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TMI Blog2022 (7) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... pation in the auction of M/s Sona BLW Precision Forge. Inc was paid. The case of the Appellant that the said amount of Rs.3.5 crore given by the Financial Creditor was purchase price of the 50% equity share in M/s SPT is not supported by the materials on the record. The amount of USD 1.5 Million was sent by the Financial Creditor to the M/s SPT directly on 23.12.2018 as share application money which amount can be said to be amount sent for equity shares which equity shares was never given to the Financial Creditor. Thus, the case of the Appellant that amount of Rs.3.5 crore be treated as investment only towards purchase of equity share is not supported from the record rather materials including acknowledgement of the Corporate Debtor clearly prove that the aforesaid amount comes within the definition of financial debt under Section 5(8)(f) of the I B Code - thus, the amount of Rs.3.5 crore is a financial debt and application filed under Section 7 was fully maintainable by the Financial Creditor. Whether the liability of the Corporate Debtor to return Rs.3.5 crore received from the Financial Creditor could have arisen only when the Corporate Debtor received the amount of USD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itting the Application under Section 7 - Appeal dismissed. - Company Appeal (AT) (Insolvency) No. 215-216 of 2022 - - - Dated:- 4-7-2022 - [ Justice Ashok Bhushan ] Chairperson And [ Shreesha Merla ] Member ( Technical ) For the Appellant : Mr. Maninder Singh, Sr. Advocate alongwith Mr. Shiv Mangal Sharma, Mr. Shashank Khurana, Mr. Janamejaya Upadhyay, Mr. Santosh Kumar and Mr. Shrinjan Khosla, Advocates. For the Respondents : Mr. Mukul Rohatgi, Mr. Shahrukh Khan and Mr. Ravi Chirania, Advocartes for Respondent No.1. Mr. Pramod Dattaram Rassam, Advocate for Respondent No.2/IRP. JUDGMENT ASHOK BHUSHAN, J. This Appeal has been filed against the order dated 07.02.2022 passed by the Adjudicating Authority (National Company Law Tribunal), Jaipur Bench admitting an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as I B Code ) filed by the Respondent Financial Creditor. A subsequent order dated 17.02.2022 passed in I.A. No. 88/JPR/2022 deleting the name of Applicants 2, 3 and 4 has also been challenged. The Appellant - Shareholder and Suspended Director of the Corporate Debtor aggrieved by the impugned orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Corporate Debtor approached the Financial Creditor to send further an amount of 1.5 Million USD directly to the US Company account and assured that the US Company i.e. M/s SPT would issue equity shares for investment by the Financial Creditor. The Financial Creditor approached the Reserve Bank of India (RBI) for granting permission to transfer funds to the M/s SPT towards Share Application money and permission having been granted, an amount of USD 1.5 million was transferred to M/s SPT by the Financial Creditor on 23.12.2016. After transferring USD 1.5 million, the Financial Creditor asked the Corporate Debtor to return Rs.3.5 crores which was disbursed by the Financial Creditor to the Corporate Debtor between 02.12.2016 to 15.12.2016. (v) US Company, M/s SPT failed to issue securities within period of 60 days and further defaulted in refund of the share application amount of USD 1.5 million. The Financial Creditor demanded entire money back both Rs.3.5 crores which was earlier disbursed and amount of USD 1.5 million directly transferred to the US Company M/s SPT. (vi) An agreement dated 21.10.2017 was signed by Mr. J. P. Aggarwal and Mr. Sandeip Aggarwal, Directors on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was appointed for M/s SPT by the General Court of Justice, Superior Court Division, State of North Carolina, USA. The Receiver has submitted a Report on 21.09.2020 before the General Court of Justice, Superior Court Division in which Report all claims filed with regard to the US Company M/s SPT were noticed. (x) In Section 7 Application filed by the Financial Creditor, a Reply dated 06.04.2021 was filed by the Corporate Debtor opposing the Section 7 Application. In the Reply, the Corporate Debtor did not deny the receipt of amount of Rs.3.5 crores from the Financial Creditor, however, took the pleas that that amount was provided to jointly bid to acquire the foreign company. It was pleaded that the amount provided by the Financial Creditor was not a loan amount, it was just the share application money. Reference to dispute with regard to M/s SPT pending in the General Court of Justice, Superior Court Division, State of North Carolina, USA has been mentioned in the Reply as well as Report of Receiver dated 21.09.2020. With regard to email dated 28.05.2021 issued by Shri Vinay Upadhyay, Director of the Corporate Debtor it is submitted that he had no right