Insolvency & BankruptcyInsolvency and BankruptcyLegal UpdatesNCLATRulingsTribunal & Appellate

NCLAT it is not a ‘Court of Law’ to not decide money claim and states that existence of undisputed ‘Debt’ is ‘Sine Qua Non’ for triggering CIRP

Hardeep Singh Sawhney vs. Sawhney Builders Pvt. Ltd.

NCLAT dismisses appeal against order of NCLT; states that there exists a dispute between the parties regarding the sum in question and the same should be taken up before the appropriate forum.

The appellant – Hardeep Singh Sawhney filed the present application under Section 7 of the Insolvency & Bankruptcy Code, 2016 (‘I&B’ Code) read with Rule 4 of the ‘I&B’ Code Rules, 2016 before the Adjudicating Authority praying to initiate ‘Corporate Insolvency Resolution Process’ in respect of Sawhney Builders Pvt. Ltd. – Respondent / ‘Corporate Debtor’. 

Appellant submits that his presently deceased mother finalised the purchase of one Villa and paid 90% of the value of the said Villa to the Respondent but that no construction had commenced till date and therefore, he was forced to prefer an Application Under Section 7 of the ‘I&B’ Code read with Rule 4 of the ‘I&B’ Rules, 2016 seeking to initiate CIRP against the Respondent. Appellant further submits that the Adjudicating Authority had wrongly rejected the Application Under Section 7 of the ‘I&B’ Code when there existed no ‘Dispute’ between the parties.

Respondent states that the said sum was shown as ‘Investment Made’ with a view to avoid ‘Capital Gain Tax’. The Respondent in its Reply before the Adjudicating Authority had averred that no assurance was given from the delivery of the Villa in favour of either Ms. Paramjeet Kaur Sawhney (since Deceased) or to and in favour of Appellant / Petitioner by the Respondent / Company, because of the simple reason that no allotment was ever made by the Respondent Company. As such, the Appellant / Petitioner is not a ‘Financial Creditor’. Respondent further submits that there is no debt much less sum of Rs. seven crores as claimed by the Appellant. That apart, the partnership firm (run by the Appellant’s father) from the ‘Financial Year’ 2007 was crediting advance to ‘Sawhney Builders Pvt. Ltd.’ and the said advances were regularly made between the two as per Ledger Account of ‘Sawhney Export House’ with ‘Sawhney Builders Pvt. Ltd.’

NCLAT states that,

 “the Adjudicating Authority while dealing with an application Under Section 7 of the Insolvency & Bankruptcy Code, 2016 (‘I&B’ Code, for short) is not required to look into any other aspect for ‘Admission’ of the Application except that he is satisfied with an act of default and had enquired that the ‘Application’ was complete and any disciplinary proceedings were pending against the prospective ‘Resolution Professional’, which even he shall admit the Application.”

Further NCLAT states that, 

“ if the ‘Financial Debtor’ is able to establish the existence of ‘Debt’ and the ‘Corporate Debtor’ default, an Application was complete in all aspects, then the Application would be admitted. To sustain an Application u/s  7 of the ‘I&B’ Code, the Applicant is to establish the existence of a ‘Debt’, which is due from the ‘Corporate Debtor’. Put it in precise term, his existence of undisputed ‘Debt’ is ‘Sine Qua Non’ for triggering the ‘Corporate Insolvency Resolution Process’. Always, it is open to the ‘Corporate Debtor’ or its Directors to point out that the ‘Debt’ is not payable by the ‘Corporate Debtor’ in ‘Law’ and in fact.”

 NCLAT notes that the Appellant did not produce an Allotment Letter or an Agreement because the Project was cancelled as early as in the year 2011. NCLAT further notes that The Appellant had not come out clean in his Application u/s 7 of the ‘I&B’ Code because he had not mentioned about the fact that his father is Director and Shareholder of the Respondent Company.

NCLAT finds that there exist serious dispute as to whether the Respondent / ‘Corporate Debtor’ owes any sum to the Petitioner / ‘Financial Creditor’ and the said dispute cannot be determined in a summary proceedings under the ‘Insolvency & Bankruptcy Code’ in the considered information of this Court. NCLAT states that the dispute between the parties should be addressed before the ‘Competent Forum’. NCLAT further states that the Adjudicating Authority under the ‘I&B’ Code is not a ‘Court of Law’ and it does not decide money claim or ‘Suit’  and that the Appellant has failed to establish when there is any ‘Debt’ recoverable from the Respondent Company and the occurrence of default. NCLAT observes that the order passed by the AA is free of infirmities and dismisses the appeal for lack of merit.

Show More

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *