TaxTMI 
TaxTMI 
TaxTMI 
2022 (2) TMI 363
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....llant/financial creditor BDH Industries Limited (hereafter called BDH Industries) and Respondent/Corporate Debtor Mars Remedies Private Limited (hereafter called MRPL) on 7.12.2011 and personal guarantee was given by the directors with the validity of one year, subject to payments received by BDH Industries. The MOU broadly provided that MRPL, would procure and obtain export orders from its customers in favor of BDH Industries for export of products to be manufactured by MRPL. The MOU also provided that BDH Industries would provide funds to MRPL for procurement of raw material and other items required for manufacture of products against such export orders obtained by MRPL. Various clauses of the MOU stipulated that MRPL will be responsible for procuring export orders from its overseas customers and ensuring payment directly to BDH Industries for such sales. 3. We heard arguments presented by Ld. Counsels of both the parties and also perused the record. 4. The Learned Counsel for Appellant has claimed that the Appellant/BDH Industries was to provide funds to MRPL as a loan for manufacture of drugs and allied products. He has stated that it was MRPL's responsibility to procure expo....
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....as also referred to communication dated 2nd November 2017 (at page 96 of Appeal Paperbook, Vol. I)) sent by MRPL to further reinforce the claim that the payment was being made by MRPL to BDH Industries and due to certain business issues it was seeking time till 31st December 2017 for completing the entire payment. 7. In response, the Learned Counsel for Respondent has argued that the MOU is not a financing agreement as is evident from various clauses, particularly clause 3 of the MOU (attached at page 146 of the Appeal Paperbook, Vol. I) and therefore, the Appellant is not entitled to file a section 7 application as a financial creditor. He has claimed that the MOU is in the nature of a business agreement wherein the rights and responsibilities of both the parties have been clearly laid out and the funds advanced by BDH Industries to MRPL are as part payment of the export orders and not a loan given to Respondent/MRPL by Appellant/BDH Industries. He has also referred to Para 1 in the reply affidavit of Respondent to claim that since exports could not happen, the advance was used for purchasing raw materials. 8. In rejoinder, the Learned Counsel for Appellant has reiterated that i....
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....censes for export of such products and since it has been finding in difficult to accept and execute more export orders for reasons of working capital constraints and other logistic requirements, it has got in touch with BDH Industries to accept and execute such export orders procured in the name of BDH Industries from its customers. Furthermore, recital (e) is about the readiness of BDH Industries, on certain terms and conditions, to accept and execute domestic as well as export orders procured by MRPL from its customers in the name of BDH Industries. Recital (f) which shows the business arrangement between MRPL and BDH Industries, is reproduced below:- "f. MRPL has agreed to procure and obtain export orders from its customers in the name and favour of BDH for export of the products to be manufactured by MRPL at its factory and the BDH has agreed to provide finances for procurement of raw materials and other items required for manufacturing and export of the products as per each such export orders on certain mutually acceptable terms and conditions between the said MRPL and BDH as recorded hereinafter." 11. From the above, it is clear that MRPL would procure and obtain export o....
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....said MOU dated 7.12.2011 is in the nature of business arrangement which outline how MRPL shall procure orders in the name of BDH Industries, procure raw-materials and packaging materials for manufacture of pharmaceuticals and allied drugs obtain payments. BDH Industries is to make payments for raw-materials and packing materials in accordance with a time schedule given in clause (11) of MOU. There is no mention of any loan, its terms and conditions, the schedule of disbursement and repayment and any interest on the principal amount. Thus, we come to a conclusion that the MOU dated 7.12.2011 is in the nature of a business arrangement between two entities BDH Industries and MRPL and is not a loan agreement. 16. We now turn our attention to examine whether the amount provided by BDH Industries to MRPL is a financial loan or not. Referring to letter of MRPL addressed to BDH Industries dated 27.11.2011 (at page 85 of Appeal Paperbook, Vol. I) we find that the subject written therein is "regarding-financial assistance for upgrading and WHO/GMP certification". Furthermore, in the same letter the following is stated: - "Our cost of the project is Rs. 65 lakhs, out of which we have spent....
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....016 (attached at pp. 94 - 95 of Appeal paperbook, Vol.I). 20. All the above documents go to show that there was a financial assistance requested vide letter dated 27.11.2011 regarding which there were delays in repayment and extensions sought by MRPL vide letter dated 28th March 2014. The documents also show that interest @ 15% per year has been calculated and communicated by the Corporate Debtor to the financial creditor. All these documents go to show that the amount provided by BDH Industries to MRPL was in the nature of loan, which was adequately secured and there was a repayment with a certain interest rate. In such a situation, it is amply clear that even though there is no explicit loan agreement between the Corporate Debtor, MRPL and financial creditor BDH Industries yet these documents establish quite convincingly the existence of a loan provided by BDH Industries to MRPL and steps taken in repayment along with repayment of interest. Thus we are convinced that the Appellant is a 'financial creditor' as defined in Section 5(7) and the debt owed to him is a 'financial debt' as defined under section 5(8) of the IBC. 21. Now we have to see whether the said debt is in default....
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....ote any other criteria for "Admission of the Application‟. 24. Thus it is considered sufficient for admission of a section 7 application that the Applicant/Petitioner is able to establish the existence of a 'Debt' and the Corporate Debtor's default, and if the 'Application' is complete in all aspects, the Application ought to be admitted by the Adjudicating Authority. In this judgment the NCLAT relied on the order passed by the NCLT, Mumbai Bench in Anchor Leasing Pvt. Ltd. v. Euro Ceramics Ltd. (CP No. 66/IBC/NCLT/MB/MAH/2018) wherein it was observed and held that "IBC nowhere prescribed the compulsory existence of an express agreement to prove the loan and its disbursement. The statement of accounts produced on record were held enough to prove the disbursement of loan amount." Hence, in our opinion, and based on the above mentioned judgment of NCLAT, we infer that even in the absence of an explicit agreement to provide loan/financial assistance if the documents can show the existence of a loan they can be considered as an adequate evidence of the existence of loan. 25. Also, in the matters M/S Mahabir Cold Storage v. CIT, Patna [1991 Supp (1) SCC 402] and Bengal Silk Mill....