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TMI Blog2021 (1) TMI 1162X X X X Extracts X X X X X X X X Extracts X X X X ..... ation for initiation of CIRP of the Corporate Debtor and as a consequence thereof appointed Ms. Pratibha Khandelwal as the Interim Resolution Professional ('IRP') and also declared moratorium in relation to the Corporate Debtor. The IRP was subsequently confirmed as the Resolution Professional ('RP'). 3. As per the Applicant, the Corporate Debtor vide letter dated 09.01.2014 appointed the Applicant as C & F agent with effect from 01.10.2013. As per the said letter dated 09.01.2014 attached with the Application, the Applicant was required to manage the Ranchi depot 19C godown of the Corporate Debtor and also to arrange funds for meeting day to day expenses. Extracts of the letter dated 09.01.2014 are reproduced below: "This is with reference to the meeting held in Delhi regarding your appointment as our C&F agent to look after operations of our MSIL depot at Ranchi for the State of Jharkhand. In connection with above, we wish to confirm your appointment as C&F agent w.e.f. 1st Oct'13. The brief details of terms and conditions are as follows: l. You shall be responsible for: i) Managing our Ranchi depot 19C godown and deal with Jharkhand State Bey. Corpn. Ltd. (JSBCL) for obt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to you thirty days notice in writing in this behalf from the date of dispatch of notice. 7. You shall not be entitled upon the termination of this agreement or appointment within the terms hereof to claim any damages or compensation from the company for such termination or consequent thereupon or otherwise relative thereto against the other. 8. Forthwith upon determination of this agreement/appointment you shall cease all dealings on behalf of the company and shall deliver custody of all premises, stock, cash, negotiable instruments, papers and documents and other items and things of the company coming into the custody of these presents. 9. The company reserve the right to appoint any other party as Sales Promoter for areas mentioned above. 10. You have to deposit minimum security of Rs. 53,15,000/- with the Company which will carry interest @ 21% p.a. We will provide you interest on Rs. 7,85,850/- @ 21% per annum. Please acknowledge receipt and as a token of your acceptance of above terms and conditions. Please sign duplicate copy of this letter and return the same to us for our records." 5. As per the Applicant, an amount of Rs. 53,15,052/- was already provided in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of order dated 28.09.2018 passed by the Adjudicating Authority in IA No. 02/JPR/2018 in the present matter. In the said IA No. 02/JPR/2018 this Adjudicating Authority held as under: - "15....Taking into consideration, all the above this Tribunal is of the considered view that the learned RP was right in classifying that portion of 'debt' owed to the respondent in relation to deposit furnished to the Corporate Debtor for payment of excise duty falls within the scope of 'financial debt' under Section 5 (8) of IBC, 2016 and in the circumstances this application stands dismissed. 16.However, sales agency commission and amounts due arising purely out of the agency relationship including the security deposit placed as between the Corporate Debtor and the respondent should be strictly excluded from the purview of 'financial debt' in order to compute extent of financial debt in CoC." 10. Being aggrieved by the rejection to classify an amount of Rs. 1,41,39,410/- as financial debt, the Applicant has filed the present Interlocutory Application to set-aside the rejection of claim dated 18.03.2019 by the RP and declare the Applicant as a financial creditor. 11. The RP submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales promoter and the other being financing the debt requirement of the corporate debtor. 16. The Applicant in its written submissions states that the RP has not submitted a single receipt, invoice, purchase order, lorry receipt, or any other document which can substantiate that any goods or services were provided or any operational activities were ever carried out except the services rendered by the Applicant under a letter dated 09.01.2014. 17. As per the Applicant all ingredients of financial debt under the Code are met in the facts of the Applicants case. The Applicant further submits that the Hon'ble National Company Law Tribunal in the matter of Nikhil Mehta and Sons Versus AMR Infrastructure Ltd. (CA (AT)(Insolvency) No. 07 of 2017) held that the prime criteria for financial debt is disbursement for consideration of time value of money. 18. We have heard the submissions made by the parties and perused the record. It is an undisputed fact that the Applicant has provided the amount in terms of letter dated 01.04.2014 and 01.04.2015 and such amount along with interest is due from the Corporate Debtor. The documents filed by the Applicant show that in order to avail the ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, only the market value of such transaction shall be taken into account; (h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution; (i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clause (a) to (h) of this clause," 19. For availing a loan/financial assistance the parties must enter into-a financial contract setting out the terms of the financial debt, including the tenure of the debt, interest payable and date of repayment as defined under clause (d) of sub rule (1) of Rule 3 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. 20. Undoubtedly such security deposit is returnable and represents a future obligation. The treatment of said security deposit in the financial statement of the Corporate Debtor for period 01.07.2014 to 30.06.2015 annexed by the Applicant in rejoinder is not evidently obvious so as to straight-away validate Applicant's contention of deducing by implication. The Corporate Debtor in its balance sheet for year ended 31.03.2016 and 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not be sufficient to conclude that there was financial debt. TDS can be deducted for various reasons. 7. As regard relying on Section 10 of the Contract Act, 1872, in our view IBC is a complete code in itself Section 238 of IBC has overriding effect on provisions inconsistent with IBC. The 'Financial contract' is defined in "Insolvency and Bankruptcy Upplication to Adjudicating Authority) Rules, 2016" Rule 3(1)(d) requires setting out the terms of the financial debt including tenure etc. We find that Appellant has failed to show any record showing financial debt to be there. As such, we are unable to find any fault in the impugned order while rejecting Section 7 application. " 23. In the instant Application no detailed initial agreement is available. Also, there is no addendum or fresh documentation explaining changing nature of agreement/ engagement, from depot management to sales promotion. Within the facts narrated by the Applicant, it is difficult to ascertain the extent and type of services. These could be vastly different from what is stated in the letters of engagement or even as claimed by the Applicant. 24. Scope and canvass of the agreement cannot be lef ..... X X X X Extracts X X X X X X X X Extracts X X X X
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