# In the matter of SMS Foundation & Investment LLP vs. Harsha Exito Engineering Private Limited Company Appeal (AT) (CH) (Ins) No. 364-2022

> NCLAT judgment dated 2023-07-04. Citation: TCN-2023-NCLAT-00409. The case involves an appeal against an order dated 08/07/2022 passed by the National Company…

- **Court:** NCLAT
- **Order date:** 4 Jul 2023
- **Citation:** TCN-2023-NCLAT-00409
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclat-new-delhi/sms-foundation-investment-llp-vs-harsha-exito-engineering-private-limited-compan-664b3565

## Summary

### Background

The case involves an appeal against an order dated 08/07/2022 passed by the National Company Law Tribunal (NCLT), Chennai Bench, which dismissed an application filed by M/s SMS Foundation & Investment LLP. The application was related to a claim to be admitted as a financial creditor. The NCLT dismissed the application because it found that the applicant was a shareholder in the corporate debtor company. The appeal was filed under Section 61 of the Insolvency and Bankruptcy Code, 2016.

## Facts

M/s SMS Foundation & Investment LLP (Appellant) filed an application before the NCLT, Chennai Bench, to be admitted as a financial creditor of Harsha Exito Engineering Private Limited (Corporate Debtor). The NCLT dismissed the application, stating that the Appellant was a shareholder of the Corporate Debtor. The Appellant claimed that a sum of Rs. 16.00 Crores was given as a loan to the Corporate Debtor, evidenced by a Loan Agreement dated 27.12.2019. The Appellant also claimed that a Memorandum of Understanding (MoU) dated 02/08/2019, which initially contemplated a share transfer, was never fully executed. The Respondent (Resolution Professional) argued that the Appellant was a shareholder, as reflected in the company's records and the MGT-7 filed with the

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## Issues and analysis

### Issue 1: Whether the Adjudicating Authority was justified in observing that the Appellant is a 'Shareholder' …

**Ratio:** The legal principle is that the transfer of shares involves a series of steps, including

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**Reasoning:** The NCLAT reasoned that the MGT-7 filed with the RoC confirmed that 18,60,000 Equity

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**Interpretation:** The interpretation is that while the formal registration of share transfer in

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**Application:** In this case, the NCLAT applied the principle by considering the MGT-7 filings,

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## Parties

- **Judges:** M. Venu…; Shreesha…; +1 more
- **Appellants:** M/s SMS Foundation…
- **Respondents:** Harsha Exito…; M/s. Harsha Exito…

## Timeline

- **2019-08-02 — Memorandum of…**: MoU dated 02/08/2019 was entered into between the Appellant and the Shareholders of the…
- **2019-08-01 — Infusion of…**: The Appellant infused a sum of Rs. 15,47,23,307/- (Rupees Fifteen Crores Forty Seven…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 61 — Appeals and Appellate Authority](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-61)

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