TaxTMI 
TaxTMI 
2021 (12) TMI 86
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....orate Debtor) owned 8 acres of land situated at S.V. Road, Vile Parle (West) Mumbai. After some discussion with the Appellant and the Corporate Debtor, it was agreed that for development of the land of the Corporate Debtor marketing and financial assistance shall be provided by the Appellant. By letter dated 03.06.2011, the Corporate Debtor issued a Letter of Intent for marketing/ financial assistance, along with the letter Memorandum of Understanding was also enclosed containing the terms and conditions and the manner of advance to be made by the Appellant for development of the property of the Corporate Debtor. In pursuance of the said letter, the Appellant had advanced different amounts to the Corporate Debtor. Vide letter dated 22.07.2011, Corporate Debtor acknowledged the receipt of Rs. 10 Crores. The letter also contained the broad terms of agreement between the parties. On 10.10.2011, the Corporate Debtor again wrote to the Appellant recording terms and conditions for financial assistance which was needed by the Corporate Debtor. A receipt of amount of Rs. 15 Crores was also acknowledged. In subsequent letter dated 01.02.2012, the letter dated 10.10.2011 was referred to as L....
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....led under Section 7 of the 'I&B Code' by the Appellant claiming as Financial Creditor for recovery of amount of Rs. 41.75 Crores together with interest accrued thereon @ 18% p.a. In the Application under Section 7 of the 'I&B Code' amount claimed was Rs. 41.75 Crores with interest and the date of default was mentioned as 12.07.2017 which was date of filing of the suit for recovery in the Bombay High Court. Reply was filed by the Respondent to Section 7 Application where it was stated that the Petitioner (Appellant before us) could only advance sum of Rs. 40.75 Crores in various tranches to the Corporate Debtor instead of admitted commitment to the tune of Rs. 300 Crores. Allegations were made against the Petitioner (Appellant) in the reply. It was stated in the reply that MoU was not finalized. It was further stated that the Corporate Debtor has filed counter claim in the Commercial Suit before the Bombay High Court which Corporate Debtor is entitled to seek from the Petitioner (Appellant). 2. The Learned Adjudicating Authority, after hearing the parties, passed the impugned order dated 25.01.2021 rejecting the Application filed under Section 7. The Adjudicating Authority in its....
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....ter claim cannot be looked into. Learned Counsel for the Appellant submits that the debt having been repeatedly acknowledged by the Respondent, the Application ought not to have been rejected. The Adjudicating Authority committed error in rejecting the Application. 5. Learned Counsel for the Respondent refuting the submissions of the Appellant submits that the Appellant is not a Financial Creditor under the 'I&B Code' and the debt claimed is not a 'financial debt'. The Respondent counsel further submits that the Application is clearly barred by limitation. The date of default shall be 01.09.2012 after which differences arose between the Appellant and the Corporate Debtor. Appellant was to infuse a sum of Rs. 300 Crores and there is no obligation to repay the said amount. It is submitted that there was no MoU executed between the parties. There is a counter claim against the Appellant in Commercial Suit filed before the Bombay High Court. 6. We have considered the submissions of the parties and perused the record. 7. From the submissions of the Learned Counsel for the parties and record, following are the issues which arise for consideration in this Appeal:- (i) Wh....
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....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;" 10. One of the sub-clauses of Section 5(8) by which 'financial debt' is defined in clause (f) which provides:- "(f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing" 11. We may first notice certain correspondences between the parties and other documents on record which throw considerable light on the nature of transaction between the parties. Letter dated 03.06.2011 which was sent by the Respondent- Corporate Debtor to the Appellant along with which MoU was sent containing terms and ....
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.... be done simultaneously with our giving notice of termination to Sheth Developers Pvt. Ltd. and Suraksha Reality Ltd. g) In consideration of your providing marketing services and marketing of the project, as well as financing of costs to be incurred for development of the said property as mentioned above together with interest, we shall pay 50% of the sale realization to you in full and final settlement pro rata wise of the finance provided by you together with interest and for marketing services. This will be in full and final settlement of the finance provided, interest and marketing services and marketing advice. h) You guarantee that because of your marketing services and advices, the amount receivable by us after deducting the payment already received by us at per clause (b, c and d) for your finance and marketing advice, the amount available to us will not be less than Rs. 1,000/- crores (Rupees One Thousand crores only). In case, for any reason, if the amount receivable to us is less than Rs. 1,000 crores (Rupees One Thousand crores only), in that event to cover the short fall, the amount payable by us to you for your financing and services will be reduced ....
