Petition under Section 7 IBC filed by a creditor against Tridhaatu Builders LLP for default on a claimed loan. The Court rejected the petition, finding no privity of contract as the subject agreements were between group partners, not the LLP, and thus no maintainable financial debt existed.
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 MUMBAI BENCH, COURT-I
CP (IB) 311/MB/2020
Under section 7 of the Insolvency and Bankruptcy Code, 2016
In the matter of
Mr. Dharmesh Kishore Chheda
702, Runwal & Omkar Esquare, Eastern Exp Hwy, Sion East, Mumbai – 400022.
… Financial Creditor /Petitioner
Versus
Tridhaatu Builders LLP
5th Floor, B-Wing, Shrikant Chambers, Near R. K. Studio, Sion-Trombay Road, Chembur, Mumbai - 400071.
… Corporate Debtor /Respondent
Order Pronounced on: 10.02.2023
Coram:
Hon'ble Member (Judicial) : Justice P. N. Deshmukh (Retd.) Hon'ble Member (Technical) : Mr. Shyam Babu Gautam
Appearances:
For the Financial Creditor : Mr. Aditya Udeshi, Advocate. For the Corporate Debtor : Mr. Vishesh Kalra, Advocate.
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ORDER
Per: Justice P.N. Deshmukh, Member (Judicial)
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Road, Chembur, Mumbai - 400071. Therefore, this Bench has jurisdiction to deal with this petition.
Submissions made by the Financial Creditor by way of Petition:
| Sr. No. | Date | Amount (in Rs.) |
|---|---|---|
| 1. | 21.10.2013 | 50,00,000/- |
| 2. | 24.10.2013 | 1,00,00,000/- |
| 3. | 29.10.2013 | 2,00,00,000/- |
| 4. | 22.03.2016 | 56,00,000/- |
| 5. | 22.03.2016 | 44,50,000/- |
| Total | 4,50,50,000/- |
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Corporate Debtor to the Petitioner is placed in “Annexure 26” of the Petition.
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| Sr. No. | On or before | Amount (in Rs.) |
|---|---|---|
| 1. | 12.08.2016 | 15,00,00,000/- |
| 2. | 25.08.2016 | 5,00,00,000/- |
| 3. | 15.09.2016 | 5,40,48,430/- |
| 4. | 31.12.2016 | 19,67,59,954/- |
| Total | 45,08,08,384/- |
Tridhaantu also agreed to pay interest on One Time Settlement, Princecare Unsecured Loans and Third-Party Unsecured Loans at 21% interest per annum and on Misc. Expenses 18% per annum from 15.08.2016 till the date of repayment.
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IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, COURT-I
CP (IB) 311/MB/C-I/2020
the cheques were returned dishonored with the remarks as “Funds Insufficient”. Copy of the Cheques and Intimation of dishonor are placed at “Annexures 10, 11, 12, 13, 14 and 15” of the Petition.
Submissions made the Corporate Debtor by way of reply:
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CP (IB) 311/MB/C-I/2020
contract between the Corporate Debtor and the Petitioner. The transaction between the parties does not classify as a Financial Debt, further the debt claimed by the party is time barred.
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Tribunal before the High Court - the Management of the Appellant-Bank against the entire Award and the Respondent against the part of the Award refusing back wages. Both the Writ Petitions i.e. W.P. No. 621 of 2009(S) filed by the Respondent and W.P. No. 3091 of 2009(S) filed by the Appellants were heard analogously and dismissed by a common order dated 8th May 2012. The Respondent not only mentioned the fact that he had initiated a Writ Petition earlier, but also annexed a copy of the common judgment and order of the High Court in the earlier Writ Petitions as Annexure P-4.
15. Even though, the Court may not have specifically dealt with the issue of res judicata raised by the Appellant-Bank as a preliminary issue, it is clear from the judgment and order of the Single Bench as also the impugned judgment and order of the Division Bench, that the second writ petition was not barred by the principles of res judicata or analogous principles.
16. The principles of res judicata are attracted where the matter in issue in the later proceedings have directly and substantially been in issue in earlier proceedings, between the same parties, in a competent forum having jurisdiction. Res judicata debars the Court from exercising jurisdiction to determine the lis, if it has attained finality between the parties. There is a distinction between res judicata and issue estoppel. In the case of issue estoppel, a party against whom an issue has been decided would be estopped from raising the same issue again.”
