Gateway Offshore Private Limited Vs Runwal Realtors Private Limited (NCLT)
Section 7 application under IB Code (IBC 2016) is not maintainable in case of lack of written document / evidence in the form of loan agreement, promissory note, contract or any document to substantiate its claim that there was a financial debt and a default of the same.
Hon’ble National Company Law Tribunal (NCLT), Mumbai Bench in Company Petition No. CP (IB) 954/MB/C-I/2019 [Gateway Offshore Private Limited and Goodhope Software Private Limited (Financial Creditors / Petitioner) VS Runwal Realtors Private Limited (Corporate Debtor)] dealt with following important question;
Whether written document / evidence in the form of loan agreement, promissory note, contract or any document is necessary to substantiate its claim that there was a financial debt and a default of the same to maintain Section 7 application under IB Code ?
Hon’ble NCLT heard the Ld. Counsel for the Financial Creditors and Ld. Counsel for the Corporate Debtor and perused the records.
It is the contention of the Corporate Debtor’s that there is no written contract regarding any loan being sanctioned to the Corporate Debtor by the Financial Creditors. In this regard, Hon’ble NCLT rely on the stand taken by the NCLAT in Narendra Kumar Agarwal and Ors. v Monotrone Leasing Private Limited and Ors. (Company Appeal (AT) (Insolvency) No. 549 of 2020 (NCLAT; Order dated 19.01.2021) wherein it was held that the written contract cannot be treated as an essential element or prerequisite to prove the existence of Financial Debt (Para 11).
However, the Financial Creditors has failed to bring on record any other evidence in the form of a loan agreement, promissory note, contract or any document to substantiate its claim that there was a financial debt and a default of the same. The Financial Creditors has produced the Corporate Debtor’s Annual reports for the Financial Years 2016-17 and 2017-18. However, the same do not reflect any debt due specifically to the Financial Creditors.
Further, the Financial Creditors has placed reliance on its bank statements and confirmation of accounts of the Corporate Debtor that reflect transactions between the parties. However, in absence of any written document indicating the purpose of the said transactions, it cannot be assumed to have been towards a loan as claimed by the Financial Creditors.
In light of the above facts and circumstances, Hon’ble NCLT hold that while a written contract cannot be treated as a pre- requisite to proving the existence of financial debt, the Adjudicating Authority must be satisfied that the Corporate Debtor is not being dragged into Corporate Insolvency Resolution Process mala fide for any purpose other than the resolution of the Insolvency. In the present matter, there is no evidence to Allow or Admit present Application.
Hence, for the reasons stated above Hon’ble NCLT reject the Company Petition bearing C.P.(IB) No. 954/MB/2019.
FULL TEXT OF THE NCLT JUDGMENT/ORDER
1. This Company Petition is filed under section 7 (“the Petition”) of the Insolvency and Bankruptcy Code, 2016 (IBC) by Gateway Offshore Private Limited and Anr. (“the Financial Creditors or FC”), seeking to initiate Corporate Insolvency Resolution Process (CIRP) against Runwal Realtors Private Limited (“the Corporate Debtor or CD”).
2. The present Petition was filed on 05.03.2019 before this Adjudicating Authority on the ground that a loan for a sum of Rs.4,43,00,000/- (Rupees Four Crore Forty-Three Lakh Only) was advanced by the Financial Creditors i.e. (Rs.1,50,00,000/-from Petitioner No.1 and Rs.2,93,00,000/- from Financial Creditor No.2) along with interest at the rate of 9 % p.a. to the Corporate Debtor and the Corporate Debtor has defaulted in repayment of the same.
3. The total amount claimed to be in default by the Financial Creditors is Rs.5,02,80,500/- (Rupees Five Crore Two Lakh Eighty Thousand and Five Hundred Only). The date of default stated to be is 3.07.2018.
4. The Corporate Debtor is a private company limited by shares incorporated on 10.06.1993 under the Companies Act, 1956, with the Registrar of Companies, Maharashtra, Pune. Its registered office is at 1st Floor, Runwal Roshni Plaza, 41/12 Karve Road, Pune-411004. Therefore, this Bench has jurisdiction to deal with this petition.
Submissions made by the Financial Creditor:
5. The Financial Creditors submits that the Corporate Debtor approached around June 2017 for financial accommodation for a short period for business expansion. Since, the Corporate Debtor was acquainted with the Chartered Accountant of the Financial Creditors, the Financial Creditors decided to disburse the loan to the Corporate Debtor. Thereafter, the Financial Creditors by way of RTGS transferred a sum of Rs.4,43,00,000/- (Rupees Four Crore Forty-Three Lakh Only) in various tranches detailed as under:
i) Amount disbursed by Financial Creditor No.1
