TaxTMI 
TaxTMI 
TaxTMI 
2021 (4) TMI 309
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....peal for the sake of convenience. 2. Appellants Contention; a. Brief facts giving rise to the present Appeal are that the Appellant happens to be the suspended Director of the Respondent No.2 Company (from now on referred to as 'R-2'), i.e. Corporate Debtor. The Respondent No.1 (from now on referred to as 'R-1') Company is involved in the sea and coastal freight water transport and operates its fleet of owned and time chartered handy size breakbulk dry cargo vessels on its linear cargo trades. The Respondent No.2 Company M/S Navalmar Shipping (India) Private Limited was set up to carry on the business of booking cargo on a commission basis for its principal, i.e. the Respondent No.1, Company, to manage Respondent No.1 Companies work more effectively. Respondent No.2 Company/ Corporate Debtor, is registered under the Companies Act 1956 since 16 January 2002. Respondent No.2 Company's main object was to carry on the business of booking cargo on a commission basis. b. Mr Andrea Colombo, who was holding a position as Director from 18 March 2002 till 1 April 2019, removed from the directorship of Respondent No.2 Company with effect from 1 April 2019 for the non-....
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....aged by Mr Andrew Colombo and Mr Fernando Poletti, the then directors of Respondent No. 2 and the representative of Respondent No.1 Company. Every sale and purchase of Respondent No.2 Company's assets during the year 2002 till 2019 was managed by the Respondent 2 to benefit Respondent No.1. They have taken the decisions to purchase various assets by using the freight payable amount lying in Respondent No.2 Company's accounts. During those years, the said directors have mismanaged the finances of Respondent No.2. When Mr Andrea Colombo was removed from the directorship of the Company with effect from 1 April 2019 for the act of non-compliance, on the ground of his being absent from all the meetings of the Board Of Directors held during 12 months commencing from 1 April 2018 to 31st of 2019, the demand notice dated 12 June 2019 was issued. 3. Grounds: The Appellant has challenged the impugned Order on the following grounds; Respondent No.1 is not an Operational Creditor. No liability arises in the form of future payments in exchange for goods or services. Respondent No.1 has not provided any goods and services to Respondent No. 2. Hence, Respondent No. 1 is not an Operat....
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....ominated Director. The Company's only shareholders, Mr Fernando Poletti and Rosy Rego, have not challenged the impugned Order dated 29 May 2020. b. The Appellant has taken a stand in this Appeal that is contradictory to the Corporate Debtor's stand before the NCLT. The objections filed on behalf of the Corporate Debtor before the NCLT was affirmed by the Appellant in his capacity as Director. The Appellant had thus clearly tried to mislead this Appellate Tribunal. c. The present proceedings are occasioned by non-payment of Operational Debt by Respondent No.2/Corporate Debtor to Respondent No. 1/Operational Creditor. The Debt accrued under the General Agency Agreement dated 31 August 2003, and both the Respondents are bound by it. d. Given the terms of the Agreement, the Corporate Debtor was to act as a cargo booking agent for the Operational Creditor (R-1) in India, on a commission basis, which carries on transporting freight by sea using ships/vessels owned/chartered by it. The Operational Creditor terminated this Agreement on 5 September 2018. e. After the Agreement's termination, the Operational Creditor issued a demand notice Dt. 12 June 2019 under section 8....
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....the question of maintainability of the Petition under Section 9 of the I & B code 2016 because the alleged Debt is not an Operational Debt. The Corporate Debtor contends that the Appellant had not raised this plea before the Adjudicating Authority. Since the legal plea can be raised at any stage of proceedings; therefore, the Corporate Debtor's objection in this regard is not sustainable. 1.2 Admittedly the Debt arose in the dealings between Respondent -1 and Respondent -2 pursuant to the General Agency Agreement. The Operational Creditor's claim had no consideration for the time value of money. Still, it was for the consideration of the service that the Corporate Debtor had provided, or was expected to provide in the future, to the Operational Creditor. The Appellant has pleaded that the Operational Creditor's advance was not meant to fund the Corporate Debtor service. Hence, there was no time value of money involved. 1.3 The Learned Counsel for the Respondent No.1 placed reliance on the judgement of the Hon'ble Supreme Court in case of Pioneer Urban Land and Infrastructure Ltd. v. Union of India, (2019) 8 SCC 416 : (2019) 4 SCC (Civ) 1 : 2019 SCC OnLine SC 1005 ....
