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TMI Blog2023 (8) TMI 1304X X X X Extracts X X X X X X X X Extracts X X X X ..... to be gathered from the nature of the Contract , its Terms and Conditions , and the Terminology , used by the Parties , is not decisive of the Legal Relationship , as per decision of the Hon ble Supreme Court of India in Snow White Industrial Corporation, Madras v. Collector of Central Excise, Madras [ 1989 (4) TMI 81 - SUPREME COURT ]. It is to be remembered that the Proceedings , under I B Code, 2016, are summary in nature , and it is not a Debt Enforcement Procedure . An Adjudicating Authority / Tribunal , is not a Recovery Forum or Court and it does not determine any Claim or Suit , in Summary Proceeding . No wonder, the objective of the I B Code , is to consolidate , and amend the laws , relating to reorganisation and insolvency resolution of corporate persons , partnership firms and individuals , in a time bound manner for maximization of value of assets of such persons , to promote entrepreneurship , availability of credit and balance the interests of all the stakeholders , including alteration in the priority of payment of government dues , and to establish an Insolvency and Bankruptcy Fund, and matters connected therewith or incidental thereto . Going by the Objective and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the 'Adjudicating Authority' ('National Company Law Tribunal', Division Bench - I, Chennai), while passing the 'impugned order', dated 11.01.2021, in IBA / 1166 / 2019 (Filed by the 'Petitioner / Financial Creditor'), under Section 7 of the I & B Code, 2016, read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, at Paragraph Nos. 13 & 14, had observed the following: 13. "It is to be seen herein that there is no financial contract which is seen on record in order to establish that the relationship between the Financial Creditor and the Corporate Debtor herein in order for the Applicant to qualify as a 'Financial Creditor'. 14. Further as already stated the alleged Financial Creditor herein has filed present Application in terms of the powers given under Clause 15 Del Credere Agency Agreement wherein the powers have been delegated to the Agent which is the Financial Creditor herein to initiate legal proceedings in case of a default made by the party. However, as already stated in the said Clause 15 it clearly manifests the fact that if the Agent shall be able to initiate against the legal proceedings, only in the name and on beha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the event of 'Person / Party', instructed or recommended by the Appellant, failing to pay the Sum(s), to whom supplies were made by the Principal, the Appellant has to pay such amounts to the 'Principal'. 7. The Learned Counsel for the Appellant / Petitioner, points out that the 'Appellant', had recommended the 'Respondent / Corporate Debtor', for supplies of PVC Suspension Resin, and on the basis of the recommendations, the 'Principal', had effected supplies to the 'Respondent / Corporate Debtor, who had not made payment. However, the 'Respondent / Corporate Debtor', had made payments, by way of 'interest', to the 'Appellant'. In reality, the 'Respondent / Corporate Debtor', through email dated 15.03.2019, had acknowledged its 'Liability', to pay the amount. 8. The stand of the Appellant is that, it issued 'Recall Notice', on 24.07.2019, demanding a Sum of Rs.1,23,14,186/-, which remained 'Outstanding', as 20.07.2019, within 7 days from the 'date of receipt of the said Notice'. Because of the fact that there was no response, to the said 'Recall Notice', the 'Appellant / Petitioner', had filed the main Petition in IBA / 1166 / 2019 (On the File of the 'Adjudicating Authority' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .961737 558 2 34 19.09.2014 13216/- 12.03.2015 Cheque No.961737 559 3 40 14.11.2014 8322/- 12.03.2015 Cheque No.961737 563 4 47 26.11.2014 163143.80 12.03.2015 Cheque No.961737 564 5 55 22.12.2014 2836/- 12.03.2015 Cheque No.961737 566 16. It is the contention of the Learned Counsel for the Appellant / Petitioner that the aforesaid 'Debit Notes', and the 'Corresponding Payments', would demonstrate that the 'Corporate Debtor', had acknowledged the fact that (i) The Amount is payable by it, to the 'Appellant' (ii) Interest was serviced, for the delayed payments and that the 'entire transaction' (between the Appellant and Respondent), has the effect of 'Commercial Borrowing', and as such, the 'Appellant', has a 'Financial Debt', due from the 'Corporate Debtor'. 17. According to the Appellant / Petitioner, the 'Adjudicating Authority' / 'Tribunal', had failed to appreciate that the 'Appellant', had not supplied any 'Goods', to the 'Respondent / Corporate Debtor', and therefore, there cannot be any 'Privity of Contract'. Also that, a 'reading of 'Debit Notes', 'Invoices' and the 'Del Credere Agent', will establish that the 'Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e words or expressions." 