Rajeev Kumar Jain VS UNO MINDA LIMITED FORMERLY MINDA INDUSTRIES LIMITED & ANR.
Company Appeal(AT)(Ins) – 947/ND/2022
Facts:
1) Appeal is filed challenging the order dated 08.07.2022 passed by the NCLT Delhi in IB- 763/(ND)/2021 where the Adjudicating Authority accepted the application of the Respondent No. 1 i.e., M/s Uno Minda Limited (Formerly known as M/s Minda Industries Limited ) filed under Section 7 of the Code and Corporate Insolvency Resolution Process (in short ‘CIRP’) was initiated against the Corporate Debtor.
Issue: Whether the appeal can be allowed ?
Arguments:
Appellant:
1) Counsel submitted that Corporate Debtor and the Respondent No. 1 had good business relationship with each other for long time and sometime during December, 2020 the Corporate Debtor and its Promoters including the Appellant herein approached the Respondent No. 1 with an offer to sale 100% stake in the Corporate Debtor along with the only asset if the Corporate Debtor situated at Narsapura Unit. It was submitted that there were some failures on the part of the Corporate Debtor and the Corporate Debtor decided to terminate the said NBO.
2) Counsel submitted that in the month of May 2021 the Corporate Debtor approached the Respondent No. 1 for further financial
assistance. During discussions, the Respondent No. 1 asked the Promoters to pledge their entire shareholding in the Corporate Debtor and also furnish respective guarantees and accordingly the Promoters pledge their shares along with one sister concern i.e., M/s Kiran Udyog Private Limited (in short ‘KUPL’).
3) Counsel submitted that all transactions were happening between the Respondent No 1 and the Promoters and not with the Corporate Debtor as such no financial assistance was availed by the Corporate Debtor from the Respondent No.1. Appellant brought out that as agreed with the Respondent No. 1 the Corporate Debtor continued to purchase various goods from its suppliers and the Respondent No. 1 provided support to the Corporate Debtor in acquiring such goods required for operation and between April, 2021 to May, 2021 certain payments were made by the Respondent No. 1 amounting to Rs. 1.15 Crores. However, due to financial distress of the Corporate Debtor, the same could not be repaid to the Respondent No. 1.
4) Counsel submitted that they could not reply such notice of the Respondent No. 1 however, on 10th June, 2022 the Corporate Debtor paid Rs. 24 Lakhs and were trying to find to repay the entire money. However, the Respondent No. 1 issued a legal notice on 08.10.23021 for invoking guarantee furnished by the Promoters groups and calling them to pay outstanding dues of Rs. 1,28,94,205/- and finally on 06.12.2021 the Respondent No. 1 filed the application under Section 7 of the code which was admitted by the Adjudicating Authority vide Impugned Order dated 08.07.2022.
Respondent:
1) Counsel denied the averments of the Appellant that debt arising out of BSA is an operational debt and not financial debt since no disbursement was made by the Respondent No. 1 to the Corporate Debtor. It is the case of the Respondent No. 1 that the Appellant never disputed the execution of the BSA and also not denied that borrowers received the amount from the Respondent No. 1. The Respondent No. 1 stated that default was committed in making repayment to the Respondent No. 1 is undisputed fact.
Decision: NCLAT dismissed the appeal.
Rationale:
1) It noted that is not sine-qua non, therefore, interest may or may not be payable by the Corporate Debtor and it is understanding between the parties which is significant and relevant to ascertain the existence of time value of money which can be in several forms, other than pure payment of interest.
2) It held that it is the Corporate Debtor who was beneficiary of such disbursal. In the present case undisputedly, the Corporate Debtor used to procure raw material from vendors for which payments were made by the Respondent No. 1, at the instructions of the Corporate Debtor and therefore it assume the character of financial debt.
3) It noted that From the various clauses referred earlier of BSA, SPA and deed of guarantees it becomes clear that these documents were made jointly by the Promoters, the Corporate Debtor and the Respondent No. 1. The Corporate Debtor consented to be party of the agreement. At this stage, the contentions of the Appellant that it was the agreement between only the Promoter Group and the Respondent No. 1 and not with the Corporate Debtor cannot be accepted.
Order:
