Srei Equipment Finance Limited vs Rajeev Anand on 8 September, 2020


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Supreme Court of India

Srei Equipment Finance Limited vs Rajeev Anand on 8 September, 2020

Author: Rohinton Fali Nariman

Bench: Rohinton Fali Nariman, Navin Sinha, Hon’Ble Ms. Banerjee

                                                                               REPORTABLE

                                      IN THE SUPREME COURT OF INDIA
                                       CIVIL APPELLATE JURISDICTION
                                        CIVIL APPEAL NO. 9425 OF 2019

          SREI EQUIPMENT FINANCE LIMITED                                      … Appellant
                                                      Versus
          RAJEEV ANAND & ORS.                                                 … Respondents


                                                      WITH
                                       CIVIL APPEAL NO. 1911 OF 2020
                         CIVIL APPEAL NO. 3112 OF 2020 (Diary No. 45282 of 2019)


                                                   JUDGMENT

R.F. NARIMAN, J.

1. Permission to file appeal granted in Diary No. 45282 of 2019.

2. In the first matter being Civil Appeal No. 9425 of 2019, an application

under section 7 of the Insolvency and Bankruptcy Code, 2016 was filed by

the appellant before the National Company Law Tribunal (hereinafter

referred to as the “NCLT” for brevity) on 16.03.2017. A loan, which was

given way back in 2008, was restructured into two loans of Rs.18.86 crores

by an agreement dated 01.04.2016, and the second being a loan of
Signature Not Verified

Digitally signed by
Nidhi Ahuja
Date: 2020.09.11

Rs.16.80 crores by agreement dated 24.06.2016, with an interest figure of
13:45:08 IST
Reason:

Rs.2.72 crores, the total amount coming to Rs.38.39 crores.
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3. To this section 7 application, a counter affidavit was filed by the

corporate debtor on 15.05.2017, in which it was stated that though

Rs.35.66 crores have become due, yet a section 7 application was

premature inasmuch as instalment payments that were agreed upon had

not yet matured. It was on this basis that this first application was

withdrawn by the appellant on 30.05.2017 with liberty to file a fresh

application.

4. A fresh application was filed on 04.08.2017, in which it was claimed

that insofar as the 01.04.2016 loan was concerned, the figure of Rs.21.41

crores was still outstanding. The corporate debtor now filed a counter

affidavit in which it denied this and stated that, as a matter of fact, from

2008 till date, an amount of Rs.65.60 crores have been repaid by it. A

supplementary affidavit was filed by the appellant dated 06.06.2018 which,

owing to technical defects, was rejected. A second supplementary affidavit

of 03.08.2018 was therefore filed, replacing this affidavit, in which it was

explained that, as a matter of fact, the corporate debtor has made payment

of Rs.18,86,00,000/- on 13.04.2016 and 16.04.2016, and thereafter of

Rs.16,80,62,000/- from 05.07.2016 and 19.07.2016, as would be evident

from pages 11 & 12 of the counter affidavit filed on behalf of the corporate

debtor. Thus, the sum of Rs.35,66,62,000/- which has been paid by the

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corporate debtor to the appellant is on account of its previous outstanding

of Rs.35,66,61,986/- which was outstanding on the part of the corporate

debtor as on 31.03.2016 as was unconditionally and unequivocally

admitted by the corporate debtor in its counter affidavit filed by it in the prior

proceeding (I.B. No. 54(PB)/2017). A sum of Rs.18,86,00,000/-, disbursed

to the corporate debtor by the appellant on 01.04.2016, is still due and

payable to it.

