# In the matter of Harsha Exito Engineering Pvt. Ltd. IA(IBC)-753-CHE-2021 in IBA-471-2020

> NCLT judgment dated 2022-07-08. Citation: TCN-2022-NCLT-04600. SMS Foundation & Investment LLP filed an application under Section 65 of IBC, 2016, seeking to…

- **Court:** NCLT
- **Order date:** 8 Jul 2022
- **Citation:** TCN-2022-NCLT-04600
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chennai/harsha-exito-engineering-pvt-ltd-iaibc-753-che-2021-in-iba-471-2020-4b7c6f68

## Summary

### Background

SMS Foundation & Investment LLP filed an application under Section 65 of IBC, 2016, seeking to set aside the rejection of their claim by the resolution professional and to be inducted as a Financial Creditor in the Committee of Creditors.

## Facts

SMS Foundation & Investment LLP (Applicant) sought to be recognized as a Financial Creditor of Harsha Exito Engineering Pvt. Ltd (Corporate Debtor).

The Applicant claimed to have transferred Rs. 12,94,04,499/- to the Corporate Debtor as an investment, later converted into a loan.

A Memorandum of Understanding (MOU) was signed between the parties on 02.08.2019 for transfer of shares.

The Corporate Debtor, via a letter dated 27.01.2020, informed the Applicant that the MOU was never revoked and 18,60,000 Equity Shares were transferred to the investor on 17.12.2019.

The Applicant's claim was rejected by the IRP on 24.05.2021, stating that the Applicants were shareholders of the Corporate Debtor.

…

## Issues and analysis

### Issue 1: Whether the claim of the Applicant is required to be admitted in the capacity as a Financial …

**Ratio:** The Applicant's claim cannot be admitted as a Financial Creditor because the Applicant is

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**Reasoning:** The Applicant's partners are reflected as shareholders in the books of the Corporate

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**Interpretation:** The Tribunal interpreted the evidence to indicate that the Applicant's

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**Application:** The Tribunal applied the principle that a shareholder cannot simultaneously

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## Parties

- **Judges:** S. Ramath…; SAMEER…
- **Appellants:** SMS Foundation &…
- **Respondents:** Harsha Exito…
- **Other parties:** P. Dha…; Mr.J. JOHN…
- **Advocates:** E. Om Pr…; Harish Ch…; +1 more

## Timeline

- **2019-08-02 — MOU Sign…**: A Memorandum of Understanding (MOU) was signed…
- **2019-12-27 — Loan Agreement…**: A Loan Agreement was executed between the parties, converting the amount into a loan with…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 65 — Fraudulent or malicious initiation of proceedings](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-65)

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