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TMI Blog2024 (2) TMI 377X X X X Extracts X X X X X X X X Extracts X X X X ..... ult is made out and so we it is found that neither the said transaction is in the shape of a financial debt or in commercial effect of borrowing is evidenced and no default is also made out. As argued by the Learned Counsel for Respondent, and also admitted by the Learned Counsel for Appellant, the said transaction of Rs. 1.25 crores was ostensibly against the purchase of the property situated at Teen Batti, Walkeshwar Road, Mumbai, which was capable of redevelopment under the provision of the Development Control Regulation 33(7) and the value of property in view of this development potential was more than Rs. 15 crores. Therefore, a total consideration as claimed by the Appellant as about Rs.4.5 crores does not appear to constitute a tenable argument as a total amount of Rs. 4.5 crores would not be sufficient consideration for acquisition of the said property - it is considered necessary to go any further into the nature of the contract, whether written or otherwise between the two parties suffice to say that if transaction was made in December, 2014 against the purchase of a specific property, the Appellant should have asserted its right within the stipulated period of three y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant agreed to acquire all assets and liabilities of the Respondent as per its audited balance sheet dated March 31, 2013, after carrying out valuation of the shares of the Respondent, for a lump sum consideration of Rs.4,50,00,000/-. 3. The Appellant has further stated that it made an advance payment of Rs.1,25,00,000/- on 17.12.2014 out of the total amount of Rs.4,50,00,000/- to the Respondent and the said payment was made subject to execution of the share purchase agreement after due diligence to be carried out by the Appellant regarding the assets, financial data and compliances of the Respondent. The Respondent had, at the time, agreed to provide all documents to the Appellant, and according to him, the debt stands acknowledged as the same was reflected in the balance sheets of both the appellant and the Respondent. 4. The Appellant has further stated that the Respondent did not take necessary steps as agreed between the parties, despite receiving a payment of Rs.1,25,00,000/- in accordance with the promised agreement. In view of such a situation, the Appellant wrote many letters/reminders to the Respondent calling upon it to forward the title documents for due dilig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority does not appear to be a valid ground in rejecting the section 7 application. Furthermore, he has argued that whether the said transaction of Rs. 1.25 crores had commercial effect of borrowing was also required to be considered by the Adjudicating Authority to arrive at a conclusion. But since it was not reasoned out in the Impugned Order, the Impugned Order may be set aside, and the matter remanded for fresh consideration by the Adjudicating Authority. 11. The Learned Counsel for Appellant has cited the judgment of this Tribunal in the matter of Sanjay D. Kakade vs. HDFC Ventures Trustee Company Ltd. and Others (2023 SCC Online NCLAT 2241). 12. In reply, the Learned Counsel for Respondent company has argued that the section 7 application as filed by the Appellant does not make out the existence of any debt or default in its repayment. Furthermore, he has argued that there is no agreement, written or oral, between the parties regarding the debt and therefore, the Learned Adjudicating Authority has given a correct finding that the amount claimed as purported debt is not a financial debt and dismissed the section 7 application. He has further argued that the Respondent h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st the Respondent, in view of its own default. He has also argued that the value of the tenanted premises is actually much more than Rs. 4,50,00,000/- as the Petitioner would become entitled to receive an ownership flat with sea view of an area of minimum 950 sq. ft. carpet on Walkeshwar Road, Mumbai and, therefore, the story peddled by the Appellant is a falsehood. 15. The Learned Counsel for Respondent has further submitted that even if, at the highest argument, it is considered that the purported oral agreement existed between Shri Shabir Nirban, ex-Director and ex-shareholder of the Respondent Company and the Appellant to purchase the entire shareholding of the Respondent in December, 2014, the Appellant has ought to have sought enforcement and specific performance of the same oral agreement within the three years i.e. before the December, 2017. Admittedly, the Appellant requested the Respondent for the first time in June 2018 to execute the Share Purchase Agreement and even if, one was to accept the argument the Appellant regarding the existence of oral agreement regarding execution of Share Purchase agreement is accepted, the said claim is barred by the limitation. 16. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6);] (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, 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; 18. We now look at the transaction that took place between the Appellant and Shri Shabir Nirban, ex-Director of the Respondent Company of an amount Rs.1.25 crores. The Appellant has stated that in or about December, 2014, Shri Shabir Nirban approached the Appellant and offered to sell him 100% shares held in Respondent Company alongwith all the assets and liabilities of the Respondent, and based on the representations, undertakings and assurances provided by the director of the Respondent Company, the Appellant agreed to pay a lump sum consideration of Rs. 4.50 crores after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bt had to be in the shape of liability and non-payment of such liability in the given time would cause default. In the present situation again, no date of default is made out and so we find that neither the said transaction is in the shape of a financial debt or in commercial effect of borrowing is evidenced and no default is also made out. 22. As argued by the Learned Counsel for Respondent, and also admitted by the Learned Counsel for Appellant, the said transaction of Rs. 1.25 crores was ostensibly against the purchase of the property situated at Teen Batti, Walkeshwar Road, Mumbai, which was capable of redevelopment under the provision of the Development Control Regulation 33(7) and the value of property in view of this development potential was more than Rs. 15 crores. Therefore, a total consideration as claimed by the Appellant as about Rs.4.5 crores does not appear to constitute a tenable argument as a total amount of Rs. 4.5 crores would not be sufficient consideration for acquisition of the said property. 23. Therefore, and also because it is necessary under the IBC to go into the nature of contract to see if it is a financial and operational debt. We do not consider ..... X X X X Extracts X X X X X X X X Extracts X X X X
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