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2020 (9) TMI 941 - AT - Insolvency and Bankruptcy


Issues Involved:
1. Whether the financial assistance provided by the Respondent constitutes a "financial debt" under the Insolvency and Bankruptcy Code (IBC), 2016.
2. Whether the Memorandum of Understanding (MoU) between the parties created a simple loan agreement or a joint business venture.
3. Whether the existence of arbitration proceedings affects the maintainability of the insolvency application.
4. Jurisdiction of the National Company Law Tribunal (NCLT), Kolkata Bench to adjudicate the matter.

Detailed Analysis:

1. Financial Debt under IBC:
The primary issue was whether the financial assistance provided by the Respondent to the Corporate Debtor constituted a "financial debt" under Section 5(8) of the IBC, 2016. The tribunal observed that the MoU dated 11.12.2015 clearly indicated that the amount provided was to be returned with bank rate of interest within 30 days but not later than 89 days. The tribunal relied on the definition of "financial debt" which includes any debt disbursed against the consideration for the time value of money. The tribunal emphasized that the amount disbursed by the Respondent had the commercial effect of borrowing and hence qualified as a financial debt.

2. Nature of the MoU:
The Appellant contended that the MoU was not a simple loan agreement but a joint venture for executing work for the Kolkata Port Trust (KOPT). The tribunal noted that the MoU consisted of two independent transactions: one related to the granting of a loan and the other to the formation of a Special Purpose Vehicle (SPV). The tribunal held that the loan transaction was independent of the SPV formation and that the loan given by the Respondent was indeed a financial debt. The tribunal pointed out that the promissory notes executed by the Corporate Debtor and its group companies further evidenced the loan nature of the transaction.

3. Arbitration Proceedings:
The Appellant argued that the existence of arbitration proceedings constituted a pre-existing dispute, thus affecting the maintainability of the insolvency application. The tribunal rejected this argument, stating that pending arbitration proceedings do not limit the initiation of insolvency proceedings under the IBC. The tribunal cited the decision in SSMP Industries V. Peerkam Food, which held that the prohibition under Section 14 of the IBC does not apply to claims preferred by the Corporate Debtor, and both claims and counterclaims can be adjudicated together.

4. Jurisdiction of NCLT, Kolkata Bench:
The Appellant challenged the jurisdiction of the NCLT, Kolkata Bench, arguing that the application should have been filed in Chennai based on the MoU. The tribunal dismissed this argument, stating that the registered office of the Corporate Debtor was in Kolkata, thus giving jurisdiction to the NCLT, Kolkata Bench. The tribunal further emphasized that Section 63 of the IBC ousts the jurisdiction of civil courts or other authorities in matters where the NCLT or NCLAT has jurisdiction.

Conclusion:
The tribunal concluded that there was a debt due and payable by the Corporate Debtor, and a default had been committed. The loan given by the Respondent constituted a financial debt under the IBC. The tribunal upheld the impugned order of the NCLT, Kolkata Bench, admitting the Section 7 application filed by the Respondent/Financial Creditor. The appeal was dismissed, and the application was deemed maintainable in law.

 

 

 

 

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