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TMI Blog2017 (9) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... eclaring the moratorium as determined. - CP (IB) NO. 39/Chd/Pb/2017 - - - Dated:- 28-7-2017 - MR. R.P. NAGRATH, J. For The Petitioner : Rohit Khanna and Raghav Kapoor, Advs. For The Respondent : I.P.S. Mangat and Ishpuneet Singh, Advs. JUDGMENT 1. This petition has been filed by Sunrise 14 A/S, a Company incorporated under the Danish law having its registered office at Kobenhavn Denmark, claiming itself to be the Financial Creditor for initiating the insolvency resolution process under Section 7 of the Insolvency Bankruptcy Code, 2016 (for short to be referred here-in-after as the 'Code') against the Respondent ( Corporate Debtor ). The application has been filed in Form No.1 as prescribed by sub-rule (1) of Rule 4 of the Insolvency Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (for brevity the 'Rules'). 2. The Board of Directors of Financial Creditor passed resolution dated 21.02.2017 (Annexure I (A) authorising Mr. Varghese Thomas, Partner, J. Sagar Associates and Mr. Rohit Khanna, Advocate, all rights to act, appear and plead on behalf of the company for initiation of corporate insolvency against the Corporate Debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the disbursement under the Facility was to be on a with recourse basis to the 'Corporate Debtor' (Seller). The same is further evident from the fact that demand promissory notes dated 21.01.2016 and 30.03.2016 were executed in favour of the Financial Creditor. The demand promissory note dated 21.01.2016 was invoked by the Financial Creditor vide legal notice dated 05.10.2016 Annexure I (U). 6. Now coming to the disputed transactions, a purchase order dated 07.12.2015 bearing No. 001 was issued by the Corporate Debtor's buyer i.e. YM Power Supplies and Contractors Limited, copy of which is Annexure I (E). The Corporate Debtor'' issued the invoice dated 21.03.2016 (page 54 of Paper Book) bearing No. MPIL/120 amounting to USD: 185, 200.00 to the buyer' located at Malawi. 7. Another purchase order dated 01.01.2016 was issued by the Corporate Debtor's buyer namely; M/s. Yiannakis General Import and Export and consequent to that on 20.04.2016, the invoice bearing No. MPIL/130 for an amount of USD: 40,429.00 was issued by the Corporate Debtor to its buyer. Copy of the purchase order and the corresponding invoice is at Annexure I (F). 8. In accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticle was delivered on 26.05.2017. 12. When the matter was listed on 07.07.2017, Mr. Chandan Deep Singh, Advocate was present for the Corporate Debtor. Notice of motion of this petition was issued to the respondent and Mr. Chandan Deep Singh, Advocate accepted notice on its behalf. It was admitted by learned counsel that copy of the petition along with the entire paper book was received by the Corporate Debtor . The matter was adjourned for enabling the respondent to file objections, if any, to the instant petition. 13. On the adjourned date 13.07.2017, Mr. I.P.S. Mangat, Advocate put in appearance for Mr. Ishpuneet Singh, Advocate for the respondent-Corporate Debtor and filed the power of attorney and later on filed the resolution of the Board of Directors dated 12.07.2017 along with the objections. The execution of Agreement dated 01.01.2016 between the parties is admitted. The Corporate Debtor has raised the objections by filing short reply that as per clause 22 of the agreement, the contract is to be governed and construed in accordance with the English law and disputes from the said agreement were to be settled by Arbitration in London. It was, therefore, stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of invoices in terms of the agreement. 19. The objection raised by the Corporate Debtor about the petitioner having not been granted full facility as agreed is absolutely untenable. This contention was raised on the basis of legal notice dated 01.11.2016 Annexure R-1 sent by the respondent. It was stated in the objections to the present petition that the petitioner established direct contract with the buyers of the respondent and received the entire payment from them directly, but the payment has not been adjusted nor appropriate payment has been released to the respondent. 20. The above is a bald assertion without any supportive document on record. There is even no correspondence exchanged between the Corporate Debtor and the 'Buyers' to affirm the aforesaid fact. The objections petition has not even been filed on affidavit. None of the persons authorised by the Corporate Debtor in the resolution dated 12.07.2017 filed affidavit to support the assertions contained in the reply/objections. 21. During the course of arguments, the main contention of the learned counsel for Corporate Debtor was that the petitioner could at best proceed against the buyers as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D 100 per drawdown. The process fee and interest accrued shall be due and payable by the seller on the repayment date. 25. Most important is the clause of the agreement i.e. 2.1 (d) that all disbursements made under this facility shall be on a with recourse basis to the Seller. Sub-clause (e) of sub-section (8) of Section 5 of the Code includes with the definition of term 'financial creditor', the receivables sold or discounted other than any receivables sold on non-recourse basis. The present is a case, where the agreement pertains to the facility to be on a with recourse basis to the Seller and not on a non-recourse basis. 26. Coming to the contention that the goods were released despite the petitioner vested with right to withhold the goods in the absence of the payment. As per clause 8.3 of the agreement, any lien shall extend to cover the cost of recovering any sums due under the agreement and in connection with the relevant goods and for that the petitioner would have the right to sell the relevant goods by public auction or private treaty, without notice to 'Seller' and 'Buyer' the petitioner's right to lien shall survive delivery of rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th an Operational Creditor , but qua the purchaser/buyer on the basis of assignment, but it is definitely a Financial Creditor under the Trade Facility Agreement qua the respondent-'Corporate Debtor'. 28. This can be further explained by an illustration that in case the payment of goods is not made by the buyer to the petitioner, the petitioner detains the goods and the documents in exercise of its right of lien, the status of petitioner would always remain that of the Financial Creditor qua the Respondent-'Corporate Debtor' and that status would not change simply, if the goods are released on the insistence of the Corporate Debtor . 29. Coming to the grievance that there was a loss to the Corporate Debtor because its purchase orders for African countries were not being accepted despite the trade facility agreement, the answer can be found from the terms of the agreement itself. Clause 4.2 of the agreement says that upon delivery by the Seller of a Disbursement Request, the petitioner may in its entire discretion decide whether or not to grant a Loan to the Seller. Should the petitioner agree to grant the proposed Loan, the term of such Loan shall be g ..... 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