to admit payments towar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Financial Creditor to the Appellant as Deal Fee which Deal Fee is clearly mentioned in the Agreement dated 04.12.2016. The Appellant has no responsibility to return the Deal Fee of Rs.3.5 crores, however, the Appellant promised to return the Deal Fee of Rs.3.5 crores after amount is received from the Investor i.e. Ajay Kumar Jain. 4. Shri Ravi Chirania, learned counsel for the Respondent refuting the submissions of learned counsel for the Appellant submits that there is categorical acknowledgement of debt of Rs.3.5 crores by the Corporate Debtor which is apparent from the various agreements which were brought on the record as well as from the series of emails sent by the Appellant as well as the Director of the Corporate Debtor Mr. Vinay Upadhyay. The Balance Sheet of the Corporate Debtor from the year 2017-18 also shows that amount of Rs.3.5 crore was extended to the Corporate Debtor under the Head of Short-Term Loan and Advances . Even, the Audit Report and duly audited Balance Sheet of the year 2017-18 shows that amount of Rs.3.5 crores was extended as unsecured loans from others . Email dated 12.03.2018 issued by the Appellant has been relied by learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 5(8) of the I B Code or the amount was advanced towards 50% equity share in M/s SPT the US Company? Question 2: Whether the liability of the Corporate Debtor to return Rs.3.5 crore received from the Financial Creditor could have arisen only when the Corporate Debtor received the amount of USD 0.80 Million from the Investor Ajay Kumar Jain and the Agreement dated 14.07.2018 being a contingent contract in so far as payment of Rs.3.5 crores of Financial Creditor is not enforceable by virtue of Section 33 of the Contract Act? Question 3: Whether the amount of Rs.3.5 crore paid by the Financial Creditor to the Corporate Debtor was towards Deal Fee payable to Appellant as per Agreement dated 04.12.2016? Question No.1 7. The first question to be considered is as to whether the amount of Rs.3.5 crores paid by the Financial Creditor to the account of Corporate Debtor is a financial debt within the meaning of Section 5(8) of the I B Code or was investment/ payment for acquiring 50% equity share of M/s SPT the US Company. We need to first notice the details of the payment made by the Financial Creditor to the Corporate Debtor totaling to Rs.3.5 crores. In Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count of M/s Warm Forgings Pvt. Ltd. as per the details of the account attached herewith (Annexure 2) to the Jason Hendren Sun Trust as per account details attached (Annexure 3). 5. The balance amount for the final acquisition (say approximately $ 4.75 Million) will be transferred through a holding company in India to be formed between the 2 parties who are signatories of this agreement. Suggested name for the new holding company will be mutually agreed between the two parties. 10. The amount of Rs.3.5 crores was disbursed by the Financial Creditor to the Corporate Debtor in the manner as indicated above which was credited in the IDBI account of the Corporate Debtor. There is no dispute between the parties regarding receipt of amount of Rs.3.5 crores by the Corporate Debtor from the Financial Creditor. What is disputed is the nature of transaction only. Financial Creditor in Section 7 Application has given details of disbursement to the Corporate Debtor. It is to be noted that M/s SPT the US Company was declared as highest bidder on 14.12.2016 and thereafter Corporate Debtor approached the Financial Creditor to send the amount directly to the US Company. In Section 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.1 $1.5 Million will be refunded with 4 transactions, in the similar manner as it was transferred to SPT from HDFC Bank with RBI approval. 3.1.1 $ 0.25 M : Shri JPA 3.1.2 $ 0.25 M : Shrimati Sumitra Aggarwal 3.1.3 $ 0.25 M : SA 3.1.4 $ 0.75 M : M/s Reckon Industries Ltd. 3.2 Rs. 3.5 Crores will be refunded by sending approximately $0.5 M through the Warm Group, IDBI Bank Account. AR has committed and agreed to make up any shortfall (due exchange rate etc.) in total amount of Rs.3.5 Crores by addition local funds from Warm Group. 3.3 As a collateral AR has agreed to give an IDBI cheque of Rs.3.5 Crores to M/s Reckon Industries Ltd. This cheque will be handed over for escrow safe custody to VU to ensure that no diversion of funds takes place from the IDBI account, post the closing transfers. 3.4 Similar AR has also committed and agreed that if there is any shortfall in $1.5 M (item 3.1) he will make up any shortfall from his own internal sources of funds. 13. The above Agreement which is agreement relied by both the parties unequivocally contains the acknowledgement of Corporate Debtor towards liability to refund the amount of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments. 