996PTC020112

Company & Directors' Information:- R I SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U52392WB1999PTC088640

Company & Directors' Information:- N G L SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U72200KL2001PTC014656

Company & Directors' Information:- L S SOLUTIONS PRIVATE LIMITED [Active] CIN = U67190DL2020PTC371664

Company & Directors' Information:- S P K SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U72200TZ2003PTC010438

Company & Directors' Information:- S V TECHNOLOGY SOLUTIONS PRIVATE LIMITED [Active] CIN = U72900TN2006PTC061654

Company & Directors' Information:- 9 I SOLUTIONS PVT LTD [Strike Off] CIN = U72200TG2005PTC048565

Company & Directors' Information:- S G SOLUTIONS PRIVATE LIMITED [Active] CIN = U74999BR2008PTC013392

Company & Directors' Information:- K P N SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U74900KA2011PTC057705

Company & Directors' Information:- V N SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U74900DL2009PTC195421

Company & Directors' Information:- R. K. SOLUTIONS PRIVATE LIMITED [Active] CIN = U74140DL2007PTC161367

Company & Directors' Information:- J K B SOLUTIONS INDIA PRIVATE LIMITED [Strike Off] CIN = U74900DL2015PTC284162

Company & Directors' Information:- S R SOLUTIONS PRIVATE LIMITED [Active] CIN = U72200HR2000PTC055629

Company & Directors' Information:- B E SOLUTIONS PRIVATE LIMITED [Active] CIN = U72200KA2005PTC037127

Company & Directors' Information:- G R K SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U72900TG2002PTC039029

Company & Directors' Information:- J TECHNOLOGY SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U74900PB2013PTC037792

Company & Directors' Information:- G N SOLUTIONS PRIVATE LIMITED [Active] CIN = U65993PN2008PTC132031

Company & Directors' Information:- J .S .SOLUTIONS PRIVATE LIMITED [Active] CIN = U72900PB2007PTC030855

Company & Directors' Information:- B AND W SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U67190MH2005PTC151380

Company & Directors' Information:- SOLUTIONS @ PANORAMA TRAVEL PRIVATE LIMITED [Strike Off] CIN = U63040MH2010PTC199347

Company & Directors' Information:- V KUMAR SOLUTIONS INDIA PRIVATE LIMITED [Active] CIN = U74900PN2013PTC149690

Company & Directors' Information:- A.N.D SOLUTIONS PRIVATE LIMITED [Active] CIN = U74999MH2013PTC244625

Company & Directors' Information:- V & M SOLUTIONS PRIVATE LIMITED [Active] CIN = U74999PN2014PTC150848

Company & Directors' Information:- G K SOLUTIONS PRIVATE LIMITED [Active] CIN = U72900MH2004PTC149891

Company & Directors' Information:- G K A SOLUTIONS PRIVATE LIMITED [Active] CIN = U72900MH2004PTC150210

Company & Directors' Information:- H. R. SOLUTIONS INDIA PRIVATE LIMITED [Strike Off] CIN = U74120TG2012PTC081581

Company & Directors' Information:- H B M TECHNOLOGY SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U72300TG2012PTC079650

Company & Directors' Information:- V Y B TECHNOLOGY SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U72900TN2012PTC088737

Company & Directors' Information:- S A E-SOLUTIONS PRIVATE LIMITED [Active] CIN = U72200WB2012PTC181964

Company & Directors' Information:- C. R. TECHNOLOGY SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U72300WB2013PTC193569

Company & Directors' Information:- K. S. E-SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U74999WB2012PTC185025

Company & Directors' Information:- O S SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U93000JK2012PTC003733

Company & Directors' Information:- B AND P SOLUTIONS PRIVATE LIMITED [Active] CIN = U24100CH2015PTC035482

Company & Directors' Information:- A T SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U72900CH2009PTC031621

Company & Directors' Information:- R AND D SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U52392CH2010PTC032232

Company & Directors' Information:- G S L SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U72300DL2007PTC164747

Company & Directors' Information:- F K SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U72900DL2008PTC186101

Company & Directors' Information:- B. R. SOLUTIONS PRIVATE LIMITED [Active] CIN = U74140DL2002PTC116699

Company & Directors' Information:- G. M. S E-SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U74140DL2012PTC235662

Company & Directors' Information:- A N S SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U74140DL2012PTC245060

Company & Directors' Information:- S & T SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U74140DL2013PTC247089

Company & Directors' Information:- M A SOLUTIONS PRIVATE LIMITED [Active] CIN = U74140DL2014PTC265618

Company & Directors' Information:- S A N SOLUTIONS PRIVATE LIMITED [Active] CIN = U74999DL2002PTC117534

Company & Directors' Information:- O J S G SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U74999DL2014PTC267923

Company & Directors' Information:- I G SOLUTIONS PRIVATE LIMITED [Active] CIN = U70109DL2012PTC244223

Company & Directors' Information:- S N R SOLUTIONS PRIVATE LIMITED [Active] CIN = U72100DL2011PTC216142

Company & Directors' Information:- P G I T SOLUTIONS PRIVATE LIMITED [Active] CIN = U72200DL2005PTC139469

Company & Directors' Information:- S N V TECHNOLOGY SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U72200DL2007PTC157730

Company & Directors' Information:- H R SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U74899DL1995PTC073143

Company & Directors' Information:- A 2 Z SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U74899DL2001PTC109658

Company & Directors' Information:- A P D SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U74900DL2013PTC249969

Company & Directors' Information:- V R A A P SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U74950DL2014PTC271337

Company & Directors' Information:- R - N - A E - SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U74900KA2008PTC045680

Company & Directors' Information:- V S T SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U74900KA2010PTC053117

Company & Directors' Information:- V SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U72200KA2010PTC052832

Company & Directors' Information:- N R L SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U72900KA2013PTC069148

Company & Directors' Information:- S V SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U74140GJ2007PTC051390

Company & Directors' Information:- H M I SOLUTIONS PRIVATE LIMITED [Active] CIN = U45203HR2021PTC094104

Company & Directors' Information:- A & A SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U72200PN2008PTC131887

Company & Directors' Information:- T N B SOLUTIONS PRIVATE LIMITED [Active] CIN = U72900MH2007GAT171606

Company & Directors' Information:- J R TECHNOLOGY SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U72200TG2008PTC057373

Company & Directors' Information:- MG SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U72300DL2006PTC155530

Company & Directors' Information:- H F SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U72300DL2007PTC168577

Company & Directors' Information:- K V M SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U72900DL2008PTC180136

Company & Directors' Information:- T F M SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U74140KL2007PTC021232

Company & Directors' Information:- A R C O N SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U72200KL2007PTC020421

Company & Directors' Information:- T & T SOLUTIONS PRIVATE LIMITED [Strike Off] CIN = U72900GJ2007PTC051103

    C.P. (IB) No. 99/BB of 2020

    Decided On, 13 March 2020

    At, National Company Law Tribunal Bengaluru

    By, THE HONOURABLE MR. RAJESWARA RAO VITTANALA
    By, JUDICIAL MEMBER & THE HONOURABLE MR. ASHUTOSH CHANDRA
    By, TECHNICAL MEMBER

    For the Applicants: Manu Kulkarni, Archishman Chaudhury, Advocates. For the Respondent: M.M. Swamy, Advocate.



Judgment Text


Ashutosh Chandra, Technical Member.

1. This Petition has been filed by Shri M.G. Mohan Kumar and two others (hereinafter referred to as ‘Applicants/Financial Creditors’) U/s 7 of the I&B Code, 2016 R/w Rule 4 of the I&B (Application to Adjudicating Authority) Rules, 2016 by inter alia seeking to initiate Corporate Insolvency & Solutions Private Limited (hereinafter referred to as the ‘Respondent/Corporate Debtor’) on the ground that it has committed default for a total outstanding amount of Rs.2,94,05,178/- (Rupees Two Crore Ninety Four lakh Five Thousand One Hundred and Seventy Eight) including the interest @ 18% per annum.

2. Brief facts of the case, as mentioned in the Company Petition, and the written submissions which are relevant to the issue, are as under. Both are merged to avoid duplication and repetition:

1) Mr. M.G. Mohan Kumar and Others (hereinafter referred to as Petitioners/Financial Creditors’) are the Financial Creditors, whereas M /s. American Road Technology & Solutions Private Limited (hereinafter referred to as ‘Respondent/Corporate Debtor’) is a Private Limited Company incorporated on 07.05.2012 with Authorized Capital of Rs.2,50,00,000/- and Paid-up Share Capital is Rs.2,09,00,000/- and having main objects of inter alia carrying on the business of Road repairs and Maintenance using state-of-the-art equipment, is the Corporate Debtor.

(2) It is stated that along with Mr.B.K.Purushothama, Financial Creditor 1, Mr. M.G. Mohan Kumar was named as director of the Company and subscriber to the MOA. Various Departments were approached to sell the new Technology for road repairs. He supported the Corporate Debtor to set up its business, along with Mr. G.V. Sudhindra who was appointed as Vice President (Operations). They approached various departments like the PWD, BBMP etc. for introducing the new technology for road maintenance. The brief sequence of events with regard to loans etc. given to the Corporate Debtor, as mentioned in the petition, is as under.