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....oney is raised from the allottee, being raised against consideration for the time value of money. Even the total consideration agreed at a time when the flat/apartment is non-existent or incomplete, is significantly less than the price the buyer would have to pay for a ready/complete flat/apartment, and therefore, he gains the time value of money. Likewise, the developer who benefits from the amounts disbursed also gains from the time value of money. The fact that the allottee makes such payments in instalments which are co-terminus with phases of completion of the real estate project does not any the less make such payments as payments involving "exchange" i.e. advances paid only in order to obtain a flat/apartment. What is predominant, insofar as the real estate developer is concerned, is the fact that such instalment payments are used as a means of finance qua the real estate project. One other vital difference with operational debts is the fact that the documentary evidence for amounts being due and payable by the real estate developer is there in the form of the information provided by the real estate developer compulsorily under RERA. This information, like the information fr....
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....' as a claim in respect of the provision of goods or services including employment or a debt in respect of payment of dues arising under any law for the time being in force and payable to the central government, any state government or any local authority. 1.5 As per the General Agency Agreement between the Operational Creditor and the Corporate Debtor, the Corporate Debtor acted as an agent of the former in India and collected various payments due to the Operational Creditor's customers remitted the same to the Operational Creditor. The Operational Creditor has annexed various invoices and debit notes with the Petition as evidence of the claim amount. Since the Corporate Debtor was an agent and service provider of the Operational Creditor, the amounts due under the transactions would fall within the ambit of Operational Debt as defined under Section 5 (21) of the Insolvency and Bankruptcy Code 2016. B. Whether alleged Debt is barred by Limitation? 1.1 The Appellant contends that Respondent No. 1's claims are barred by time, and by no stretch of the imagination, Respondent No. 1 can make good its dead claim. It is contended that by the issuance of notice dated 12 Jun....
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....s significant that despite being a shareholder of the Corporate Debtor Company, she has not come forward to challenge the Order admitting the insolvency petition. 1.8 It is essential to mention that after the matter was reserved for Orders, the Hon'ble Supreme Court settled down the law relating to the Limitation Act's applicability to the Insolvency proceedings, which is very much relevant for this case. In Civil Appeal No. 2734 of 2020, Laxmi Pat Surana V Union Bank of India Hon'ble Supreme Court has held: "35. The purport of such observation has been dealt with in the case of Babulal Vardhraji Gurjar (II) (supra). Suffice it to observe that this court had not ruled out the application of section 18 of the Limitation Act to the proceedings under the Code, if the fact situation of the case warrants. Considering that the purport of section 238 A of the Code, as enacted, it is clearificatory in nature and being a procedural law had been given retrospective effect; which included application of provisions of the Limitation Act on case to case basis. Indeed, the purport of amendment in the Code was not to reopen or revive the time-barred debts under the Limitation Act. ....
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....wed Limitation accruing due to the effect of section 18 of the limitation Act. Section 18 of the Limitation Act gets attracted the moment acknowledgement in writing signed by the party against whom such a right to initiate resolution process under section 7 of the Code enures. Section 18 of the limitation act would come into play every time when the principal borrower and/or the corporate guarantor (corporate Debtor), as the case may be, acknowledge the liability to pay the Debt. Such acknowledgement, however, must be before the expiration of the prescribed period limitation including the fresh period of Limitation due to acknowledgement of the Debt, from time to time, for institution of the proceedings under section 7 of the Code. Further, the acknowledgement must be of a liability in respect of which the financial Creditor can initiate action under section 7 of the Code." (emphasis supplied) 1.9 Based on the above observation of the Hon'ble Supreme Court, it is clear that Section 7 of the I&B Code comes into play on non-payment of "debt" when whole or any part or instalment of the amount of Debt has become due and payable and is not paid by the Corporate Debtor. When the Co....
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....t issued any notice of dispute until the demand notice dated 12 June 2019. Further, there is no document to substantiate any dispute in relation to the Operational Debt prior to the demand notice. The Corporate Debtor has never raised any dispute about falsification fabrication of invoices prior to the receipt of demand notice. It is pertinent to mention that the Corporate Debtor has not taken the falsification or fabrication of invoices in its reply dated 1 July 2019. As contemplated under the I& B code 2016, the dispute has to be a pre-existing dispute that is genuine and not a patently feeble argument, as held in the case of Mobilox Innovations (supra). It is also important to mention that any investigation into the issues of fabrication/falsification of documents, invalid debit notes, directors having a conflict of interest after leaving the Corporate Debtor Company etc., as now raised by the Respondent/Corporate Debtor, are the issues clearly outside the scope of the summary proceedings. The Petition filed under Section 9 of the Code is filed by Mr Andrea Colombo, being duly authorised by Board Resolution dated 15 July 2019 by the Operational Creditor Company, which is a separ....