A Financial Creditor filed a petition under Section 7 of the IBC claiming a loan from 2007. The Tribunal held the transaction was an investment for equity, not a loan, and the petition was time-barred, dismissing it.
Petition dismissed as the financial debt claim was not a loan and was barred by limitation.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE NATIONAL COMPANY LAW TRIBUNAL, COURT-V, MUMBAI BENCH
C.P. No. 60/IBC/MB/2021
Under Section 7 of the Insolvency and Bankruptcy Code, 2016 read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudication Authority) Rules), 2016 In the matter of
Sanjay Pagrani alias Raju Pagrani proprietor of Multifragrance SL . B 35617877, Calle Sao Paulo 50,
El Sebadel, 35009, Las Palmas de Gran Canaria, Spain.
……Financial Creditor/
Petitioner
U.S. Hospitality Private Limited
Block no. 3, Plot no. 142, Ram Bhuvan, opp. Kanada high school, Mumbai, Maharashtra- 400 031
..…..Corporate Debtor
Order Reserved on: 14.12.2022
Order Pronounced on: 17.01.2023
Coram:
Hon’ble Shri Kuldip Kumar Kareer, Member (Judicial) Hon’ble Smt. Anuradha Sanjay Bhatia, Member (Technical)
NATIONAL COMPANY LAW TRIBUNAL, COURT-V, MUMBAI BENCH
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For the Petitioner : Ms. Rita Bhatia (Advocate) For the Corporate Debtor/ Respondent : Ms. Jennifer Michael (Advocate)
Per: Shri Kuldip Kumar Kareer, Member (Judicial)
Order
Facts of the case
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through its Lawyers vide letter dated 18.09.2017, wherein the Respondent has acknowledged the receipt of US $ 2,50,000/-. Thus, the Respondent owes the amount to Rs. 1,11,22,552.50/- to the Petitioner and has committed default in repayment of the same.
Reply by the Respondent
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allegedly paid by him for acquisition of 25% equity interest in the Respondent Company . Furthermore, a similar stand was taken by the Petitioner through his letter dated 24.07.2020. The Respondent further submits that the Payment Advise dated 13.01.2007, issued by Yes Bank clearly states that the purpose of remittance is “ Investment in Purchasing, Constructing and Operating a Hotel Business in India” and makes no mention of the transaction being a loan.
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litigation never came forward with his purported claim of USD 250,000/. The Petitioner, in his legal notices, claims to have been coerced into ‘investing’ whereas in the present Petition claims the said amount as ‘Unsecured Loans’. The Respondent states that the Present Petition is initiated for the purpose of threatening and extorting money from Ms. Simi Jagtiani.
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reflected in the Bank Statement (Exhibit-G) of the Respondent. The Petitioner further requested the Respondent to transfer an amount of Rs. 40,00,000/- to another investor in the same project as the Petitioner owed monies to such other investor, i.e. his uncle Mr. Rajesh Ahuja, and the said transfer is reflected in the financial statements of the Respondent. Furthermore, various amounts aggregating to more than Rs. 50,00,000/- were to be adjusted towards various expenses paid off or required to be paid off by the Respondent Company on behalf of the Petitioner. According to the Respondent, it is the Petitioner who owes money to the Respondent Company since the adjustments were made on the basis of the instructions given by the Petitioner. Therefore, the amount as received from the Petitioner in the year 2008 in the Respondent’s books is reflected as Rs. 45,22,553/-. The Respondent further submits that the amount claimed by the Petitioner is neither due nor payable by the Respondent.
Rejoinder by the Petitioner
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Balance Sheet of the Respondent Company as on 31.03.2007. The said amount, which was invested in the Company on false assurances of issuing a 25% equity share in the Respondent No.1 Company, has been surreptitiously reduced to Rs.42,22,552.50/- in the following Balance Sheets till 31.03.2019.
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regarding the investment made by the Petitioner in the Respondent company.
16.The Petitioner submits that the conduct of the Respondent in the year 20142015 evoked suspicion in the mind of the Petitioner and therefore, he issued letter dated 14.09.2017 to the Respondent who, through its letter dated 18.09.2017, for the first time admitted as follows:
"In fact, the $2,50,000 payment referred to in your letter was paid by Pagrani's company Multifragances in Spain to Mr Jagtiani's company US Hospitality Private Ltd, in India. Furthermore, this payment was not to entitle your client to a 25% equity interest in Mr Jagtiani's company, but rather was an investment in a specific project US hospitality was involved, namely a project to lease real estate in Pune, India, with the hopes to build a hotel on the said property."
The Petitioner submits that, on account of this admission made by the Respondent that the Respondent company had received "investment," a fresh cause of action arose to the Petitioner to file the present proceedings to recover the amount invested in the Respondent company with which the Respondent had purchased property situated in Pune which is under litigation. It is, therefore, denied that the above Petition has been filed after a lapse of 13 years.
