Thursday 29 October 2020

Technology Development Board Vs. M/s Logic Eastern (India) Private Limited & Ors - Tribunal is not supposed to ascertain the quantum of Default

 NCLT Principal Bench (18.07.2018) in Technology Development Board  Vs. M/s Logic Eastern (India) Private Limited & Ors..[(IB)-623(PB)/2017]  held that: Tribunal is not supposed to ascertain the quantum of default or to pass a decree as to how much is actually due to the Financial Creditor.

 

Excerpts of the order;

# 18. In this regard it is seen that the variance in the amount of default is mainly on account of difference of dates. Be that as it may the corporate debtor would be entitled to raise objection  of any mismatching of dues before the IRP/ committee of creditors. In the present proceeding the Tribunal is not  supposed to ascertain the quantum of amount of default or to pass a decree as to how much is actually due to the applicant financial creditor. The Code requires the adjudicating authority to only ascertain and record satisfaction in a summary adjudication as to the occurrence of default before admitting the application. What is material is that the default is at least 1 Lakh. Once the default is Rupees one Lakh or more the Code gets triggered in view of Section 4 of the Code. 


# 19. The respondent corporate debtor has taken another objection that the applicant itself had initiated arbitration proceeding against the respondent company and the issue of "defaultis pending and is under consideration before the Ld. Arbitrator. It is stated that since the applicant itself had revised the payment schedule vide letter dated 05.02.2016, there is no default committed by respondent in repayment of loan amount


# 20. In this regard it is now well settled that pendency of arbitration or suit cannot be a ground to deny admission of an application under Section 7 of the Code, once the application is complete and there has been commission of default. 


# 30. It is thus seen that applicant had disbursed an amount of Rs. 4.12 Crores to the corporate debtor in three instalments. After adjusting the repayments made by the corporate debtor a claim has been made for Rs. 8,34,91,352/- which includes Rs 4,12,00,000/- towards principal along with applicable interest


# 31. The material on record clearly goes to show that respondent had availed the loan facilities and has committed default in repayment of the loan amount. In an application under Section 7 of the Code when the debt is not disputed and there has been occurrence of existence of default which is much more than rupees 1 lakh as provided under Section 4 of the Code, the application is clearly maintainable and deserves to be admitted


# 32. Under sub-section 5 (a) of Section 7 of the code, the application filed by the applicant financial creditor has to be admitted on satisfaction that:

  • 1. Default has occurred

  • 2. Application is complete, and 

  • 3. No disciplinary proceeding against the proposed IRP is pending 


# 33. In the case in hand the respondent company has committed default in repayment of the outstanding amount. Moreover, the application of the financial creditor is complete and there is no disciplinary proceeding pending against the proposed IRP. We are satisfied that the present application is complete and the applicant financial creditor is entitled to claim its outstanding financial debt from the corporate debtor and that there has been a default in payment of the financial debt


# 34. As a sequel to the above discussion and in terms of Section 7 (5) (a) of the Code, the present application is admitted

 

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The sole purpose of this post is to create awareness on the "IBC - Case Law" and to provide synopsis of the concerned case law, must not be used as a guide for taking or recommending any action or decision. A reader must refer to the full citation of the order & do one's own research and seek professional advice if he intends to take any action or decision in the matters covered in this post.