2. Also regarding the Rs.3.5 Crs. Short term loan given to Warm Forgings (P) Ltd. from Reckon Industries Limited, it may not be possible to consider 18% p.a. interest. However, since the mutual understanding was to repay the money in 3 to 4 months initially agreed with 12% interest, as per Amit Ji s email (point 6 of attached email), the maximum interest which may be considered is 12% p.a., as initially agreed, which we plan to repay in the next 3 months. We highly appreciate your positive consideration of the above, enabling us to resolve all matters amicably. Many Thanks, Regards Best Wishes, Vinay Vinay Upadhyay Director: Warm Forgings Pvt. Ltd. www. warmforging.com 16. The aforesaid email also mentions that amount of Rs.3.5 crore was a Short Term Loan given to Corporate Debtor by the Financial Creditor. In the email Director also conceded that maximum interest which can be considered is only 12%. 17. The Adjudicating Authority also referred to the Balance Sheet of the year 2017-18. In the Balance Sheet of the year 2017-18, the amount of Rs.3.5 crore was mentioned under the classification of Borrowing as Unsecured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he commercial effect of a borrowing. There cannot be any denial to the commercial effect of the transaction since it is on the record that the amount which was given by the Financial Creditor was credited in the IDBI Bank account of the Corporate Debtor from which the EMD for participation in the auction of M/s Sona BLW Precision Forge. Inc was paid. The case of the Appellant that the said amount of Rs.3.5 crore given by the Financial Creditor was purchase price of the 50% equity share in M/s SPT is not supported by the materials on the record. The amount of USD 1.5 Million was sent by the Financial Creditor to the M/s SPT directly on 23.12.2018 as share application money which amount can be said to be amount sent for equity shares which equity shares was never given to the Financial Creditor. Thus, the case of the Appellant that amount of Rs.3.5 crore be treated as investment only towards purchase of equity share is not supported from the record rather materials including acknowledgement of the Corporate Debtor clearly prove that the aforesaid amount comes within the definition of financial debt under Section 5(8)(f) of the I B Code. We, thus, are satisfied that the amount of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 30% ownership units in the name of Mayank Rajput (son of Second Party) and remaining 15% ownership is in the name of third party through his wife Mrs. Anamika Jain. The Second Party has represented that the present venture is beneficial and has invited Third Party to buy additional 85% ownership of the same as the Second Party does not have adequate capital at this stage. After this agreement, the Third Party shall become 100% owner of the First Party. Based on the representations of the Second Party, the third party has agreed to enter into this venture by having 100% total ownership including 15% already owned by third party. NOW THIS AGREEMENT WITNESSETH AS FOLLOWS: 1. That no acquire 85% additional ownership units in the first party, the third party or his relatives, associates or his companies has agreed to invest further 5.2 million USD in the First Party by July, 2019 through his own accounts/ family members accounts and through his partnership firm M/s Himani International (23/3 East Patel Nagar, New Delhi 110008). The funds put in by the Third Party shall be used to pay off the following liabilities: (i) Mr. Jai Prakash Aggarwal along with his f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney if a certain ship does not return. The ship is sunk. The contract can be enforced when the ship sinks. 22. As noticed above, the Financial Creditor being not part of the Agreement dated 14.07.2018, the submission that payment to the Financial Creditor was contingent contract is without any foundation. Agreement dated 14.07.2018 was agreement between third parties of which Financial Creditor was not part therefore the question of non-payment by Corporate Debtor to the Financial Creditor on the basis of such agreement does not arise, nor by Agreement dated 14.07.2018 the liability to pay debt of the Financial Creditor can be diluted. Any Agreement by the Corporate Debtor with third parties cannot dilute the debt due to Financial Creditor. We, thus, do not find any substance in this submission of the Appellant. Question 3 23. Shri Maninder Singh, learned counsel for the Appellant submitted that the amount of Rs.3.5 crore paid to the Appellant was towards Deal Fee which in fact the Appellant was not liable to refund but as a good will gesture he promised to repay the same provided he receive the same from Mr. Ajay Kumar Jain. The Appellant referred to agreement dat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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