Unlike Section 9, There Is No Scope Of Raising A Dispute In A Section 7 Petition: NCLT Mumbai Reiterates
The National Company Law Tribunal, Mumbai Bench, comprising Shri H. V. Subba Rao (Judicial Member) and Shri Shyam Babu Gautam (Technical Member), while adjudicating an application under Section 7 of Insolvency and Bankruptcy Code, 2016 (“IBC, 2016”) in Idea Lenders & Anr. vs Navdurga Advisory Private Limited has reiterated that there is no scope of raising a dispute under a...
The National Company Law Tribunal, Mumbai Bench, comprising Shri H. V. Subba Rao (Judicial Member) and Shri Shyam Babu Gautam (Technical Member), while adjudicating an application under Section 7 of Insolvency and Bankruptcy Code, 2016 (“IBC, 2016”) in Idea Lenders & Anr. vs Navdurga Advisory Private Limited has reiterated that there is no scope of raising a dispute under a Section 7 petition
Background Facts
Idea Commercials and M/s. R.P. Lath & Sons (“Financial Creditors”) jointly advanced a loan amount of Rs. 1,15,00,000/- to Navdurga Advisory Private Limited (“Corporate Debtor”) at an interest rate of 18% p.a. in pursuance of a Loan Agreement dated 21.10.2021. The Corporate Debtor agreed to repay the sum along with interest by 2.12.2021. The Corporate Debtor failed to repay the money and the Financial Creditors issued a Demand Notice dated 13.12.2021 for immediate payment. It was contended by the Financial Creditors that the Corporate Debtor has admitted the debt of the Financial Creditors as “Short-term burrowing” in its audited balance sheet for the year ended 31.03.2022.
On the contrary, it was contended by the Corporate Debtor that the Banker’s Book Certificate from the financial institutions maintaining accounts of the Financial Creditors was not furnished. Further, the Financial Creditors failed to furnish any certificate as required under the Banker’s Books Evidence Act, 1891 (‘BBE Act, 1891’). Further, due to the COVID-19 Pandemic, the Corporate Debtor had not received payments from its clients, due to which it was not able to repay the loan of the Financial Creditors
Findings of the Tribunal
The Tribunal observed that the Corporate Debtor has admitted the Debt of the Financial Creditors as “Short-term Borrowings” in its audited Balance Sheet for the year ended 31.03.2022. Reliance was placed by the Tribunal on the judgment of the Supreme Court in Swiss Ribbons Pvt. Ltd. & Ors. Vs. Union of India & Ors. [Writ Petition (Civil) No. 99 of 2018] to hold that, unlike Section 9, there is no scope of raising a dispute under a section 7 petition. As soon as a ‘debt’ and ‘default’ is proved, the adjudicating authority is bound to admit the petition.
With the aforesaid observations, the Tribunal admitted the petition of the Financial Creditors and initiated Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor.
Case:Idea Lenders & Anr. vs Navdurga Advisory Private Limited
Case No. CP (IB) 249/MB/2022
Counsels for the Applicants Mr. Shadab S. Jan a/w Mr. Mufaddal Paperwala
Counsel for the Respondent Adv. Aniket Worlikar