NCLT rejects the application of the petitioner finding that the petitioners have failed to substantiate the amount of interest in case of default to be paid to the petitioner agreed between the parties; finds that the deposit made by the petitioner is not a financial debt under the IBC.
In the present matter, petition is filed by the petitioners/financial creditors for initiation of Corporate Insolvency Resolution Process against respondent/corporate debtor company Desia Hotel and Resort Pvt. Ltd in form 1 of the Insolvency & Bankruptcy Code (Application to the Adjudicating Authority) Rules, 2016 in terms of section 6 of the Insolvency and Bankruptcy Code, 2016 (IBC) read with Rule 4 of the Insolvency & Bankruptcy Code (Application to the Adjudicating Authority) Rules, 2016. Petitioner avers that the corporate debtor availed unsecured debt from the petitioner and has defaulted in repayment of the same along with monthly interest to the petitioner.
NCLT peruses section 7 of the IBC and finds that the financial creditor is required to establish certain facts prior to furnishing an application under section 7(1) of the IBC. NCLT observes that the date of notice for default in payment sent by the petitioner is the date of the alleged default. NCLT finds that the petitioners have failed to file the agreement entered between the parties with regards the debt and has also failed to produce any documents to show the agreed term of interest for default in payment between the parties. Further, NCLT observes that the petitioners have also failed to produce any document in support of the date of default in payment by the respondent. NCLT also observes that the petitioners have also failed to produce any law to prove that in absence of any agreement to repay the amount, the date of default under section 7 of the IBC can be treated as the date on which the demand notice was sent.
NCLT observes that, “the main distinction between sections 7 and 9 of the IBC is that it is not necessary to send the notice upon the corporate debtor to initiate the proceedings under section 7 of the IBC as was decided by SC in the matter of Innovative Industries Ltd. v ICICI Bank, (2017)205 Comp Cas 57 (SC).”
NCLT rejects the contention of the applicants that the date of the default is the date of the notice sent by the petitioners to the Respondent. NCLT further observes that, “ if the date of the notice is not treated as the date of default then the application was filed after 3 years after the cause of action arose and hence, the application is barred by limitation. NCLT finds that the petition has failed to show what the date of cause of action is as well as the date of default.”
With regards the amount deposited by the petitioners, NCLT observes that the petitioners have failed to mention in the application the fact that the amount was deposited against the consideration for time value for money. Since the petitioners failed to show the amount of interest agreed upon between the parties, NCLT finds that case of petitioners does not fall under Section 5(8)(a) of the IBC and also under (b), (c), (d),(e), (f), (g), (h) or (i) of section 58 of IBC and rejects the petitioner’s contention that the amount deposited comes under the financial debt and that the petitioner comes under the definition of financial creditor under section 5(7) of IBC. NCLT thus, rejects the application since the petitioner failed to bring on record the default recorded with the information utility or such other record or evidence.