(3) The BBMP agreed to adopt this new technology and awarded a contract for a value of Rs.17,37,82,500/- which was issued on different dates. Further this contract was divided into 6 packages, namely A to F. They persuaded Karnataka Bank Ltd (KBL) to finance the first equipment which was costing approx Rs. 2,70,00,000/-. On 21.09.2012 Karnataka Bank Ltd. Overseas Branch, St. Marks Road, Bangalore, sanctioned a term loan of Rs.2,00,00,000/-. On 26.09.2013 Canara Bank sanctioned Operating Cash Credit of Rs.50 Lakh and Bank Guarantee limit of Rs.2,50,00,000/-.

(4) It is stated that pressure to make pressing payments. Financial Creditor 1, namely, Mr. M.G. Mohan Kumar raised an amount Rs.20,54,000/- from Bajaj Finserve Ltd. in his personal name and transferred the same to the Corporate Debtor. This amount was repayable in 36 instalments of Rs.72,213/- with first instalment falling due on 05.05.2014 and the last instalment on 05.04.2017. Out of his first 10 instalments have been reimbursed to the Financial Creditor 1 and other payments are still due from 05.03.2015. The aggregate of unpaid instalments amounts to Rs.18,77,538/-. This amount is payable with an interest of 18% p.a. which works out to Rs.4,32,316/- till August 2017. The transfer of the aforesaid amount to the Corporate Debtor’s account is reflected in the Financial Creditor No.1’s statement of Account.

(5) It is stated that during the last week of December 2014, the interest due to Karnataka Bank Ltd exceeding more than 3 months and therefore there was pressure to regularize this to avoid the account becoming NPA. Further, to avail the enhanced OCC limit of Canara Bank it was necessary to keep the Account with Karnataka Bank regular. The Financial Creditor No.1 therefore further loaned an amount of Rs/9,85,000/- on 26.12.2014 which was repayable before 10.01.2015. This amount is also to be repaid with an interest of 18% p.a. which works out to Rs.5,31,881/- till August 2017. Therefore, the aggregate amount payable to Financial Creditor No.1 is Rs.30,39,000/- along with an interest of 18% p.a. from the due dates amounting to Rs.9,64,917/-, till August 2017. The total amount due to the Financial Creditor No.1 from the Corporate Debtor is Rs.40,03,197.

(6) The Petitioner submits that the Corporate Debtor approached Canara Bank, Cantonment Branch, Bangalore for a term loan of Rs.3,00,00,000 for funding two more equipment of Python 5000 and this sanction was done on 25.07.2014. To meet the various compliances of this Term Loan, Financial Creditor No.2, namely Brindavan Beverage Private Limited was requested to support with temporary funding. It is contended that a total amount of Rs.2,05,00,000/- was given as loan by the Financial Creditor 2, as follows: 02.09.2014 – Rs.40,00,000/-; 26.09.2014- Rs.20,00,000/- and two payments on 02.01.2015 aggregating to Rs.45,00,000/-. That is a total of Rs.1,05,00,000/-. These were returned as follows: on 08.09.2014 – Rs.20,00,000/-; on 23.09.2014 – Rs.20,00,000/-; on 27.1.2015 – Rs.20,00,000/- i.e. returned Rs.60,00,000/- leaving an unpaid balance of Rs.45,00,000/-. The Financial Creditor No.2 again advanced a sum of Rs.1,00,00,000/- to Vanijya Advisory Services Private Limited at the rate of 21% p.a. compounded and payable on monthly basis, which in turn was transferred to the Corporate Debtor. Thus the total unpaid loans came to Rs.45,00,000/- plus Rs.1,00,00,000/- i.e. Rs.1,45,00,000/-. Further, the interest payable on this amount was @ 21% p.a. An interest of Rs.2,15,000/- has been paid on 23.09.2014 and 25.09.2014. An amount of Rs.21,500/- towards income tax at source has been deducted. The balance amount has fallen due from Jan, 2015. Therefore, the total outstanding amount, including principal and interest amounts to Rs.2,33,81,250/- (Rs.1,45,00,000/- plus interest of Rs.88,81,250/-). Reference has been made to the Cash Vouchers reflecting the payments made along with cheques issued by the Financial Creditor No.2 in favour of the Corporate Debtor.

(7) It is stated that Mrs. Bhanu Prabha, the Promoter Director of the Corporate Debtor started handling the Operations from March 2015 and got the cheque signing authority on 22nd April, 2015. The Financial Creditor 1 started performing an advisory role and liasoning with BBMP, and he resigned on 16th October, 2015, and executed the share transfer form in relation to his 999 shares of Rs.100/- each that were held by him. This was registered on 19th October, 2015. Since his resignation numerous follow up in the form of emails were sent to the Corporate Debtor, but the same remained unanswered.

(8) As regards Financial Creditor No.3, Mr. Harishchandra Naik and Mrs. Sapna Harishcahandra Naik, it is stated that when the contracts were awarded by the BBMP and term loans were taken from Karnataka Bank Ltd. and Canara Bank in 2013, these two Creditors agreed to subscribe to the Equality Capital in the Corporate debtor, and remitted amounts on different dates, totaling Rs.22,00,000/-. However, it is seen that in the written submissions made by the Financial Creditor the amounts stated to be contributed by these two creditors is stated to be “Loans” and not contribution towards “Equity”. We shall discuss this later. However as to the amounts the same are started to be under:

(9) It is stated that the Financial Creditor No.3 i.e. Mr.Harishchandra Naik, gave an amount Rs.7,00,000/- of which Rs.2,50,000/- has been repaid on 26.04.2017 and the balance amount of Rs.4,50,000/- along with the interest payable @ 12% per annum compounded on monthly basis works out to Rs.2,59,238/- till August 2017. Hence, the total outstanding is Rs.7,09,238. As regards Ms. Sapna Harishchandra Naik, out of the amount of Rs.15,00,000/- financed, an amount of Rs.7,00,000/- has been repaid on 16.06.2014 and 10.10.2014. The balance amount of Rs.8,50,000 and interest @ 12% p.a. compounded on monthly basis works out to Rs.4,61,493/- till August 2017, totaling to Rs.13,11,493/-. The total sum outstanding from the Corporate Debtor towards both the Financial Creditors No.3 is Rs.20,20,731/- (Rs.7,09,238/- plus Rs.13,11,493/-). In conclusion, the cumulative amount of claim outstanding from the Corporate Debtor in favour of all the Financial Creditors is Rs.2,94,05,178/- which comprises of both the principal amount and interest calculated up to August 2017.

(10) The Petitioners stated that there is an admitted debt which fell due on the Corporate Debtor and that this debt falls well within the definition of a ‘Financial Debt’ under Section 5(8) of the I&B Code, 2016. It is further the case of the Financial Creditors that there has been a default in payment of such aforesaid debt by the Corporate Debtor and in view of the same the instant petition ought to be admitted.

(11) It is further stated that the Corporate Debtor has raised a frivolous contention that the Financial Creditor No.1 has placed irrelevant facts and unconnected documents before this Tribunal. Pursuant to the Order dated 01.03.2019 passed by the Ld. LVI Addl. Chief Metropolitan Magistrate, the Financial Creditor No.1 has been acquitted from C.C. 10144/2017. Further, findings of fact recorded by the Criminal Courts in India have no bearing on the findings in civil cases. Regarding the Company Petition bearing No.215/2015 filed by one A.V.Balasubramanian, pending before the High Court of Karnataka, seeking winding up of the Corporate Debtor it is stated that firstly, the Petitioner in the aforesaid Company Petition is not one of the Financial Creditors to the instant Petition, and further, it is settled law that independent proceedings may lie before a High Court and this Tribunal and there is no bar on this Tribunal to entertain Insolvency Resolution Process.

3. The Respondent has filed the Statement of Objections. Though detailed submissions have been made, only such facts are mentioned as are relevant to these proceedings under section 7 of the Code:

(1) It is submitted that currently a petition for winding up (under Sections 434(1)(a) and 439 of the Companies Act 1956) filed by A.V.Balasubramanya on 18 November 2015 in CoP 215/2015 against the Company is pending adjudication before the High Court of Karnataka. Hence, these proceedings cannot be maintained.

(2) The Company was incorporated on 7 May 2012 with the Petitioner No.1 (Mr. M G Mohan Kumar) and one Mr.Purushothama B Kalachari as the First Directors and Subscribers to the MOA and AoA of the Company, with a view to running the operations of the Company on behalf of Ms. Hebbar, who had conceptualized the business—but lived in the US. Ms Hebbar was thereafter appointed as Director of the Company on 12 May 2012 and allotted 2,03,000 shares in the Company (vide two tranches—4,000 shares on 28 August 2012 and 1,99,000 shares on 31 October 2012).

(3) However, Petitioner No.1 did not supply accurate information and embezzled funds from the Company, had failed to repay loans, maintain company books and had defaulted on several statutory requirements. Petitioner No.1 had not held board meetings or maintained the minutes. Not one of the financial decisions were taken with board or shareholder approval and none of the transactions were recorded and approved via resolutions. On return from the US, Ms. Hebbar revoked the cheque signing authority of the Petitioner No.1. These material facts have been suppressed as these facts would reveal that no financial debt has been created against the Company. Up to 17 April 2015, the Petitioner No.1 had a free rein in running the Company, and several close acquaintances were hired as key employees of the Company. She ordered a forensic investigation of the Company by an independent entity to determine the nature of cash flows within and without the Company from the date of incorporation till 31 May 2015. Petitioner No.1 refused to assist in this investigation and resigned from the Directorship of the Company, though he is yet to surrender the original share certificates to the office of the Company.

(4) It is contended that the forensic investigation, conducted by V. Raghavan and Co., Chartered Accountants revealed that: Records and documentation of the Company had not been maintained properly, payments were made in cash, Bills/Vouchers/Invoices and Receipts were missing, raw materials stock/inventory register was not maintained during the period between 12 May 2012 and 31 December 2014; Standard accounting policies had not been adhered to, sales/revenue invoices are not recognized and accounted for on a monthly basis, but were recognized and accounted on a yearly basis at the yearend; there was huge working capital mismanagement incurring of additional interest on term loans; there had been severe misuse of powers and statutory non-compliances; Unsecured loans had appeared to have been availed from various individuals, HUF and Corporate entities in the form of cash and cheques in direct contravention of the Companies Act, 2013; and there had been misappropriation of funds from the Company by the Petitioner No.1 whereby the Company had lost a minimum of INR 3,76,18,983/- (i.e., over Rupees 3.7 crores) on account of various fraudulent actions undertaken by the Petitioner No.1 and his accompliances. The full extent of fraud and misappropriation is yet to be determined. It is evident that the Petitioner No.1 had, therefore, grossly abused his statutory and fiduciary responsibilities.

(5) Ms.Hebbar filed two criminal complaints against the Petitioner No.1 and his accompliances (specifically also against Mr. K.Rajendra who the Petitioners claim has acknowledged the various financial debts claimed by them in the present petition) with respect to the various crimes committed by them against the Company. The first criminal complaint was filed with the Malleswaram Police Station vide written complaint dated 14 October 2016 against the Petitioner No.1 for offences under Sections 420, 419, 465 and 120(B) of the Indian Penal Code (‘IPC’) and one Mr. A.V.Balasubramanyam for offences under Sections 465 and 120(B) of the IPC. The said FIR was numbered as Crime No. 207/2016. The Malleswaram Police found sufficient evidence to file a charge sheet implicating the Petitioner No.1. The second criminal complaint was filed the High Grounds Police Station vide written complaint dated 2 June 2017 against the Petitioner No.1, G.V.Sudhindra (Vice President of the Company) and K.Rajendra, Manager Finance and Administration for offences under Sections 406, 402, 465, 468, 477A and 120(B) of the IPC for misappropriation of Company funds to the tune of INR 3,76,18,983. The High Grounds Police registered an FIR on the same day which was numbered as Crime No.87/2017. Petitioner No.1 and the other Accused moved the Hon’ble City Civil and Sessions Court, Bengaluru under Section 438 of the Code of Criminal Procedure, 1972 seeking anticipatory bail in the event of their arrest in connection with Crime No.87/2017. After taking on record objections by the Ld. Public Prosecutor the Hon’ble Sessions Court was pleased to pass an order dated 19 October 2017 rejecting the petition for anticipatory bail filed by the Petitioner No.1 and his co-accused by concluding that

“On careful perusal of the entire complaint, the complainant has made some serious allegations of cheating and misappropriation of funds to the tune of several crores, with regard to sudden increase of salary of petitioner no.2, foreign travelling expenses of petitioner no.1, purchase of consumables and amount due from BBMP etc. When the entire allegations are observed there are serious allegations of misappropriation and cheating to the tune crores of rupees. I am of the opinio0n that, since compliant is based upon the audit report, furnished by the auditors and there are serious allegations of cheating and misappropriation, the police need the accused for interrogation in this case. The advocate for Petitioners have vehemently canvassed his arguments that the Petitioner no.1 is reputed chartered accountant, who has promoted several famous company like Air Deccan etc. However, merely because a person is reputed and promoted several companies, it cannot be ground to allow this petition. On a careful perusal of the complaint, objections of learned PP and report of IO, I am of the opinion that, there are serious allegations of misappropriation and chearting to the tune of several crores of rupees. If the accused are enlarged on bail, they are likely to abscond and hamper the investigation. I am of the opinion that, Petitioners are not entitled to bail”.

(6) In addition, since the Petitioner No.1 was a chartered accountant, the Board of Directors of the Company passed a Board Resolution on 09th June 2017 resolving to file a complaint with the ICAI, in view of the financial irregularities caused by Mr. Mohan Kumar. The same was filed on against the Petitioner No.1 and K. Rajendra with the Disciplinary Directorate of the ICAI vide letter dated 26 June 2017 alleging the following against the Petitioner No.1— Conspiracy to cheat with dishonesty, criminal breach of trust, criminal conspiracy, forgery for purpose of cheating, forging of documents and falsifications of accounts, and the same was taken on record by the ICAI (one bearing reference mno.226/2017 and the other bearing reference no.227/2017) which intimated the Company that it was processing the complaint vide letters dated 03rd August 2017. The evidence filed before this Tribunal also points to the fraudulent creation of non-existent Financial Debt. Petitioner No.1not approached this Hon’ble Tribunal with clean hands. The alleged financial debts are of the years 2013-14-15 –during which time the Petitioner No.1 was in-charge of the day to day affairs of the Company, and he has deliberately suppressed all relevant financial statements of the company with a view to playing a fraud on this Tribunal since they know very well that the claimed Financial Debts find no mention in the mandatory statutory filings or balance sheet of the company. Even if some entries are to be found in the audited accounts of the company, these entries are highly suspicious and are under criminal investigation. In the interests of transparency and to show the falsity of the claims made by the petitioners, the Company is producing the relevant herewith as follows: Auditors’ report of the company for the years 2013-14 and 2014-15 along with accompanying financial statements.

(7) The balance sheets (which were prepared and signed off on by the Petitioner No.1) do not adequately disclose the alleged financial debts claimed in the present petition. While the above documents do disclose unsecured loans and credits availed from both related parties and directors, the said loans and credits are shown as a whole. There is no breakup as to the extent of borrowings and explanation of who the borrowings are from. Further, nowhere in any of the auditors’ reports has there been any mention of the details of the loans disclosed in the financial statements. No such break-up can be inferred in favour of the petitioners, when Petitioner No.1 is under investigation for criminal actions.

(8) It is stated that the Petitioners have also suppressed earlier Legal Notices issued by them to the Company and Ms. Hebbar, such as of 10 April 2017, issued under Section 271(2)(A)of the Companies Act 1956 demanding repayment of debts allegedly owed by the Company to them. The Company has replied to these demand notices separately, and has clearly highlighted the absurdity of the claims made by the Petitioners.

(9) The Respondent submits that as per the provisions of Section 7 of the IBC there must be an existence of a financial debt and there must be a default of the financial debt; and The Financial creditor making an application must; Furnish the record of the default recorded with the information utility or such other record or evidence of default as may be specified; and Furnish any other information as may be specified by the IBBI. Further, the definition of Financial Debt’ at section 5(8) of the Code clearly postulates that any money advanced must be for consideration i.e., there must be a need for the borrowing of such money and the money must be advanced against consideration for the time value of money. Admittedly, not one of the alleged debts is under a written contract with clear defined terms. If any of these conditions are not met, the present application must be rejected.

(10) It is submitted that Petitioner No.1 was in charge of the company at the relevant time and has himself failed to disclose any documentation evidencing the purpose for which the various debts were advanced and how these funds were spent and why they could not be repaid. None of these alleged debts are even reflected in the books of accounts of the Company and all the registers at the Company were blank and there were no recorded minutes or resolutions. None of the alleged Loans have been sanctioned or approved by the Board of Directors or by the Shareholders. Under Section 179 of the Companies Act 2013 and Articles 20&21 of the Articles of Association of the Company (produced as Annexure A to the Petition), the power to borrow money is only vested with the Board of Directors acting collectively by way of passing a resolution. In the absence of any Board Resolutions (before or after the alleged disbursement of the amounts) or correspondence prior to these alleged loans, the conclusion that these alleged borrowings were all mala fide and fraudulent is inescapable. Tellingly, all documents produced are emails that seek to record these transactions, after the alleged transactions have allegedly occurred, seemingly with the sole purpose of creating a paper trail.

