2022 (12) TMI 476 - AT - Insolvency and Bankruptcy

Tribunal affirms buyer/seller relationship, emphasizes primary document, dismisses appeal.

The Tribunal upheld the Adjudicating Authority's decision, determining the relationship between the parties as that of a Buyer/Seller rather than a ... Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - High Seas Sale Agreement, source document or not - nature of relationship between appellant and respondent - buyer-seller relationship or not - validity of arbitral award. What is nature of relationship between the Appellant- M/s Shakti International Pvt. Ltd. and the Respondent- M/s Pandi Devi Oil Pvt. Ltd.? - Whether above relationship is to be treated as Buyer/Seller in commercial transactions or as Financial Creditor and Corporate Debtor? - HELD THAT:- Prima-facie Loan Agreement as subsequent Renewal Agreement were entered into to facilitate successful completion of the original Master Agreement i.e. High Seas Sale Agreement. It is also observed that the MoU makes reasonably clear the relationship between the Appellant and the Respondent as Buyer and Seller in course of normal commercial transactions rather than as pure Financial Creditor and Corporate Debtor - this Appellate Tribunal do not find any error in the impugned order whereby the Appellant has not been treated as Financial Creditor and in effect Section 7 Application under I & B Code, 2016 the Appellant was not entertained. Whether the High Seas Sale Agreement dated 23.04.2012 is to be treated as source document or ought to be considered along with other two agreements i.e. Loan Agreement dated 09.04.2021 Loan Renewal and Working Capital Loan Agreement dated 21.03.2013 as part of full documentation? - HELD THAT:- From the impugned order 27.04.2021 it is seen that the Adjudicating Authority had detailed examination of all the record and heard the submissions by both the parties in course of various stages of 17 hearings. It is for neither expected nor desirable for this Appellate Tribunal to go into detailed of various claims and counter claims based on the alleged Ledger Accounts of both the parties which evidently has been scrutinised in details and gone into by the Adjudicating Authority - This Appellate Tribunal observes that the Adjudicating Authority has treated High Seas Sale Agreement as a source documents. Looking to the detailed examination done by the Adjudicating Authority and elaborate discussions in the preceding paragraphs, this Appellate Tribunal comes to the conclusion that the Adjudicating Authority has not erred in treating High Seas Sale Agreement as source document and other two agreements can be treated as part of full documentation. Whether the Arbitral Award based on consent terms is subject to subsequent MoU dated 19.03.2015 entered into between Appellant and Respondent to give effect to consent term? - HELD THAT:- From the averments made during proceedings, this Appellate Tribunal observed that subsequent to settlement/consent term dated 18.03.2015, both the parties agreed to sign MoU dated 19.03.2015 to give effect to consent terms. It has been brought to the notice of this Appellate Tribunal that as per this MoU, in view of financial difficulties of the Respondent, the Appellant agreed to run Respondent’s plant/factory independently. The Appellant also further agreed to give advance of Rs. 25,00,000/- to the Respondent for overhauling/ revamping plant and machinery. The consent term was converted into MoU dated 19.03.2015 which apparently has again been disputed by allegations by both parties of not fulfilling their terms. It can therefore be presumed that the Arbitral Award based on consent terms is subject to subsequent MoU dated 19.03.2015 entered into between the Appellant and the Respondent to give effect to consent term. This Appellate Tribunal, otherwise, do not find any prima-facie valid/ solid reasons for parties to sign MoU on 19.03.2015 just after one day of signing of Arbitral Award dated 18.03.2015 which in turn was based on consent terms dated 18.03.2015, other than to give effect and ensure implementation of consent terms. It is therefore felt that the Arbitral Award based on consent terms is subject to subsequent MoU dated 19.03.2015 entered into between the Appellant and the Respondent to give effect to consent term. This Appellate Tribunal also conscious of the fact that the I & B Code, 2016 is primarily for resolution and keeping the company/ corporate debtor in running condition as far as possible. In catena of judgements, it has been held that the Corporate Insolvency Resolution Process should not be used as recovery mechanism. Adequate alternative legal recourse and platforms including Civil Courts are available to enforce their respective claims. This Appellate Tribunal, is of the considered opinion that there is no error in the impugned order dated 27.04.2021, passed by the Adjudicating Authority. Appeal is devoid of any merit and stand dismissed - Appeal dismissed. Issues Involved:1. Nature of the relationship between the Appellant and the Respondent.2. Whether the 'High Seas Sale Agreement' is the source document or should be considered along with other agreements.3. Whether the Arbitral Award based on consent terms is subject to the subsequent MoU.Detailed Analysis:Issue No. (I): Nature of Relationship(a) Nature of Relationship:- The Appellant, M/s Shakti International Pvt. Ltd. (SIPL), is involved in importing, exporting, and dealing in oils, while the Respondent, M/s Pandi Devi Oil Pvt. Ltd. (PDOPL), is engaged in importing crude palm oils and running a factory for the same.- A 'High Seas Sale Agreement' was executed on 23.04.2012, under which SIPL agreed to import crude palm oil for PDOPL.- SIPL granted a loan of Rs. 1,84,00,000/- to PDOPL on 09.04.2012, which was later renewed on 21.03.2013, including an additional working capital loan of Rs. 71,00,000/-.(b) Buyer/Seller or Financial Creditor/Corporate Debtor:- The agreements and MoU indicate that the relationship between SIPL and PDOPL is of a Buyer and Seller rather than a Financial Creditor and Corporate Debtor.- The Loan Agreements were part of the commercial transactions to facilitate the High Seas Sale Agreement.- The Tribunal concluded that the relationship is commercial and not financial, supporting the Adjudicating Authority's decision to dismiss the Section 7 Application under the I & B Code, 2016.Issue No. (II): Source Document- The 'High Seas Sale Agreement' dated 23.04.2012 was the primary document governing the transaction between SIPL and PDOPL.- The Loan Agreements were subsequent and independent but were part of the financial arrangements to facilitate the High Seas Sale Agreement.- The Tribunal agreed with the Adjudicating Authority's view that the High Seas Sale Agreement is the source document, and the other agreements are part of the full documentation.Issue No. (III): Arbitral Award and Subsequent MoU- The Arbitral Award dated 18.03.2015 was based on consent terms agreed upon by both parties.- A subsequent MoU dated 19.03.2015 was signed to give effect to the consent terms, indicating that the Arbitral Award is subject to the MoU.- The MoU included provisions for SIPL to run PDOPL's plant and provide financial assistance, which was allegedly not fulfilled by SIPL.- The Tribunal concluded that the Arbitral Award is subject to the MoU, and the MoU supersedes prior agreements and negotiations.Conclusion:- The Tribunal upheld the Adjudicating Authority's decision, finding no error in treating the Appellant as a Buyer/Seller rather than a Financial Creditor/Corporate Debtor.- The High Seas Sale Agreement was correctly treated as the source document.- The Arbitral Award is subject to the subsequent MoU, and the I & B Code should not be used as a recovery mechanism.- The appeal was dismissed, granting liberty to the parties to seek alternate legal remedies if required.Final Order:- The appeal is dismissed with no costs, and parties are given liberty to pursue alternate legal remedies in accordance with the law.