48. This Court in the case of Associated Indem Mechanical (P) Ltd. vs. W.B. Small Industries Development Corpn. Ltd.23 while construing the definition of the term "premises" as provided under Section 2(c) of the W.B. Government Premises (Tenancy Regulation) Act, 1976, observed thus: (SCC pp. 614-15, para 13) "13. ……..The definition of 'premises' in Section 2(c) uses the word "includes" at two places. It is well settled that the word "include" is generally used in interpretation clauses in order to enlarge the meaning of the words or phrases occurring in the body of the statute; and when it is so used those words or phrases must be construed as comprehending, not only such things, as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include. (See Dadaji v. Sukhdeobabu [(1980) 1 SCC 621; Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. [(1987) 1 SCC 424 : AIR 1987 SC 1023] and Mahalakshmi Oil Mills v. State of A.P. [(1989) 1 SCC 164]. The inclusive definition of "District Judge" in Article 236(a) of the Constitution has been very widely cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s it is not said in terms that "person" shall mean one or other of the things which are enumerated, but that it shall "include" them. 19. The General Clauses Act, 1897 in Section 3(42) defines "person": "3. (42) 'person' shall include any company or association or body of individuals, whether incorporated or not;" 20. Section 3 of the 1986 Act upon which reliance is placed by learned counsel for KPTC provides that the provisions of the Act are in addition to and not in derogation of any other law for the time being in force. This provision instead of helping the contention of KPTC would rather suggest that the access to the remedy provided to (sic under) the Act of 1986 is an addition to the provisions of any other law for the time being in force. It does not in any way give any clue to restrict the definition of "person". 21. Section 2(1)(m), is beyond all questions an interpretation clause, and must have been intended by the legislature to be taken into account in construing the expression "person" as it occurs in Section 2(1)(d). While defining "person" in Section 2(1)(m), the legislature never intended to exclude a juristic person like company. As a matter of fact, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons 30A of IBC (Corporate Insolvency Resolution Process) Regulations 2016, approved the application for withdrawal." 21. The Learned Counsel for the Appellant / Petitioner, adverts to the Order dated 19.02.2019 in CP (IB) No. 315 / 7 / HDB / 2018, wherein, at Paragraphs 14 & 15, it is observed as under: 14. "The only contention raised by Corporate Debtor that it had paid money covered by the invoices for which there is no proof. The second contention is that Petitioner is not a Financial Creditor which is also not correct as documentary evident support that Petitioner is a Financial Creditor and money was paid on behalf of Corporate Debtor to M/s. RIL for supply of goods and credit facility was provided to the Corporate Debtor and money was payable with interest. Further, Corporate Debtor relied on Hon'ble NCLT, Principal Bench, New Delhi order in CP No.IB-212(PB)/2018 in the matter of M/s.Cadillac Info-Tech Private Limited vs Hallow Infrastructure Private Ltd. The facts of the case is different from the present case. 15. So, in the light of above discussion it is proved that Petitioner is a Financial Creditor and that the debt due by Corporate Debtor is a Financial Debt. Peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument; (d) the amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital lease under the Indian Accounting Standards or such other accounting standards as may be prescribed; (e) receivables sold or discounted other than any receivables sold on non-recourse basis; (f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing; 1 [Explanation. - For the purposes of this sub-clause,- (i) any amount raised from an allottee under a real estate project shall be deemed to be an amount having the commercial effect of a borrowing; and (ii) the expressions, "allottee" and "real estate project" shall have the meanings respectively assigned to them in clauses (d) and (zn) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016);] (g) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price and for calculating the value of any derivative transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agent. The Agent hereby agrees to submit to the Company an unconditional and irrevocable Bank Guarantee / Cash deposit for a sum of Rs.40,00,000/- (Rupees Forty Lakhs only) towards Security Deposit. The Bank Guarantee so deposited with the company under this Agreement shall be initially valid for a period of eighteen months from the date of execution of this Agreement. The Agent further agrees to provide the Company with additional Bank Guarantees, for such value and validity period, as may be intimated by the company from time to time." 35. Clause 10 of the 'Agreement', speaks to the effect that "the Agent shall pay or arrange to pay the Company on or before the respective due dates the invoice amounts for the said products supplied by the company to any party as instructed / indicated by the Agent. In the event of the party/ies instructed / recommended by the Agent to whom supplies have been made by the Company have not effected payment on or before the respective due dates, then the Agent shall pay to the Company the entire Invoice amount forthwith." 