(11) The Respondent has mentioned provisions contained under Section 166 of the Companies Act, 2013, which impose certain minimum duties and obligations on the directors of the company, and states Petitioner No.1 has demonstrably failed to discharge these duties and has achieved undue gain to himself at the cost of the Company. Further, the Petitioner No. 1 also has failed to comply with his obligations cast upon him under various sections of the Companies Act, 2013) such as: Section 134; Section 179(1); Section 179(3); Section 180; Section 188(1); Section 188(2); and Section 184 read with Section 189. Hence, the acts of the Petitioner No.1 cannot create binding obligations on the Company and even if any such alleged debts have been created, as per Section 166, the liability to repay them rests entirely on the petitioner No.1 (and his associates in his criminal activities). As regards the debt of Rs.40,03,197/-, it is submitted that the purported calculation sheets produced along with the petition are not authentic and are fabricated documents. They also do not add up to the claim sought to be raised by the Petitioner No.1. As per part IV of the petition and the Working Sheet I produced by the Petitioners the unpaid amount of Rs.18,77,538/- with interest @ 18% (compounded monthly) adds up to Rs.23,09,854/-. Similarly, as per Working Sheet No. II and the averments in Part IV of the instant applications, the amount of Rs.9,85,000/- with the interest (at 18%, compounded monthly) comes to Rs.15,16,881/-. Therefore, the total sum claimed by the Petitioner No.1, as per his own working sheets is INR 38,26,735/- (i.e INR 23,09,854 + INR 15,16,881) and not Rs.40,03,197/- as claimed.

(12) Petitioner No.1 has claimed that he raised a sum of INR 20,54,000/- from Bajaj Finserve Ltd. and transferred it to the Company. No board resolutions, shareholders resolutions or disclosures have been produced with respect to this alleged loan. Also, since this alleged sum was given out of funds acquired by the Petitioner No.1 by borrowing/accepting a loan from another entity, it would amount to a Deposit under Rule 2(c) (viii) of the Companies (Acceptance of Deposits) Rules, 2014. As per Section 73(2) of the Companies Act, 2013 deposits cannot be accepted by a Company from its members without a resolution to that effect passed by the Company at a general meeting. Further, the financial statements of the Company would show that no such deposit or loan or general resolution has been recorded in any statement issued by the Company, and the claim of such a deposit has to be rejected. Reference has been made to sections 73 and 76A of the Companies Act 2013 for such contravention and further liable to indemnify the Company against losses caused due to such rampant mismanagement. Petitioner No.1 has failed to produce any contract that would set down the requirement for the sums to have been borrowed and the repayment terms thereof. What is furnished is a letter issued by K.Rajendra, former Manager, Finance and Accounts of the Company to the Petitioner No.1 accompanied by a bank statement showing transfer of INR 19,43,840/- to the Company by the Petitioner No.1 at Annexure C to the instant application. This merely asserts the existence of a ‘loan form Director’ by the Company via Mr.K.Rajendra, the then Manager of Accounts and Finance of the Company and is merely a recording after the fact and is not addressed to any other Director or shareholder of the Company. The accompanying bank statement (produced at Annexure C and E) also cannot be said to prove the existence of a financial debt owed by the Company to the Petitioner No.1. A mere unilateral transfer of money without any supporting Board Resolution, resolution in general meeting, agreement or any other similar document evidencing offer and acceptance of loan cannot, even remotely, amount to the creation of a legally enforceable debt under any provision of law. A statement of account of the Petitioner No.1 with Bajaj Finserve Ltd. showing that the Petitioner No.1 has taken a loan of INR 20,54,000 from Bajaj Finserve Ltd. at Annexure D to the instant application; and some E-mails at Annexure F. These documents do not satisfy the evidentiary requirements of proving a debt, and do not show why the same was required by the Company. They do not disclose any the terms o the loan nor any binding obligation, so as to prove the existence of either a financial debt or the existence of any default by the Company.

(13) As stated above Mr. K.Rajendra is the co-accused of the Petitioner No.1 in Crime No.87/2017 for alleged offences under Sections 406, 402, 465, 468, 477A and 120(B) of the IPC for misappropriation of Company funds to the tune of INR 3,76,18,983. Hence a letter issued by him cannot be relied upon as evidence of creation of a financial debt owed by the Company. Similarly, the Statement of Account at Annexure D1 being a statement of account between Petitioner No.1 and Bajaj Finserve does not in any manner show the Company being bound by any legally enforceable debt and no valid supporting documents showing the assignment of this loan to the Company has been produced by the Petitioners. Further, documents at Annexure C and D refer to a sum of INR 19,43,840/- whereas the claims made in the Petition state a loan of INR 20,54,000/-. The Petitioner has in the Petition claimed an interest of 18% compounded monthly whereas Annexure C records that the interest payable is 16% per annum. Thus the claims made by the Petitioners are completely false and fabricated. These discrepancies are clear cut evidence of the mala fide intent of the Petitioners and the falsity of the alleged debt.

(14) With regard to the Petitioner No.1’s claim he repaid liabilities of Rs.9,85,000/-owed by the Company directly to a Bank, it is pointed out that in the synopsis he claims that the debt to Karnataka Bank was at risk of being classified as an NPA and therefore he transferred the sum of INR 9,85,000/- to Canara Bank. At Annexures F and G he claims that this money was paid to Karnataka Bank. No record of any RTGS transfer has been produced. The letter issued by Venkatarathnam Adhikari Naidu and K.Rajendra dated 26 December 2014 attached at Annexure G, Emails from the Petitioner No.1 to Ms.Hebbar produced at Annexure F1 and Emails from the Petitioner No.1 to Ms. Hebbar produced at Annexure 1 to the instant application do not, in any manner, evidence the existence of such a financial debt owed by the Company, being a unilateral statements by the Petitioner No.1 and have any evidentiary value. No documents have been produced to support the claim of 18% interest or regarding the repayment schedule for such sums. There is not a single document evidencing that such a sum was actually paid out to Canara Bank (or Karnataka Bank).

(15) With regard to the debt of Rs.2,33,81,250/- allegedly in default owed to the Petitioner No.2, it is submitted that the sum of INR 1,00,00,000/- has been claimed to have been advanced by Petitioner No.2 to a company called Vanijya Advisory Services Pvt. Ltd and not to the Corporate Debtor. Even if Vanijya further loaned this sum to the Company, the former would then be the Financial Creditor and not Petitioner No.2. It is also important to note that the Petitioner No.1 was a director Vanijya at the relevant time which would make this transaction fall foul of Section 185 of the Companies Act 2013. Without prejudice to the above objections, it is submitted that since both the Petitioner No.2 and the Company are unrelated corporate entities, this would be an inter-corporate loan u/s 186 of the Companies Act, 2013, and as per sub-section (4) the Company was required to disclose to the members in the financial statement the full particulars of the loans etc. given, and the purpose of the same. It is submitted that the Petitioners have failed to produce the audited balance sheets of Petitioner No.2 that disclose any such inter-corporate loan. Also, the ‘Standalone Financial Statements’ of the Petitioner No.2 for the Financial Year 01 April 2014 to 31March 2015, as available publicly on the website of the Ministry of Corporate Affairs, does not disclose any such loan by the Petitioner No.2 to any unrelated entity as per Section 186 of the Companies Act, 2013.

(16) It is also submitted that Form MGT-8 (Report prepared by Company Secretary) for the year 2014-15 that was attached to Form MGT-7 of the Petitioner No.2 contains no disclosures of any loans made under Section 186 of the Companies Act, 2013 in that fiscal year. The Board Report of the Petitioner No.2 for the Financial Year 2014-15 also contains no mention of any inter-corporate loans advanced by the Petitioner No.2 in that fiscal year. While the report does mention that certain loans advanced have been attached at Annexure C—the Annexure C is missing from the Board Report uploaded on the website of the Ministry of Corporate Affairs. The only documents produced by the Petitioner to prove the existence of the alleged debt of INR 2,33,81,250 are: A letter from the Petitioner No.1 and Venkatarathnam Adhikari Naidu (erstwhile Director) to the Petitioner No.2 dated 30 December 2014 attached at Annexure L to the said petition; Bank/Cash Vouchers for a total of INR 45,00,000 allegedly issued to the Company by the Petitioner No.2 at Annexure N; A letter from the Petitioner No.1 to the Petitioner No.2 dated 18 August 2014 at Annexure O; A letter from the Petitioner No.1 to the Petitioner No.2 dated 08 January 2015 also at Annexure O; An alleged ledger statement of the Petitioner No.2 for its account with Petitioner No.1 at Annexure P; A letter from Vanijya to the Petitioner No.2 at Annexure Q; and Several cheques produced at Annexure R and S.

(17) It is submitted that the above documents do not in any manner prove the existence of a financial debt. A document creating a financial debt must illustrate – the terms of a particular loan (in terms of interest payable, conditions for incidence of default etc.) and also show a binding obligation on the part of the party receiving money to repay the money transfer. None of the above documents possess the above two ingredients. The letter at Annexure L has been issued to the Petitioner No.2 purporting to evidence a loan of INR 45,00,000/- advanced by the Petitioner No.2 to the Company, but the said letter has been issued by Petitioner No.1 to Petitioner No.2 purporting to bind the Company to an alleged financial debt. No resolution of the Board is attached to the letter at Annexure L. There is no offer of loan, no acceptance of loan and no terms of loan set out in the said letter. The very existence of this letter, having been created by two of the petitioners in the instant application, with no supporting documents or specifics as to terms of loan cannot bind the Company to a financial debt.