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(Company Appeal (AT)(Insolvency) No. 699 of 2022) to establish that Doctrine of res judicata is applicable even to the proceedings under IBC and challenge to the findings in incidental or collateral proceedings amounts to an abuse of process of Court:
“In addition to the above judgment of Hon’ble Supreme Court, in the recent judgment in Civil Appeal No. 4840 of 2021 dated 17.08.2021 in the matter of Neelama Srivastava Vs. State of UP and Ors. held that when the judgment attained finality, it cannot be re-agitated in any collateral or incidental proceeding. In Rudra Kumar Sain and Ors. Vs. Union of India and Ors. while dealing with identical issue, the Hon’ble Supreme Court held that reconsideration of the judgment of the Court which has attained finality is not normally permissible. The decision upon the question of law rendered by this Court was conclusive and would bind the Court in subsequent cases. The Court cannot sit in appeal against its own judgment.
37. In the matter of Union of India Vs. Maj. S.P. Sharma, the Hon’ble Apex Court held a decision rendered by the Competent Court cannot be challenged in a collateral proceeding for the reason that it is not permissible to do so as and when chooses and the finality of the proceeding would seize to have any meaning.
38. Applying the principle laid in the above judgment to the present facts, to give quietus to the dispute and to avoid abuse of the process of Court to challenge the judgment which attained finality in a collateral or incidental proceeding, the appellants must be nonsuited.
39. In view of the principle laid down in the above judgements, the principle of resjudicata, though a part of CPC, it would be
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applicable to the proceeding of this Tribunal and IBC. Only to prevent the abuse of process of law and give a finality to any proceeding, or orders, and to avoid an endless litigation to frustrate the very object of enacting IBC, the claim of appellants is liable to be rejected.”
Submissions made by the Financial Creditors by way of Affidavit in Rejoinder:
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IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, COURT-I
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Retirement Deed dated 13th August, 2016, the Corporate Debtor is liable to make payment of interest at the rate of 21% per annum on the principal outstanding amount and the Corporate Debtor has, in its books of accounts, only recorded the principal outstanding amount and has not factored in the interest due and payable.
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Bank of India and Anr. (2021 SCC Online SC 267) that an acknowledgement of debt extends limitation for filing an application under the provisions of IBC. In the present case, admittedly, there is such an admission of liability by the Corporate Debtor on 31.03.2017, 31.03.2018, 31.03.2019, 23.07.2019 and on 31.03.2020 and the last of which is made by the Corporate Debtor on 31.03.2020. The date of filing the present Petition is 20.01.2020. Therefore, admittedly, in the present case, such admissions extend the time for filing the application under Section 7 of the IBC and therefore, the present Petition is within limitation.
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Findings:
This Limited Liability Retirement Agreement (this Agreement) is made and entered into on the 12th August, 2016, at Mumbai by and between: i. Mr. Krishnan Muthukumar.
ii. Mr. Dhananjay Anand Sandu.
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iii. Mr. Pritam Chivukula.
vi. Sandu Homes LLP. vii. Four Seasons Developers Private Ltd. viii. PrinceCare Developers LLP.