36. Clause 15 of the 'Del Credere Agency Agreement', dated 04.04.2017, points out as under: "In the event of any party/ies to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent', is liable to pay a sum of Rs.1,23,14,186.94/- in respect of the Supplies made by M/s. Chemplast Sanmar Limited', on Appellant's instructions. 41. In the 'Legal Notice', dated 24.07.2019, issued by the Appellant's side to the Respondent, indicates that the 'Respondent', through Email dated 15.03.2019, had acknowledged a Sum of Rs.90.84 Lakhs, which was payable by the 'Respondent', as on 15.03.2019. 42. In reality, the Respondent, was called upon by the Legal Notice dated 24.07.2019 (issued on behalf of the Appellant), to pay a Sum of Rs.1,23,14,186.94/-, being the 'Sum Outstanding', as on 20.07.2019, within 7 days of receipt of the Notice. 43. A mere running of the eye of the Invoices dated 16.06.2017, 22.06.2017, 14.07.2017, 19.07.2017, 24.07.2017, 22.09.2017 and 01.11.2017 (vide Page 95 to 101 of Vol. I of the Appeal Paper Book of the Appellant - Diary No. 822 dated 24.09.2021), indicates that the Customer and the Delivery at Consignee, was mentioned as the Respondent / Vijay Aqua Pipes (P) Ltd., Tiruvallur, Tamil Nadu, and in all these Invoices, the Product Description, was mentioned as K6701 PVC Suspension Resin 25 KG Bag and the 'Transporter Name', was mentioned as W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 04.04.2017, between the 'Parties' enjoins that "Notwithstanding this Agreement, the Company is entitled to sell or distribute either directly or indirectly the Said Products in the City of Chennai and its suburbs, Tamil Nadu." 49. It is clear from Clause 3 of the 'Del Credere Agency Agreement' dated 04.04.2017 that the Company shall pay to the Agent, Commission, as intimated by the Company from time to time, against the sale of the said Products to the 'Parties', recommended / instructed by the 'Agent', further, the said 'Commission', shall be paid to the 'Agent', only upon 'Realisation of the Sale Proceeds', either from such 'Parties', recommended by the 'Agent' or from the 'Agent'. As a matter of fact, the 'Company', shall pay the 'Commission', within 30 days of such 'Realisation', etc. 50. More importantly, Clause 3 of the 'Del Credere Agency Agreement', dated 04.04.2017, points out that the 'Company', is entitled to 'deduct / adjust', any amounts whatsoever, payable by the 'Agent', to the 'Company', from and out of such 'Commission', payable and release the 'Balance'. Indeed, the 'Commission', in terms of Clause 3 of the 'Del Credere Agency Agreement', speaks of 'Del Creder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is mentioned as Rs1,337,915/- and the 'rate of interest', was mentioned as 21% per annum, would be charged, if payment was not made on or before 'due date'. 56. In the instant case on hand, one can deduce safely and securely that the 'Appellant / Financial Creditor / Petitioner', as per 'Invoice', is enjoined to 'receive Money for and on behalf of M/s. Chemplast Sanmar Limited' ('Principal Company'). It cannot be gainsaid that 'no amount', was 'disbursed', to the 'Corporate Debtor', by the 'Appellant / Petitioner / Financial Creditor'. To put it precisely, Clause 15 of the 'Del Credere Agency Agreement', dated 04.04.2017, lucidly points out that the 'Agent' if he / it to commence any 'Legal Proceedings', it can do so, only in the name and on behalf of the 'Company' for the 'recovery' of the 'Outstanding Sums'. Also that, the 'Company' would, if required, is to 'Execute', a 'specific Power of Attorney', in favour of the 'Agent', to initiate 'such proceedings'. 57. There is 'no dispute', as to the fact that 'M/s. Chemplast Sanmar Limited', the 'Company' which appointed the 'Appellant' / 'M/s. Madras Chemicals & Polymers', as its 'Agent', manufactures PVC RESIN and as per the 'Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a 'Default', a 'Demand Notice', as per Section 8 (1) was not given to the 'Corporate Debtor'. Section 8 (2) of the 'Code', specifies a period of ten days of the receipt of the 'Demand Notice' or 'copy of Invoice', mentioned in Section 8 (1) of the 'Code'. The 'Legal Notice', dated 24.07.2019 of the Appellant / Petitioner's, only mentions 'within 7 days of receipt of this Notice', etc. As a matter of fact, the 'Legal Notice', dated 24.07.2019 of the 'Appellant / Petitioner', was not issued, in terms of Section 8 (1) of the 'Code'. 64. Be that as it may, the very fact that the 'Del Credere Agency Agreement', dated 04.04.2017, between 'M/s. Chemplast Sanmar Limited' ('Company') and the 'Appellant / Petitioner' ('Madras Chemicals & Polymers' - Firm), mentions that 'M/s. Chemplast Sanmar Limited' ('Company'), which manufactures 'PVC Resin', and for selling the Said Products, through 'Agent', had appointed the 'Appellant' / 'Petitioner', as its 'Agent', going by the 'Product Description', in the Invoices' (vide Pages 95 to 101 of the Appellant's Paper Book - Diary No.822 dated 24.09.2021). Considering the spirit and tenor of the 'Del Credere Agency Agreement', dated 04.04.2017, this ' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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