(18) The Bank/Cash Vouchers produced at Annexure L purport to show the existence of a disbursement of a total of Rs.45,00,000 as loan do not contain the ‘Company Seal’ of either the Petitioner No.1 or the Company (a sine qua non of loan agreements between companies). As a result there is no method by which to verify the signatures affixed on them. In any event, the said Bank Vouchers find no mention in any of the official public declarations by either the Petitioner No.1 or the Company nor do they contain the terms of anything remotely close to a loan agreement. At best they constitute a unilateral transfer of funds from Petitioner No.2 to the Company which the Company cannot be held liable for not returning as the Petitioner No.1 had full control of the Company at this point in time and is likely to have embezzled these funds. The existence of a financial debt is thus disproved by the documents at Annexure N. The documents produced at Annexure O suffers from the same defects as the letter produced at Annexure L. The letters at Annexure O by the Petitioner No.1 are without any valid authorization by the Company. There are no reasons mentioned as to why the loan was being taken and no supporting documents provided by the Petitioners to show that it was undertaken on behalf of the Company in a legal manner.

(19) The document at Annexure P is an internal ledger statement of the Petitioner No.2. The fact that the Ledger account has not been maintained accurately is obvious from the first entry that does not even relate to the Company but is an entry on a loan to Vaijya. And cannot be a debt binding the Company. The said ‘loans’ in the ledger statement find absolutely no mention in the filings of the Company made before the Ministry of Corporate Affairs. The said document is nothing but a sham document. Further, the ledger statement produced at Annexure P bears no attestation of either an internal accountant or third party, neutral financial professional. It is therefore clear that the said ledger statement does not prove the existence of any financial debt. The letter at Annexure Q purports to be evidence of the loan of INR 1,00,00,000/- disbursed to the Company by Petitioner No.2. However, interestingly, the said loan, as per the letter was in fact disbursed to Vanijya and not the Company. In the absence of any underlying agreement creating a debt, the alleged cheques produced at Annexure R and Annexures S do not support the Petitioners case in any manner. Nor do the alleged loans reflect in the public document of either the Petitioner No.2 or the Company. In the absence of the any document to evidence a valid debt, payment of any alleged interest or TDS (made by none other than the Petitioner No.1 himself) does not have any bearing and cannot be considered in any manner to be an admission of fact.

(20) The claims made by the Petitioners as to the alleged financial debt owed by the Company to Petitioner No.2 also show several discrepancies between the amounts claimed (and the dates on which these amounts were disbursed) and Working Sheet No II which is the basis for quantifying the claim. The money has alleged been disbursed in five tranches (as per the petition) though the working sheet records completely different disbursements – being three in number.

(21) The tranche of Rs.20,00,000 alleged to have been disbursed on 26 September 2014 (as stated in Part IV of the instant application) contains no supporting documents whatsoever and finds no mention in any of the Annexures produced along with the petition. It is evident, by this material contradiction, that the Petitioners have no means to substantiate the debt they have claimed in Form I.

(22) Further, anther technical defect is the non-production of letter dated 30 December 2014 even though the ledger entry produced at Annexure P when making mention of two alleged loans of Rs.20,00,00,000/- and Rs.25,00,000/- each cites a ‘letter dated 30 December 2014’. It is therefore submitted that the two alleged aforesaid loans are non-existent loans. As regards the debt allegedly owed by the Corporate Debtor to Petitioner Nos. 3 and 4, it is stated that these sums were allegedly advanced towards equity subscription by Petitioner Nos. 3 and 4. Of the sums advanced, it is alleged that a balance of INR 4,50,000/- is owed to Petitioner No.3 and INR 8,50,000/- owed to Petitioner No.2. Section 5(8) of the Code defines a “financial debt”. Monies paid to a company for any allotment/subscription of shares does not qualify as a “financial debt”. As such, it is not open for the Petitioner Nos.2 and 3 to approach this Hon’ble Tribunal under Section 7. Reference has been made to sections 62 and 63 of the Companies Act, 2013 to say that as no special Resolution was passed by the Board nor any approval taken for allotment of further shares of the Company. Since the Financial Creditors 3 & 4 were not existing shareholders, they could have been allotted Preferential Shares, which required a special resolution, which has to be filed with the Registrar of Companies in Form MGT-14. The Petitioners have failed to produce any such resolution.

(23) The only documents relied upon by the Petitioners to attempt to prove these transactions are e-mails/letters between Petitioner No.3 and 1 and a table at Annexure X which appears to be a summary of the claims prepared by the Petitioners and not any independent document evidencing any transaction. These emails are not even copied to other directors or shareholders of the Company. None are supported by any documents showing the terms of the transactions or approval of the issue of shares between the Company and the Petitioner Nos. 3 and 4 or the nature of their relationship. Further none of the e-mails or letters are supported by any accompanying Board Resolution or agreement entered into between the Company and the Petitioner Nos.3 and 4. Furthermore, given the criminal antecedents of the Petitioner No.1, any document executed by him (the letters) or received by him (the e-mails) draws an adverse inference of falsity.

(24) The Respondent has argued that even if the documents produced along with the instant application evidence the existence of a financial debt, there is no proof of default by the Company. It is submitted, without prejudice to any of the objections above, the Petitioners have not led proof as to existence of a default of financial debt by the Company. It is reiterated that in order for an application for financial insolvency to be admitted, the petitioners must prove both that there existed a financial debt owed by the corporate debtor and that the corporate debtor was guilty of defaulting on the said financial debt. In the instant application, none of the documents produced disclose any terms of any of the alleged loan undertaken. There are no conditions as to interest and no conditions as to default. It is well established that default of any debt can only occur upon the triggering of a foreseen event that forms part of any agreement that gave rise to a debt. In the absence of any case made out for any default, the Petition needs to be dismissed.

(25) It is submitted that the Respondent Company is a Going Concern, is solvent and is able to pay its debts, for example Canara Bank, issued a SARFAESI Notice to the Company in July 2016 but the same Canara Bank proceeded to renew the terms of the loan arrangement it had with the Company vide loan extension letter, produced as Annexure R29. This proves the Bank’s confidence in the Company’s solvency. Work Orders placed on the Company by BBMP are produced herewith as Annexure R30 series to show that the Company’s business is booming and that it is a more than viable going concern.

4. The Financial Creditors have filed para wise rejoinder 24.11.2017 for the statement of objections dated 07.11.2017 by inter alia contending as follows:

(1) In para 4, adequate proof for the existence of the debt has been provided by the Applicants. The audited Balance sheet as at 31.03.2016 which is available in public domain on the MCA site, shows the corporate loan of Rs.1.45 crore from Brindavan Private Limited.

(2) In para 6, this is not the correct position of law. As per Explanation to Section 7(1), the default to even other Creditors who are not applicants is also treated as default.

(3) In para 8, IBC 2016 has overriding effect on the Companies Act, 2013, therefore, the Petition u/s 433 of the 1956 would be infructuous.

(4) It is stated that the funds provided by Ms.Hebbar in India over a period of approximately 2 years was only Rs.38 lakh. In this fund, the Applicant No.1 had to set up the Company and meet local capital expenditure, initial establishment and start-up expenses, Business Development including introduction of the new concept to the Government and local bodies and also the working capital. Several meetings were held with the PWD, Task Force for Quality Assurance in Public Works etc. The first contract obtained was from BBMP for Rs.17.40 Cr. Therefore the Applicant 1, in the interest of developing the business for the Company and to protect the interest of the promoter had to resort to borrowings from his known sources. Both Husband and wife never provided requisite funds to set up and run the Company. Further, the BBMP payments was not at all regular, therefore, there was a severe cash crunch to manage the Company. Further, 2 more machines were to be imported at a cost of Rs.4.65 Cr as BBMP was not accepting the execution of the contract of Rs.17.40 Cr. Therefore, additional funding in the form of Bank loan, margin money, Bank charges, etc. was incurred during the first two years of the Company’s commencement.

(5) In para 14, there were no adequate funds in the Company to embezzle. BBMP paid only Rs.3.50 Cr (approximately) during the period of the Petitioner No.1’s management. There were substantial bills pending as on 31.03.2015 when the Petitioner 1 handed over the management to Ms.Bhanu. All records were properly maintained as the statutory audit reports for the Financial Years 31.03.2013, 31.03.2014 and 31.03.2016 do not report any such fraud, embezzlement or misappropriation. The Company has deliberately not filed the Audit Accounts for 31.03.2015 and it is in default. However, the previous year’s figures in audited statements for the year ended 31.03.2016 do not indicate any such misappropriation or embezzlement. In the audited statement of accounts for 31.03.2016, Cash-flow statement which is mandatory is not provided and Fixed Assets Schedule is missing.

(6) In para 16, the Petitioner No.1 is apprehending that Ms.Bhanu and the other present Director have destroyed all the evidences including the minutes books and statutory records, etc. Criminal complaints are filed to avoid the recovery of legitimate money due to various people including the Petitioner.

(7) In para 19, the liquidity crunch was mainly because the BBMP had not released payments towards contracts executed and Mrs.Bhanu had agreed to stop gap arrangements.

(8) In para 21, V.Raghavan and Co’s report is not acceptable and there are many wrong and mis-statements. The report at two places in para “IX) Observations on Payments/Expenditure” says that “hence there is scope of misappropriation of funds”. Therefore, this is not confirmation of mis-appropriation. Further, the Annexure 1 to 4 mentioned in the Report is not provided. In para ‘XI) Other Observations” there is a comment that advance for capital equipment was made much in advance and there is huge time gap between the making of the advance and the arrival of the equipment. In this context, it should be noted that, the advance was made by Ms.Bhanu directly to the Vendor from her foreign account and the Petitioner 1 is not involved in this. Customs clearance was delayed as the benefit of exemption notification was not given due to which the customs duty of approx. Rs.80 lakhs was levied. Therefore, the Petitioner 1 had to initiate appeal to the Commissioner (Appeals) and get the benefit of the notification. Therefore, the investigation report is drawn up in haste and not reflecting the proper position. Further, the magnitude of Rs.3,76,18,893/- is not justifiable at all when we examine the accounts for the FY 2014-15 and 2015-16. It should also be noted that, there is no domestic enquiry or opportunity of being heard given to the Petitioner or other employees named in the report and therefore, principles of natural justice is ignored in the conclusions arrived in the report. Another, important point to be noted is the date of signing of the report by V.Raghvan and Company is not available. The report says that it is covering the period from 07.05.2012 to 31.05.2015. Therefore, the report would have been issued subsequent to 31.05.2015 and may be in the Financial Year 2015-16. But the Audit Report for the Financial Year 2015-16 by S.Bhat & Associates, CAs, states that there is no fraud by the Company or fraud on the Company. Therefore, there is conflict between the Statutory Audit Report and the Investigation Report.

(9) In para 22, Report of V.Raghvan and Co is not reliable and made according to the requirement of Ms.Bhanu and other directors, and in para 23, it is totally denied. Further, it should be observed that the Petitioner 1 has not been paid any remuneration or fees for all his services; in para 24 to 34, Criminal Complaints and Complaints to ICAI are baseless and respective Courts or Authorities will deal with the subject. In para 35, Amount transferred by the Petitioner 1 and others are available in the Bank Statements and any fraud alleged is denied.

(10) In para 36, Annexure R17 is not complete and most of the schedules to the Accounts and Notes on Accounts is missing. These are deliberately concealed by the Respondent. Further, any issue or circulation of audited statement of accounts without attaching all the report of the Board of Directors and report of Auditors and relevant Notes to the Account is violation of Section 134(7) of the Companies Act, 2013.

(11) In para 37, Audited Accounts for 31.03.2014 mentions an amount of Rs.27,10,000/- from related parties which includes the amount provided by Petitioner 1 of Rs.20,54,000/- before 31.03.2014. Amount from Brindavan Beverages P. Ltd. was borrowed during 2014-15. As mentioned above audited accounts of 31.03.2015 is not complete therefore, it is difficult to identify the amount in the provided statement of accounts as far as Brindavan Beverages Private Limited is concerned. However, audited accounts for 31.03.2016 is available in MCA website. The Previous year’s figures in this audited statement of accounts, the breakup of figures for long term borrowings of Rs.5,57,09,640/- is available in Note 5. In this note, under Unsecured Loans from Others an amount of Rs. 1,47,00,000/- is shown, out of which Rs.1,45,00,000/- is pertaining the Brindavan Beverages P Ltd. and Rs.2,00,000/- is from Bonanza Investments Ltd.

(12) In para 39 to 47, the requirement of IBC 2016 is satisfied and the application is maintainable. Further, necessary approvals to borrow the money etc., has been done as and when required. Applicants strongly feel that the Corporate Debtor has tampered with the evidences in favour of the Applicants as the Corporate Debtor was in management of the Company since April 2015. Three more directors namely Mr. Venkatarathnam Adhikari Naidu, Mr. Indrajit Yadav and Ms.Ramadevi were made to quit the Company and at present Ms.Bhanu and Mr.Kiran Srinivasa Murthy who is related to Ms.Bhanu are the only Directors. Therefore, it is a strong case for appointment of an IRP without losing time. The Corporate Debtor instead of settling the legitimate dues of the Creditors is indulging in extravagant spending which is not warranted for the nature, size and type of business. To give instance, the audited accounts for 31.03.2016 shows that there is an addition to the fixed assets to the tune of Rs.1,24,08,532/- and a Vehicle loan from HDFC Bank of Rs.62,65,853/-. Applicant understand that this is a Jaguar car brought at a cost of approx. 1 Cr. Further, on 15.12.2016 another expensive SUV of Mercedes Benz made model GLE250D 4MATIC registered with RTO, Bangalore with Registration No.KA02 MM0180. Only, IRP can study the affairs of the Corporate Debtor and submit a fair report to arrive at a resolution plan.

(13) In para 64 to 82, when the Corporate Debtor balance sheet as at 31.03.2015 and 31.03.2016 reflects this liability of the Corporate Debtor. It is meaning less on their part to waste the valuable time of the Tribunal.

(14) In para 89-90, the Respondent has concealed the fact as to how the Company was functioning and executing orders when the Promoter had not provided adequate funds.

(15) In para 91, the Petitioner No.1, helped the Corporate Debtor to bag an order of value Rs.17.40 Cr. From BBMP in the very second year of its existence and an order of value Rs.5 Cr.(approx) in the 3/4th year of its existence from Greater Hyderabad Municipal Corporation (GHMC). He operated with severe financial constraints and operational constraints to set up procedure with BBMP and machine operations, in spite of many technical problems faced.

(16) In para 93 and 94, Mrs.Bhanu after he return is lucky to realize the money from BBMP as it was already sufficiently old for BBMP. Canara bank has taken exposure as Mr. A.V.Balasubramanya has provided a valuable collateral security which was valued at Rs.2.73 Cr. and also given personal guarantee to the Bank.

a. The Petitioners have cited the following cases in support of their various contentions: Innoventive Industries Limited v. ICICI Bank & And1; BNY Corporate Trustee Services Ltd. v Eurosali UK 2007-BBL plc & Ors2; Madhusudan Gordhandas & Co. V. Madhu Woolen Industries Pvt. Ltd3; Bombay High Court in Re: Focus Advertising Pvt. Ltd4; Punjab National Bank v. James Hotels Ltd5; Forech India Limited v. Edelwesis Assets Reconstruction Co. Ltd6; Machindranath Kernath Kasar v. D.S. Mylarappa & Ors7 ; V.K.Jain v. Richa Laboratories (P) Ltd8; Central Bank of India v. Sukhani Mining and Engineering Industries Pvt. Ltd and Ors9; Nisar Ali V State of Uttar Pradesh10; Surjit Singh V. State of Punjab11; Kishan Singh v. Gurpal Singh12; Govind Rubber Ld. V. Louis Dreyfus Commodities Asia Private Limited13; Royal British Bank v. Turquand14; Ram Baran Singh v. Mufassil Bank Ltd15; T.R. Praft Ltd. v. E.D. Sasoon & Co. Ltd16; Premalatha v. Mysore Minerals Ltd.17; M/s. Iba Health (I) P Ltd. v. M/s Info-Drive Systems Sdn. Bhd18.

5. Heard Shri Archishman Chaudhury, learned Counsel for the Applicants and Shri M.M. Swamy, learned Counsel for the Respondent. We have carefully perused the pleadings of the parties and the extant provisions of Code and Rule made thereunder. The cases cited by the Petitioners have also been considered but the same are of little help as they pertain to the period prior to the enactment of the Code.

6. At the very outset we may mention that these are proceedings are under section 7 of the Code, and we would not be concerned here with the details of the Company’s internal matters, disputes, accusations and counters to the same, or cases pending in other courts as mentioned at great length by both the Petitioner and the Respondent, unless they have a bearing on the existence of the debt itself. The present proceedings are summary proceedings under the Code, where the existence of a debt, as per the meaning assigned in the Code, and a default in repayment of the same are alone sufficient to trigger an insolvency resolution process, keeping in mind the financial position of the Corporate Debtor. However the debt and default should be apparent from the records or documents produced, and not entail detailed investigation. This is unlike proceedings u/s 9 of the Code, as seen in CP (IB) Nos.116 and 117, (as also in our earlier decision u/s 131 in CP No.43) which were directed against the same Corporate Debtor, and where we have dealt with in detail with the pre-existing disputes, between the Company’s earlier and present management.

