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TMI Blog2019 (4) TMI 1845X X X X Extracts X X X X X X X X Extracts X X X X ..... ation number of the Corporate Debtor is U74239DL1996PTC076006 and its registered office is situated at Plot No. 13, Road No. 35F/F, West Punjabi Bagh, Near New Delhi, West Delhi-110026. 3. The petitioner has proposed the name of Resolution Professional, Shri Madan Lal Aggarwal, #3004, SF, SBI Officers Housing Society, Sector 49D, Chandigarh- 160047, email id [email protected]. He has registration No. IBBI/IPA002/1P-N00497 / 2017-18/11553. A written communication dated 11.06.2018 made by Mr. Aggarwal in terms of Rule 9(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 has also been placed on record (Annexure-2). There is a declaration made by him that no disciplinary proceedings are pending against him in Insolvency and Bankruptcy Board of India or ICSI Insolvency Professional Agency. In addition, further necessary disclosures have been made by Mr. Aggarwal, as per the requirement of the IBBI Regulations. Accordingly, he satisfies the requirement of Section 7 (3) (b) of the Code. 4. Facts which are material to the controversy raised may first be noticed. The pleaded case of the Financial Creditor is that he is one of the promoters of Gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r:- "...............As a pre condition to the acquisition, Piramal requires Medinn to acquire an infringing trademark called "NPD Endura Mass". In order to pay for this consideration towards acquisition of NPD Endura Mass, Medinn is falling short of the liquid funds required and requires some external funding support. Therefore, Medinn through its directors has requested Mahesh to lend them a sum of Rs. 1.7 cr. (one crore sevent lakhs only). Mahesh has agreed to lend to Medinn a sum of INR 1.7 cr. (one crore sevent lakh only) for a very short term. These funds are agreed by Medinn to be returned at the earliest as soon as 1) either the deal is consummated with Piramal or 2) Medinn will generate other funds to return the money to Mahesh within 3 months. ....................................................It is further agreed that in case Mahesh requests for other executable securities the company or its promoters would provide satisfactory executable securities without delay. .................................... .................................... .................................... The company has issued a cheque bearing no. 004178 on ICICI Bank, Punjabi B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner is that the total amount in default and due to the financial creditor by the corporate debtor as on 01.06.2018 is Rs. 11. Learned counsel for the Corporate Debtor has opposed the admission of the petition by asserting that:- (i) The Respondent is the manufacturer of farnous brand "Endura Mass" since 01.02.2001. In August 2009 fact came in his knowledge that there is one product with deceptively similar trade mark "NPD Endura Mass" being sold in the market and Mr. Sanjay Kumar Chetwani is a key person behind this mischief. The Respondent had filed a police complaint to that effect against Mr. Sanjay Kumar Chetwani including two others which was registered as Crime No. 274 dated 23.09.2009 (Annexure R-3) u/ s 420 of IPC r/ w Sections 102, 103 & 104 of Trade Marks Act, 1999. (ii) The Respondent never knew for so many years that said Mr. Chetwani got his trade mark NPD Endura Mass registered and it could be known only when Mr. Chetwani filed a Civil Suit against the Respondent in May, 2017. In the said suit relief prayed for by Mr. Chetwani was that to let him use his Trade Mark NPD Endura Mass with further relief that the Respondent be restrained from interfering in his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the aforesaid deal as well as for the purpose to win deep confidence of the Respondent. (v) As per the petitioner both aforesaid persons demanded Rs. 50 crores for the purpose to finalize the deal with the Respondent of his product 'NPD Endura Mass'. During protracted mediation, the petitioner stated that Mr. Chetwani has agreed to finalize said deal at Rs. 4.40 crores. After winning deep confidence the petitioner advised the Respondent to pay Rs. 10 lacs to the petitioner as a token money has to be paid to Mr. Chetwani. The said amount of Rs. 10 lacs paid by the Respondent to the petitioner through online mode. Further a cheque bearing No. 004177 for remaining amount of Rs. 4.30 crores was given by the Respondent to the petitioner to complete the aforesaid deal. (vi) When date of signing of assignment deed was getting nearer the petitioner stated that both abovesaid persons are not accepting the cheque and asked the petitioner to arrange the money by way of demand drafts. As the Respondent on that very occasion were not having adequate balance in the bank account, the petitioner offered that if the Respondent can arrange Rs. 2.70 crores then the