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.... Agency (OA) appointed by BIFR sought for refunding above advances and also the advances of Rs. 40,75,00,000 received from a strategic investor against Vile Parle Property along with interest, if any as decided by BIFR by selling the said property. (Reference is invited to Note no. 25[1.1b(iii)] about the Hon'ble Supreme Court's Order for not to encumber or in any way alienate the property)." 14. The Corporate Debtor was before BIFR and MDRS was submitted to the Operating Agency where advance of Rs. 40.75 Crores received by strategic investor i.e. Appellant was noticed and it was also mentioned that if decided by BIFR, by selling the said property the amount shall be refunded. 15. Similarly, Balance Sheet of 2016-17 as on 31.03.2017 also in the Column of 'other current liabilities' mentions 'advance received towards project development Rs. 407,500,000/-'. We may also refer to the Commercial Suit No. 782 of 2017 which was filed by the Appellant for recovery of Rs. 40.75 Crores with interest. The reply of Respondent in the Commercial Suit has been brought on record wherein paragraph 7 of the Affidavit, Notice of Motion was replied. It is useful to refer paragraph 7 of the reply....
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....this court." 17. High Court of Bombay had issued interim injunction order expressing the opinion that there is a clear admission of liability, hence, the Plaintiff cannot be denied the relief. The Commercial Suit is said to be pending. 18. The materials as noted above clearly indicate that amount of Rs. 40.75 Crores was advanced by the Appellant to the Respondent as financial assistance to develop S.V. Road property situated at Vile Parle. The MoU dated 10.10.2011, which cannot be denied by any of the parties, do contain the manner in which the advance received from the Appellant shall be dealt with. In the MoU dated 10.10.2011 in clause (i) following was stated:- "i) In a case where GTL terminate/ defers this marketing arrangement then GTL shall pay back the amount advance by you with interest." 19. We have further noticed that in the Balance Sheets which are required to be mandatorily maintained under the Companies Act, 2013, the receipt of advance of Rs. 40.75 Crores from the Appellant has been acknowledged and admitted. In the Balance Sheet, it was also mentioned that in the Notes-25 (7)(a) that if BIFR so directs the advance of Rs. 40.75 Crores shall be refun....
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....nder the above heading:- "PART-V PARTICULARS OF FINANCIAL DEBT (Documents, Records and Evidence of Default) 3. Record of default with the information utility, if any (attach a copy of such record) Balance Sheets for the Financial Years 2013-2014, 2014-2015, 2015-2016, 2016-2017 and 2018-2019. Copies of the Balance Sheets are annexed as Exhibit 'G' to 'L' hereto. 21. When we consider all the above documents and correspondences including the Balance Sheets, the conclusion is inescapable that the amount of Rs. 40.75 Crores advanced by the Appellant was nothing but was a financial debt within the meaning of 'I&B Code' and the Adjudicating Authority committed error in holding that the Appellant is not a 'Financial Creditor'. 22. Now we come to the question as to whether the acknowledgment contained in the Balance Sheets as noted above, the Appellant will have a fresh period of limitation as per Section 18 of the Limitation Act. The Appellant has filed the petition under Section 7 claiming the date of default as 12.07.2017 when he filed Commercial Suit for recovery of Rs. 41.75 Crores with interest. The Adjudicating Authority has observed that the said date cannot be....
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....ll be fresh period of limitation on each acknowledgment and Application filed on March, 2020 cannot be said to be barred by time. The question as to whether the acknowledgment in the Balance Sheet can give lease of fresh period of limitation is no more res integra in view of the recent judgment of the Hon'ble Supreme Court in "Asset Reconstruction Company (India) Limited vs. Bishal Jaiswal and Anr.- (2021) 6 SCC 366". The Hon'ble Supreme Court in the said judgment after considering all earlier judgments of the Hon'ble Supreme Court and High Courts has held that acknowledgment in the Balance Sheet is sufficient for attracting the provisions of Section 18 of the Limitation Act, 1963. The Hon'ble Supreme Court in the above case has quoted an earlier judgment of the Hon'ble Supreme Court in "Khan Bahadur Shapoor Fredoom Mazda vs. Durga Prasad Chamaria and Ors.- AIR 1961 SC 1236", a passage from the above judgment was quoted. Para 15 of the judgment is as follows:- "15. In an illuminating discussion on the reach of Section 18 of the Limitation Act, including the reach of the Explanation to the said Section, this Court, in Khan Bahadur Shapoor Fredoom Mazda v. Durga Prasad, (196....