7. On the other hand it is also a settled position of law that the provisions of the Code cannot be invoked for recovery of outstanding amounts but can be invoked to initiate CIRP for justified reasons as per the Code. The Hon’ble Supreme Court in the case of Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited19, has inter alia, held that I&B Code, 2016 is not intended to be a substitute to a recovery forum and cannot be used to jeopardize the financial health of an otherwise solvent compay by pushing it into insolvency. The Hon’ble Supreme Court in the case of K.Kishan Vs. Vijay Nirman Company Pvt. Ltd. clarified that the Petitioners cannot use IBC either prematurely or for extraneous considerations or as substitute for debt enforcement procedures. In Transmission Corporation of A.P. Ltd. Vs. Equipment Conductors and Cables Ltd20, Hon’ble Supreme Court of India has inter alia held that existence of an undisputed is sine qua non of initiating CIRP.

8. Before proceeding, we may briefly touch upon the facts of the cased and its surrounding circumstances. Since the Company was incorporated on 7 May 2012 till the return of the Promoter Director in April 2015, the Financial Creditor No.1 Mr. M.G. Mohan Kumar, along with the other close associates was fully in charge of all business matters of the Company. He has stated that he worked diligently for the company and because of the meagre cash flow, on account of non-receipt of payments by BBMP and non-infusion of required funds by the promoters, he had to use his own contacts with other Companies, banks, individuals etc. to raise funds for the company (as well shall discuss later) to keep it going and for getting new contracts. On the other hand the Promoter Director has stated that on return to India she found that the Petitioner No.1 had indulged in embezzlement, had failed to repay loans and maintain company books and had defaulted on several statutory requirements. He had also not held board meetings or maintained the minutes, and not one of the financial decisions were taken with board or shareholder approval and none of the transactions were recorded and approved via resolutions. He saddled the Company with several unnecessary liabilities and had deliberately not maintained any records of his financial mis-delalings. She therefore revoked the cheque signing authority of the Petitioner No.1, and she also ordered a forensic audit by an Independent Auditor, V Raghavan & Co., Chartered Accountants. The detailed report has been placed on record, and summary of the findings is mentioned supra in the Corporate Debtor’s objections. Apart from pointing out several accounting errors, it talks about the misappropriation done by the Financial Creditor No.1. This has been dealt with in detail in CP No.116 in which the petition was filed by him as an Operational Debtor against the same Corporate Debtor. That Petition stands dismissed.

9. Pursuant to the findings of the Independent Auditor the Corporate Debtor, filed Criminal cases against the Financial Creditor 1, Mr. M.G. Mohan Kumar and others. The Financial Creditor 1/Petitioner, as an accused, moved the Hon’ble City Civil and Sessions Court, Bengaluru under Section 438 of the Code of Criminal Procedure, 1972 seeking anticipatory bail in the event of their arrest in connection with Crl. No.87/2017. The Hon’ble Sessions Court passed an order dated 19.10.2017 rejecting the petition for anticipatory bail filed by the Petitioner and his co-accused, holding that there existed incontrovertible circumstances that make out a prima facie case that the Petitioner and his co-accused were guilty of offences alleged in the criminal complaint in Crime No.87/2017. These facts are mentioned here as the Financial Creditor No.1 was also instrumental in the arrangement of funds through other Financial Creditors, in this very Petition.

10. At this point we may mention that in C.P.No.43/BB/2018 we dealt with a petition filed under section 131 of the Companies Act 2013, wherein the Corporate Debtor had sought this Tribunal’s approval for revision of its Financial Statements and Board Reports for the FYs 2012-2013 to 2014-2015. The revision was sought on the basis of the same Independent Auditor’s report as is mentioned in the preceding paras, and which had led to the filing of Criminal cases against the Petitioner and other co-accused. This Bench allowed the Petition permitting the revision of accounts for the FYs 2012-13 to 2014-15. Apart from the legal issues in the matter, detailed reference was also made to the criminal cases filed by the Corporate Debtor against Mr. M G Mohan Kumar and others. In the interest of justice, this Bench had allowed Mr. M G Mohan Kumar to implead himself, and his objections were considered, even though the same was unnecessary considering that a corporate entity which had detected errors in its financial statements had sought revision of the same, and no one should ordinarily have any objection to the same. Apart from the accounting deficiencies, the alleged acts of misappropriation etc., as agitated before other forums, and referred to above, were also considered, as in CP No.116 and 117 of 2017.

11. Debt, as defined under the Code in section 3(11) means a liability or obligation in respect of a claim which is due from any person, and includes a financial debt or on operational debt. Such a debt would arise from a claim, as defined in section 3(6), i.e. from a right to payment in the hands of the Creditor. Such a right could arise from the terms and conditions agreed to by the concerned opposite parties, in the shape of a Contract or an Agreement or Board Resolution, if any, so that the same could be enforced in the case of default. Section 3(12) of the Code defines as non-payment of a debt when the whole or part or instalment of the amount of debt has become due and payable and is not paid by the debtor or the corporate debtor.

12. The definition of ‘Financial Debt’ in section 5(8) of the Code clearly postulates that any money advanced must be for a consideration i.e., there must be a need for the borrowing of such money and the money must be advanced against consideration for the time value of money. To understand the definitions in the perspective of the facts obtaining in the present case, let us look into the meaning of the terms Time value of money and Financial Creditor. As regards the meaning of the term Financial Creditor, in Company Appeal (AT) (Insolvency) No.57 of 2018, decided on 12.07.2018, the Hon’ble NCLAT held that:

1. “There is nothing on the record to suggest that 2nd and 3rd Respondents had given the loan in favour of the ‘Corporate Debtor which can be termed to be ‘disbursement of an amount for consideration for the time value of money’ as required under Section 5(8). Merely grant of loan and admission of taking loan will ipso facto not treat the 2nd and 3rd Respondents as ‘Financial Creditors’, till they show that it complies with the substantive definition or any one or other clause of Section 5(8).

2. Mere fact that the company paid interest @12% per annum, during certain period cannot be the ground to hold that the ‘debt’ comes within the meaning of ‘Financial Debt’ to treat the 2nd and 3rd Respondents as ‘Financial Creditors………..”.

13. Further, as regards the meaning of the terms “time value of money”, in Nikhil Mehta & Sons (HUF) & Ors. Vs. AMR Infrastructure Ltd. C.P. No. (ISB)-03 (PB)/2017, decided by Hon’ble NCLAT in Company Appeal (AT) (Insolvency) No.07 of 2017 on 21.07.2017, it was held that:

1. “the first essential requirement of financial debt has to be met viz that the debt is disbursed against the consideration for the time value of money and which may include the events enumerated in various sub-clause… The key feature of financial transaction as postulated by Section 5(8) is its consideration for time value money. In other words, the legislature has included such financial transactions in the definition of ‘Financial debt’ which are usually for a sum of money received today to be paid for over a period of time in a single or series of payments in future. It may also be a sum of money invested today to be repaid over a period of time in a single or series of instalments to be paid in future. In Black’ law –Dictionary (9th edition) the expression ‘Time Value’ has been defined to mean ‘the price associated with the length of time that an investor must wait until an investment matures or the related income is earned.

2. In other cases too, the concept of time value of money has been examined. Most notably, in Uttam Galva, the NCLT clarified that ‘business always runs keeping in mind the time value for money….transaction will be operational if payment is to goods or services, transaction is financial if money is lent in contemplation of returns in the form of interest.’ Thus, merely because an operational creditor claims interest for a delayed payment does not mean the claim becomes a claim for financial debt. The intent of the parties, viz advancing of money for financial returns, or supply of goods and services may be looked at in ascertaining if a debt is financial or not”.

These decisions shall also be kept in view while examining whether the debts claimed to be existing argued by the Petitioners can be treated as “Financial debt” and the Petitioners as “Financial creditors”.

14. Let us now examine each of the debts referred to by the Financial Creditors who have jointly filed this petition. Admittedly, not one of the alleged debts is under a written contract with clearly defined terms and conditions.

