Issue Of Share Application Money As Financial Debt Once Decided In Earlier Proceedings Can't Be Reagitated In Subsequent Plea U/S 7 Of IBC: NCLAT

The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Ashok Bhushan and Mr. Barun Mitra (Technical Member) has held that Once the issue of whether share application money amounts to a financial debt has been decided by the Adjudicating Authority in earlier proceedings, the same question cannot be agitated in a subsequent application filed under Section 7 of the IBC as such a plea is barred by Res-Judicata. The present appeal has been filed under section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC) against an order passed by National Company Law Tribunal (NCLT) by which it admitted an application under section 7 of the IBC. The Appellant submitted that there are no material proofs that there was any statutory compliance regarding private placement hence due to non-refund of the amount, the amount shall not become deposit. There was no default on the part of the corporate debtor hence the corporate debtor could not have been put to insolvency proceeding. Per contra, the Respondent submitted that issue as to whether the amount advanced by financial creditor is a financial debt or not has already been concluded and decided in favour of the financial creditor in the earlier application which was filed by the financial creditor under Section 7 and the said issue that amount advanced is the financial creditor operates as res judicata and cannot be allowed to be questioned by appellant. It was further contended that the liability has been acknowledged by financial creditor in its financial statement which has been noticed by the adjudicating authority. Default has been committed by corporate debtor in refunding the amount of financial debt. The amount paid advanced by the financial creditor is financial debt, which has become final between the parties and cannot be allowed to be re-agitated. The Tribunal noted that in Neelima Srivastava' Vs. 'State of Uttar Pradesh & Ors.' the Supreme Court had occasion to consider finality of judgment between the parties and the principle of res judicata. It was held by the Supreme Court that once a judgment between the parties have attained finality, it was not permissible for the parties to reopen concluded judgment. It further observed that in earlier proceeding between the parties under Section 7 of the IBC, the issue was decided in favour of the financial creditor that amount of US $ 1,24,000/- and US $ 1,42,000/- remitted by financial creditor to the corporate debtor as a financial debt. The said issue cannot be allowed to be reopened by the appellant by raising precedents of this Tribunal. It further observed that the financial creditor after the closure of the earlier proceedings repeatedly sought refund but the corporate debtor failed to repay. Consequently, the creditor filed an application under section 7 of the IBC which was admitted. The earlier statements of the debtor to refund the amount was without intent as no payment was made even after the 2019 proceedings. This clearly establishes the case of default. Accordingly, the present appeal was dismissed. Case Title: Ajit Kumar Gupta Versus Uniexcel Ltd. & Anr. Case Number: Company Appeal (AT) (Insolvency) No. 1686 of 2023 Judgment Date: 03/09/2025Click Here To Read/Download The Order

Issue Of Share Application Money As Financial Debt Once Decided In Earlier Proceedings Can't Be Reagitated In Subsequent Plea U/S 7 Of IBC: NCLAT

Mohd Malik Chauhan

Tags