remaining Rs. 1.70 cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent against the petitioner is clearly a counterblast to the notice issued under Section 138 of Negotiable Instrument Act by the petitioner on 28.04.2018. It has then submitted that the petitioner, for the conclusion of the deal with Piramal granted a short-term loan, amounting to Rs. 1.70 crores as per memorandum of understanding dated 16.01.2018 read with Agreement dated 06.12.2016 to the Respondent. The petitioner also stated that he has no relation with Mr. Chetwani whatsoever, and was only coordinating with him on behalf of the Respondent to help the deal along. The petitioner is indulged into consultancy business and on the request of the Respondent, had finalized a deal with Mr. Chetwani for purchase of its trade mark wherein the role of the petitioner was middleman and not otherwise. The Respondent after due negotiation agreed upon a price to be paid to Mr. Chetwani, filed a consent terms (Annexure 1) in the Court of District and Session Judge, Jaipur. The relevant clause 'f' of the said consent terms reads as under:- "The plaintiff agrees and undertakes to sell and transfer the mark 'NPD Endura Mass" to defendant absolutely on the consideration of Rs. (Rup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion 'Financial Creditor' and the expression 'Financial Debt' within the meaning of the term used in Section 7 read with Section 5 (7) & (8) of the Insolvency & Bankruptcy Code. Ld. Counsel for the petitioner lowered his eyes and was not able to post any satisfactory answer. 16. In order to find out as to whether the petitioner answers the description of "Financial Creditor" in terms of the aforesaid provision of the Act, it would be profitable to read the provisions of Sections 5 (7) & (8) and Section 7 of IBC which are set out below: 5. Definitions: In this Part, unless the context otherwise requires- 7. "financial creditor" means any person to whom a financial debt is owed and includes a person to whom such debts has been legally assigned or transferred to; (8) "financial debt" means a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money and includes (a) money borrowed against the payment of interest; (b) any amount raised by acceptance under any acceptance credit facility or its de-materialised equivalent; (c) any arnount raised pursuant to any note purchase facility or the issue of bonds, notes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en default has occurred. The first question arises for consideration is as to who is a 'Financial Creditor'. In order to ascertain the meaning of that expression we have to examine its definition as provided by Section 5 which is applicable to Part Il. We have already extracted the provisions of Sections 5 (7) and 5 (8) of the IBC which are relevant to the issue raised. Section 5 (7) of IBC defines the expression "Financial Creditor" and Section 5 (8) of IBC defines the expression "Financial Debt" which has been used in Section 5(7) of IBC. 17. A perusal of definition of expression 'Financial Creditor' would show that it refers to a person to whom a Financial debt is owed and includes even a person to whom such debt has been legally assigned or transferred to. In order to understand the expression 'Financial Creditor', the requirements of expression 'financial debt' have to be satisfied which is defined in Section 5(8) of the IBC. The opening words of the definition clause would indicate that a financial debt is a debt along with interest which is disbursed against the consideration for the time value of money and it may include any of the events e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansaction are sometimes used as devices for raising money. In a transaction of this nature an entity may require liquidity against an asset and the financer in return sell it back by way of a forward contract. The difference between the two prices would imply the rate of return to the financer. (See Taxman's Law Relating to IBC, 2016 by Vinod Kothari & Sikha Bansal). 18. When we examine the nature of transaction in the present case, we find that it is a pure and simple advancement of loan denuded of any element of time value for money. Therefore, such a transaction would not acquire the status of a 'financial debt' as the transaction does not have consideration for the time value of money, which is a substantive ingredient to be satisfied for fulfilling requirements of the expression 'Financial Debt'. 19. As a sequel to the above discussion, we are unable to persuade ourselves to accept that the petitioner is covered by the expression "Financial Creditor" in term. Therefore, the petitioner does not answer the description of Section 7 read with Section 5(7) & 5(8) of IBC. The petition is accordingly dismissed. The remedy of the petitioner may lie elsewhere. 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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