15. With regard to the Debt of Rs.40,03,197 claimed by Petitioner No.1, it is seen firstly that the working of the amounts mentioned by the Financial Creditor 1 does not tally with the figures claimed. The amounts claimed at Rs.18,77,538 and Rs.9,85,000 each with interest @ 18% work out to Rs.38,26,735 and not Rs.40,03,197 as per the Application. Be that as it may, the amount of Rs.20,54,000, forming part of Rs.40,03,197, is stated to have been taken by the Financial Creditor 1 from M/s. Bajaj Finserve Ltd and deposited in the Company. It is seen that at page 36 there is letter dated 28.03.2014 from Mr. K.Rajendra, Manager, Finance & Accounts, to the Financial Creditor 1, Mr. M.G. Mohan Kumar, referring to the latter’s mention of a loan taken from Bajaj Finserve and mentioning an interest @16% and fixing EMIs, as against interest shown as chargeable @ 18%by the Financial Creditor. At page 38 is the Loan Account Statement of Mr. M.G. Mohan Kumar. There are e mails of 2016 (i.e. after the Promoter Director had taken charge of the affairs of the Company, and subsequent to the event) from him to the Corporate Debtor requesting payments of the remaining EMIs. At page 45 is a letter to the Financial Creditor 1 from the Company regarding payment of Rs.9,85,000 term loan of instalment to Karnataka Bank. These are only references of loans stated to be taken for the Company, by the Financial Creditor 1 or by the Manager Finance. There is nothing on record to show if any such decision was taken in the Board or Resolution passed to raise the above alleged loans. There is nothing to show that these amounts were given to the Corporate Debtor by the Financial Creditor No.1, which could be termed as “disbursement of an amount for the time value for money”, as required by section 5(8) of the Code. In the absence of any such decision, Resolution or agreement that shows that the amounts were given by the Financial Creditor to benefit by way of interest etc., on a later date, or agreement which could create a right to payment, i.e. a claim in the hands of the Financial Creditor, the amounts even if they were taken would not be termed as a “financial debt” as per the definition in the Code. Even if EMIs were fixed and interest paid therewith in some instalments, they would not acquire the meaning of financial debt in the absence of any agreement between the financial creditor and the Corporate Debtor or Board approval or Board Resolution to that effect clearly laying down the terms and conditions of such a debt, if any, as also held in the cases cited supra. Further, in the background of accusations of misappropriation etc. leveled against the Financial Creditor No.1, which have also been dealt with in CP (IB) No.116/BB/2017, it is difficult to rely upon oral agreements or communications made by him or his associates for raising funds without any reference to decisions taken in the Board or Resolutions passed to that effect. In fact it was considered in that CP that it was actually the Financial Creditor No.1 who owed amounts to the Corporate Debtor, as per the Independent Auditor’s Report.

16. Similarly the direct payment of Rs.9,85,000 stated to have been made by the Financial Creditor No.1 suffers from the same shortcomings and does not appear to exist as per the available records. There is no evidence as to its existence, and in any case cannot be treated as a financial debt, for the same reasons as mentioned above. There is no basis to say that that same was given as a consideration for the time value of money, there is no agreement or Board Resolution, or even any agreed terms as to the interest being claimed. Applying the decisions of the Hon’ble NCLAT referred to above, even if these are debts, they would not fall within the definition of “financial debt” as per the Code. It has also been mentioned in the Auditor’s Report that payments have been made by cash through cash vouchers/invoices.

17. As regards the Financial Creditor BBPL, Petitioner No.2, (financial debt stated to be Rs.2,33,81,250/-) at Page 60, Ann. L is placed a letter addressed to the Financial Creditor requesting for a loan of Rs 45 lakh. Bank and cash Vouchers are also placed on record for the above. Letter dated 18.

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08.2014 confirming a loan of Rs.1 crore from BBPL has been signed by the Petitioner No.1. It is seen that this loan has been taken through Vanjiya Advisory Services P Ltd. (a Company belonging to the Petitioner No.1) and not directly from BBPL. In the Ledger Account of the Corporate Debtor in the books of BBPL placed at page 65, Ann P (as furnished by the Petitioner) also it is seen that the journal entry in respect of this loan is in the name of Vanjiya Advisory Services Ltd. and not the Corporate Debtor. Ann Q also shows that the loan was taken by Vanjiya Advisory Services from BBPL. There is no mention in the letter that the same was taken for and on behalf of the Corporate Debtor except an undated handwritten note suggesting that the same was given it at the behest of Mr. M.G, Mohan Kumar, Petitioner No.1. Also Form MG 8 for the FY 2014-15 attached to Form 7 does not disclose any such loan. With these evidences on record we are unable to give a finding that the amount of Rs.2,33,81,250 amounts to a financial debt as per the Code. Here again, there are no Board Resolutions or agreement entered into between the BBPL or even Vanjiya with the Corporate Debtor for his transaction, let alone the purpose of the same and terms of the same, such that it could be termed as a financial debt that was given for time value of money. The Accounts submitted by the Corporate Debtor too do not reflect any such credit entry. In view of this position, we are unable to a conclusion that there was a financial debt of Rs.2,33,81,250 owed by the Corporate Debtor to the Financial Creditor No.2, i.e. BBPL within the meaning of the Code, even if some payments were made directly or indirectly through Vanjiya. 18. The Financial Creditor has mentioned that the Balance Sheet for the YE 31.03.2015 of the Corporate Debtor shows the existence of the debt at Note 5. We have perused the same. It is seen from the Balance Sheet for the YE 31.03.2015 that at Note 5 Long Term Borrowings are mentioned. Borrowings of Rs.1,20,25,063 from Karnataka Bank and Rs.2,40,00,000 from Canara Bank are mentioned therein. Unsecured Loans are mentioned at Rs.1,47,00,000. However, while in the Foot Notes 1 and 2, details of the Bank Loans are given, there is no mention of the breakup of Unsecured Loans of Rs.1,47,00,000. Thus, the Financial Creditor No.1 contention that out this Rs.1,45,00,000 pertains to BBPL is not verifiable as the same is not supported by any further evidence. Whereas other loans taken seem to be incorporated in the Balance Sheet, such as from The Karnataka Bank and the Canara Bank. 19. As regards the debt of Rs.7,09,238/- claimed as owed to Petitioner No.3, at Ann U is a letter dated 08.04.2015 requesting return of amounts given for equity allotment by Mr. HN Naik, addressed to Mr. M.G. Mohan Kumar, referring to his “discussions and e mails”. Ann U mentions proposed refund details referring again to “discussions and e mails”. Ann W, an e-mail of 11.11.2013 refers to investment in the Corporate Debtor. It is clear that the sums paid were or allotment of shares and do not constitute financial debt given to benefit from the time value of money. 20. Similarly, the debt of Rs.13,11,493/- claimed as owed to Ms. Sapna Harishchandra Naik is also towards purchase of Equity in the Corporate Debtor and does not constitute a financial debt. There is also no material on record that the same could in any way be stated to be given for time value of money. There is no agreement or resolution to indicate this. Money transferred for equity through e mails without any Board Resolution is in any case irregular, and will not constitute a financial debt u/s 5(8) of the Code. Interestingly while all the correspondence furnished by the Petitioner shows that the amounts stated to be given were for allotment of shares, the Petitioner has termed them as “Loan” in its written arguments submitted during the course of these proceedings, perhaps with the intent of getting the same within the meaning of the term “financial debt”. We shall ignore this. Even otherwise the amounts stated to have been paid would not constitute financial debt as per the Code, for the reasons cited in respect of the earlier amounts dealt with above, even if some amount is otherwise due. 21. We may also add that these proceedings would have no bearing on any other matter before any other Court and are strictly limited to and independent proceedings under the Code and have been examined as such, with regard to the material brought on record. 22. Even as we discuss the above transactions in cursory manner, as the Code does not allow for detailed investigation, the same have to be considered strictly as per the IBC only and as to whether they fall within the definitions incorporated in the Code itself. We find that the Corporate Debtor had sought re-audit vide IA No.312/2019 in the instant CP No.43 was before us, seeking revision of accounts, and which was allowed by us vide order dated 31.12.2019. Hence, if in the process of such recasting and revising of accounts it is noticed that any dues exist, these proceedings will not come in the way of any such exercise conducted by the Corporate Debtor and the dues if any, to be appropriately dealt with. 23. We may also mention that as far as these proceedings are concerned, the Petitioner’s claim, debt and default relate to FY 2012-13 onwards. The Code came into effect in 2016 and this Petition was filed on 25.10.2017. As per our findings above, the financial debt does not exist, as per the provisions of the Code and is also not borne out of the Financial Statements of the Corporate Debtor. Defaults 3 years prior to the Demand Notice are therefore barred by limitation. In fact part of the alleged debt was barred by limitation even prior to the commencement of the Code, and it is well settled that the IBC cannot be used for reviving a time barred debt. 24. Lastly, these proceedings are not recovery proceedings. However, we find that the Petitioner has approached this forum only for recovery. He has not made out any case that the Corporate Debtor is insolvent and unable to repay its debts because of which CIRP should be initiated against it. We find that the Company is seeing an upswing in its business. Earlier Canara Bank had issued a SARFAESI Notice to the Company in July 2016 but has now proceeded to extend loans to it showing confidence in the Company’s solvency. It is engaged in important task of road repairs and has tied up with important government departments like BBMP. The Work Orders placed on the Company by BBMP show that the Company’s business is continuing well and that it is a more than viable going concern. The Company was able to repay the loan of Rs.2,00,00,000 (Rupees Two Crores only) sanctioned by Karnataka Bank Ltd. vide sanction reference GMS (RFD) 182 dated 21.09.2012 to the full and final satisfaction of Karnataka Bank Ltd. Thus the Corporate Debtor is fully solvent and is therefore not a fit case for initiation of CIRP. Further the last Financial Statement available on our record indicates healthy returns from the business and profits. 25. In view of and for the reasons discussed above, we are of the considered view that there was no financial debt within the meaning of the Code. The Company Petition in C.P. (IB) No.99BB/2017 is accordingly dismissed along with pending IAs, if any. No order as to costs.
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