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FINDINGS:
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equivalent to Rs. 1,11,22,552.50 as on 31st March 2007 and presently Rs. 1.85 Crores considering the enhanced value of USD. However, the Petitioner has not relied upon any loan document which might have been executed between the Petitioner and the Corporate Debtor with regard to the terms and conditions of the said loan transaction along with any repayment schedule or the rate of interest. However, surprisingly, the Petitioner has relied upon the notice dated 14th September, 2017 (Annexure -E) which was served upon Mr. Daljeet Jagtiani (a Director of the Corporate Debtor) wherein it was stated that the Petitioner wired USD 2,50,000/- and further that the Petitioner was entitled to obtain 25% equity interest in the Corporate Debtor, i.e., U.S. Hospitality Private Limited in exchange for the said sum of money. In response to the notice dated 14.09.2017, reply (Annexure -F) dated 18.09.2017 was sent on behalf of Mr. Daljeet Jagtiani stating that the payment of USD 2,50,000/- was not towards 25% equity interest but was rather an investment in a specific project of U.S. Hospitality Private Limited as the said Company was involved in the Project to lease Real Estate in Pune, India with a hope of building a hospital on the said property. The Petitioner has further relied upon notice dated 24.07.2020 got served by the Petitioner upon the Corporate Debtor and its Directors and in Para No. 3 of the notice, it has been reiterated by the Petitioner that on 1st September, 2007, he wired a sum of USD 2,50,000/- from his Bank Account Multi Fragrances to the Corporate Debtor and further that the Petitioner was coaxed and coerced by his wife to invest huge amount in her father’s project
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with an assurance that he would be given a 25% stake in all assets of the Company.
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drawn that the transaction in question was a loan transaction or that the amount in question was borrowed by the Corporate Debtor from the Petitioner. If the reply dated 18.09.2017 is read carefully, it transpires that even though a denial has been put forward in respect of proposed 25% equity interest, yet the Respondent has stated that it was an investment and the so-called admission made in the reply cannot be said to be an admission on the part of the Corporate Debtor that it was a loan transaction.
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reply that an amount of Rs. 20 lacs were paid back to the Petitioner as on 11.02.2008 as is evident from the statement of account (Exhibit G) attached with the reply. So far as the Petitioner is concerned, in the rejoinder filed by him, the transfer of an amount of Rs. 20 lacs as on 11.02.2008 has not been specifically denied and it has only been stated that it was a personal transaction not relating to the transaction which took place in the year 2007. Even this plea raised on behalf of the Petitioners seems to be a tentative one and does not really explains the exact position and circumstances under which a sum of Rs. 20 lacs were paid to the Petitioner.
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from 09.01.2007 i.e. any time prior to 09.01.2010. However, the Petitioner has claimed that the date of default was 24th July, 2020 which is the date of the notice sent by the Petitioner to the Corporate Debtor and its Directors stating that he was coaxed and coerced by his estranged wife, Ms. Simi Jagtiani to invest with the assurance that he would be given a 25% stake in the assets of the Company. By no stretch of imagination, the date of issuing said notice can be treated to be the date of default. The date of default in plain language would mean the date when the borrower refuses to pay or commits default in payment of instalment of principle or interest as and when the same fall due. As per record, after the transaction took place on 09.01.2007, the Petitioner issued first notice to the Director, Mr. Daljeet Jagtiani on 14.09.2017. In our considered view, even the date of default is not correctly mentioned in the Petition.
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of the Petitioner so far as the point of limitation is concerned. After the balance sheet of 2008, the Petitioner has relied upon the balance sheet of 2018 and the intervening balance sheets have not been placed on record which means that there is no acknowledgment of liability by the Corporate Debtor from 2008 onwards. It is well settled that an acknowledgment is valid only if it takes place before the period of limitation finally expires. Therefore, if it is presumed from the sake of arguments that the Corporate Debtor acknowledged the liability lastly on 31st March, 2008 as reflected in the balance sheet and the subsequent acknowledgment took place in the balance sheet of 2018, the same is of no consequence as per the provisions of Section 18 of the Limitation Act as the balance sheets of the intervening years have not been produced. The Petitioner has also relied upon the balance sheet for the year ending 31st March 2019 but there is no reference of the amount/ transaction in question in the said balance sheet.
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the Petitioner. Firstly, the very transaction on the basis of which the present Petition is filed is not a loan transaction as there is ample indication from the record that the Petitioner had made the payment of USD 2,50,000/- with a view to acquire 25% equity stake in the Corporate Debtor or one of its Projects. Therefore, the said claim/transaction does not fall within the four corners of the definition of the Financial Debt in terms of Section 5(8) of the Code, as it has absolutely no connotation or effect of a commercial borrowing. Secondly, the Petitioner has not properly explained the entry in Exhibit-G whereby he alleged received back a sum of Rs. 20 lacs on 11.02.2008. Apart from that, as pointed out above, the Petition is miserably barred by time.
Sd/Sd/Anuradha Sanjay Bhatia Kuldip Kumar Kareer Member (Technical) Member (Judicial)
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2 issues framed by the court
Whether a payment made to acquire an equity stake constitutes a financial debt under the Insolvency and Bankruptcy Code.
Whether the company petition filed to initiate Corporate Insolvency Resolution Process is barred by the law of limitation.
3 provisions across 2 enactments
Sanjay Pagrani alias Raju Pagrani
U.S. Hospitality Private Limited
Kuldip Kumar Kareer
Anuradha Sanjay Bhatia
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