5. On this pleading, the NCLT finally held:

“21. The Corporate Debtor in the previous round of
litigation had candidly admitted the restructuring of the
total loan amount of Rs.35,66,61,986 by way of executing
two contracts firstly being Agreement bearing No. 105996
dated 01.04.2016 for facility of Rs.18,86,00,000/- and
secondly being Agreement bearing No. 111305 dated
24.06.2016 for facility of Rs.19,53,00,000/- as detailed in
preceding para 5 of the order. It is also evident from a
perusal of supplementary affidavit dated 03.08.2018 read
with a copy of confirmation of transaction (Annexure-B)
that a sum of Rs.18,86,00,000/- was further disbursed by
the Petitioner on 13.04.2016 to the Respondent after the
aforesaid candid admission by it and the said amount is
an independent transaction and having no relevancy with
the previous one. It does not lie in the mouth of the
Corporate Debtor to take a contrary stand and principles
in the nature of estoppel would come in play.”

As a result thereof, the NCLT admitted the application and appointed a

Resolution Professional. A Committee of Creditors was also thereafter

appointed.

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6. The impugned judgment referred to the NCLT order and then held as

follows:

“19. Thus, it is clear that document which was already
rejected by the Adjudicating Authority, has been made the
basis for passing the Order of Admission, which is not
permissible under law.

20. Based on loan Agreement dated 1 st April 2016 the
amount Rs.18,86,00,000/- was disbursed. The bank
certificate filed by ‘Corporate Debtor’ shows that while
amount has been returned back. But the finding of the
Adjudicating Authority that a sum of Rs.18,86,00,000/-
was again disbursed to the ‘Corporate Debtor’ is not
supported by any evidence. The ‘Corporate Debtor’ has
filed the document to prove that he has repaid the said
amount through RTGS transfer to the account of the
‘Financial Creditor’.

21. During the argument, it is admitted by the parties that
previous petition filed by the ‘Financial Creditor’ was
withdrawn. The document(s) filed in the earlier petition,
which was dismissed as withdrawn, could not have been
relied on by the Adjudicating Authority. Therefore, it is
clear that finding of the Adjudicating authority that a sum
of Rs.18,86,00,000/- was again disbursed to the
‘Corporate Debtor’ by the ‘Financial Creditor’ which is still
due and payable is erroneous, without any basis and
unsustainable.”

As a result thereof, the NCLAT allowed the appeal and set aside the

NCLT order, thereby making it clear that the section 7 application will

have to be dismissed.

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7. We have heard learned counsel for the parties, including the parties

in Civil Appeal No.1911 of 2020 and Civil Appeal No.3112 of 2020. A bare

reading of the NCLT order shows that it is only after a perusal of the

documents, pleadings, and the supplementary affidavit of 03.08.2018,

including the counter affidavit in the earlier section 7 application, that the

NCLT came to the conclusion that a loan amount remained outstanding.

The NCLAT, when it dealt with the NCLT order, wrongly recorded that

documents which were already rejected by the adjudicating authority

could not have been the basis of the order of admission. The NCLAT also

wrongly recorded that there was no further evidence in support of the fact

that any amount was outstanding. Further, the NCLAT also held that a

‘document’ filed in the earlier petition that was dismissed as withdrawn

could not have been relied upon by the adjudicating authority. The

NCLAT is wrong on all these counts. As has been stated earlier,

documents evidencing an outstanding loan amount were produced; a

supplementary affidavit dated 03.08.2018 was also relied upon; and the

admission made in the counter affidavit that was made in the first round

of litigation, can by no means be described as a ‘document’ in an earlier

petition that could not be relied upon. The ‘document’ was not a pleading

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by the appellant – it was a counter affidavit by the corporate debtor in

which a clear admission of the debt being outstanding was made.

8. For all these reasons, we set aside the NCLAT order and restore

that of the NCLT. The resolution proceedings will continue from the stage

at which they were interrupted. Accordingly, Civil Appeal No.9425 of

2019 is disposed of.

9. Accordingly, in view of our judgment in Civil Appeal No.9425 of

2019, Civil Appeal No.1911 of 2020 and Civil Appeal No.3112 of 2020 are

also disposed of.

10. Intervenors have also been heard. Application for directions by the

intervenor is allowed to be withdrawn to be pursued before the

appropriate forum.

………………………………J.

(Rohinton Fali Nariman)

………………………………J.

(Navin Sinha)

………………………………J.

(Indira Banerjee)
New Delhi;

September 08, 2020.

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