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IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, COURT-I
CP (IB) 311/MB/C-I/2020
Private Limited) vs Tridhatu Aranya Developers LLP whereby it is held as under :
“10. It is the main case of the Appellant that there is a privity of contract between the Appellant and the Corporate Debtor Company having regard to the principal outstanding amount being reflected in the Balance Sheet for the year ending March 2019; the Supplementary Retirement Deed executed by the continuing partners of the ‘Corporate Debtor’ recording the factum of unsecured loans and finally the cheques issued by the ‘Corporate Debtor’ in favour of the Appellant towards payment of the due amount. At the outset, we address ourselves to the issue raised by the Appellant that the Supplementary Retirement Deed evidences a privity of contract between the Appellant and the ‘Corporate Debtor’. 11. It is evident from the material on record that both the Retirement Deed dated 12/08/2016 and the Supplementary Retirement Deed dated 13/08/2016 were entered into between the ‘Tridhaatu Group’ and ‘Prince Care Group’, to which the ‘Corporate Debtor’ ‘Tridhaatu Aranya Developers LLP’ is not a party. The ‘Corporate Debtor’ is a Limited Liability Partnership incorporated under the provisions of the Limited Liability Partnership Act, 2008, and is a body incorporate independent of its partners. It is to be seen whether any debt/liability has been taken up by a partner in the name of the LLP. In the Application under Section 7 of the Code filed by the Appellant herein the ‘Corporate Debtor’ is described as an LLP, and as a part of the ‘Tridhaatu Group’. The repayment amounts and the terms reflected in Clause
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1(A)(c) of the Supplementary Retirement Deed dated 13.08.2016 are between ‘Tridhaatu’ and ‘Prince Care’ ‘Groups’ and essentially between the partners thereof, pursuant to which, the post dated cheques were issued. Likewise, Clause 4, which speaks of ‘Default in Repayment’ also establishes that the terms are between the Partners of ‘Tridhaatu’ and ‘Prince Care’ ‘Groups’ only. Even the correspondence dated 10.06.2019 is addressed by the representatives of the ‘Prince Care Group’ to the representatives of the ‘Tridhaatu Group’. It is specifically stated in the legal Notice dated 05.08.2019 issued on behalf of the ‘Prince Care’ ‘Group’ that the cheques issued by ‘Tridhaatu Builders LLP’ and ‘Tridhaatu Aranya Developers LLP’ were dishonoured, against which issue, the Appellant has issued Notices under the provisions of Section 138 of the Negotiable Instruments Act, 1881 and that their claim is against the ‘Tridhaatu Group’. The ‘Corporate Debtor’ is a distinct legal entity and the aforenoted ‘Deeds’ do not construe any privity of contract between the ‘Corporate Debtor’ and the Appellant and further establishes that mere issuance of these 2 cheques does not construe ‘liability’ having consideration for ‘time value of money’. Further, the LLP Retirement Deed refers to a lumpsum amount of Rs.45,08,08,384/- to be paid by the ‘Tridhaatu Group’. It is the case of the Respondent that out of this sum, a sum of Rs.6,13,34,457/- is towards miscellaneous expenses and the remaining amount is not bifurcated and is towards ‘One Time Settlement’.
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observed in a catena of Judgements that IBC is not a ‘recovery’ proceeding or a Code for settlement of collateral disputes.”
Sd/-
Sd/-
SHYAM BABU GAUTAM JUSTICE P. N. DESHMUKH Member (Technical) Member (Judicial)
10.02.2023 SAM
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3 issues framed by the court
Whether the debt claimed constitutes a 'financial debt' under the Insolvency and Bankruptcy Code, 2016, given the absence of privity of contract between the creditor and the corporate debtor.
Whether the petition is maintainable when the underlying agreements were entered into by the partners of the group and not the corporate debtor itself.
Whether the acknowledgment of debt in the balance sheet extends limitation for filing an application under Section 7 of the IBC in the absence of a specific financial debt.
Colour shows how this judgement treated each authority
Shyamji Optima Pvt. Ltd. vs Tridhaatu Aranya LLPReferred¶16
Shyamji Optima Pvt. Ltd. vs Tridhaatu Aranya LLP
Central Bank of India & Ors. vs Dragendra Singh JadonReferred¶18
Central Bank of India & Ors. vs Dragendra Singh Jadon [Civil Appeal No. 5036 of 2022]
Vikas Dahiya vs Arrow Engineering LimitedReferred¶24
Vikas Dahiya vs Arrow Engineering Limited
M/s. Orator Marketing Pvt. Ltd. versus M/s. Samtex Desinz Pvt. LtdReferred¶27
M/s. Orator Marketing Pvt. Ltd. versus M/s. Samtex Desinz Pvt. Ltd
Asset Reconstruction Company (India) Limited vs Bishal Jaiswal and Anr.Applied¶30
Asset Reconstruction Company (India) Limited vs Bishal Jaiswal and Anr.
Laxmi Pat Surana vs Union Bank of India and Anr.Referred¶24
Laxmi Pat Surana vs Union Bank of India and Anr.
Ashok Commercial Enterprises & Anr. vs Parekh Aluminex Ltd.Referred¶27
Ashok Commercial Enterprises & Anr. vs Parekh Aluminex Ltd.
2 provisions across 1 enactments
Mr. Dharmesh Kishore Chheda
Tridhaatu Builders LLP
Justice P. N. Deshmukh
Mr. Shyam Babu Gautam
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
