TaxTMI 
TaxTMI 
2022 (7) TMI 148
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....ondent - Financial Creditor. A subsequent order dated 17.02.2022 passed in I.A. No. 88/JPR/2022 deleting the name of Applicants 2, 3 and 4 has also been challenged. The Appellant - Shareholder and Suspended Director of the Corporate Debtor aggrieved by the impugned orders has come up in this Appeal. 2. Brief facts of the case necessary to be noticed for deciding this Appeal are:- (i) The Respondent No. 2 incorporated a company in USA being M/s Selma Precisions Technologies, NC, LLC (hereinafter referred to as 'US Company/ SPT') on 22.11.2016. The Respondent No. 2 incorporate the company in USA with object of taking over a US Company namely M/s Sona BLW Precision Forge. Inc. 500 Oak Tree Drive, Selma LC 27576 USA, which was under going Bankruptcy Proceedings in USA under Chapter 7 of Bankruptcy Laws of USA. (ii) A discussion took place between the Corporate Debtor and the Respondent No. 1 - Financial Creditor for participating in the auction process of M/s Sona BLW Precision Forge Inc. Corporate Debtor approached the Financial Creditor for the purpose of acquisition of M/s Sona BLW Precision Forge Inc. Corporate Debtor asked the Financial Creditor to extend 50% of total pur....
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....Creditor demanded entire money back both Rs.3.5 crores which was earlier disbursed and amount of USD 1.5 million directly transferred to the US Company - M/s SPT. (vi) An agreement dated 21.10.2017 was signed by Mr. J. P. Aggarwal and Mr. Sandeip Aggarwal, Directors on behalf of the Financial Creditor and Mr. Amit Rajput and Mr. Vinay Upadhyay, Directors on behalf of the Corporate Debtor, wherein Appellant/ Corporate Debtor accepted and acknowledged debt of INR 3.5 crore and USD 1.5 million. Mr. Amit Rajput, the Appellant in the agreement gave the manner of transfer of the entire fund of USD 1.5 million as well as Rs.3.5 crore. A cheque dated 31.10.2017 of Rs.3.5 crore was also prepared in the name of Respondent No.1 - Financial Creditor signed by the Appellant on behalf of the Corporate Debtor, however, only photocopy of the cheque was given to the Respondent No.1 and original cheque was kept under the custody of the Mr. Vinay Upadhyay. The cheque was never deposited in the account of Financial Creditor. (vii) Financial Creditor filed an application under Section 7 on 20.03.2018 against the Corporate Debtor. Director of the Corporate Debtor by email dated 28.05.2018 stated t....
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.... State of North Carolina, USA has been mentioned in the Reply as well as Report of Receiver dated 21.09.2020. With regard to email dated 28.05.2021 issued by Shri Vinay Upadhyay, Director of the Corporate Debtor it is submitted that he had no right to admit payments towards interest amount. Reference to Agreement dated 14.07.2018 has also been made in the Reply. It was submitted that earlier Section 7 Application was withdrawn by the Financial Creditor without taking any liberty to file the Application. Rejoinder Affidavit was also filed by the Financial Creditor to the Reply of the Corporate Debtor. (xi) Adjudicating Authority by the impugned order dated 07.02.2022 admitted the Section 7 Application. Adjudicating Authority has returned the finding that the Corporate Debtor in series of emails has admitted the liability of repaying the sum of Rs.3.5 crores to the Financial Creditor. The Corporate Debtor through its Director - Mr. Vinay Upadhyay admitted and acknowledged that Rs.3.5 crore was taken as Short-Term Laon from the Financial Creditor with interest of 12% p.a. repayable withing three months. The Adjudicating Authority has also referred to the Balance Sheet of the Corpor....
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....-Term Loan and Advances'. Even, the Audit Report and duly audited Balance Sheet of the year 2017-18 shows that amount of Rs.3.5 crores was extended as 'unsecured loans from others'. Email dated 12.03.2018 issued by the Appellant has been relied by learned counsel for the Respondent to submit that the said email contains clear acknowledgment of debt. Even Agreement dated 14.07.2018 in which Financial Creditor was not a party there is clear acknowledgment of Rs.3.5 crores to the Financial Creditor owed by the Corporate Debtor. It is submitted that the contract dated 14.07.2018 was not contract entered between the Financial Creditor and the Corporate Debtor rather said agreement was between the US Company, the Appellant as Director of the Corporate Debtor and one Mr. Ajay Kumar Jain. The submission of learned counsel for the Appellant that the said Agreement was a contingent contract which cannot be enforced by the Financial Creditor is without any basis. The said agreement was between the third parties which is not binding on the Financial Creditor. The submission of learned counsel for the Appellant that the amount of Rs.3.5 crore was Deal Fee which was paid by the Financial Credito....
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....meaning of Section 5(8) of the I&B Code or was investment/ payment for acquiring 50% equity share of M/s SPT - the US Company. We need to first notice the details of the payment made by the Financial Creditor to the Corporate Debtor totaling to Rs.3.5 crores. In Section 7 Application filed by the Financial Creditor details of payments totaling to Rs.3.5 crores have been given. Following details have been given in the Section 7 Application regarding the payment of Rs.3.5 crores:- (i) Date: 02.12.2016 - Rs.1.4 Crore vide cheque of HDFC Bank. (ii) Date: 08.12.2016 - Rs.25 Lakhs by RTGS by HDFC Bank in IDBI Bank account of the Corporate Debtor. (iii) Date: 13.12.2016 - Rs.1.5 Crore by cheque of HDFC Bank. (iv) Date: 15.12.2016 - Rs.10 Lakhs by cheque of HDFC Bank. 8. It is also on the record that on 22.11.2016 the Directors of the Corporate Debtor namely Mr. Amit Rajput, Mrs. Anupama Rajput Chauhan, their son Mayank Rajput and Kartik Rajput the brother of Mrs. Anupama Rajput incorporated a company in USA by the name of M/s Selma Precision Technologies, NC, LLC (US Company). Holding of the US Company was to the following effect:- (i) Mr. A....
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....inancial Creditor in Section 7 Application has given details of disbursement to the Corporate Debtor. It is to be noted that M/s SPT - the US Company was declared as highest bidder on 14.12.2016 and thereafter Corporate Debtor approached the Financial Creditor to send the amount directly to the US Company. In Section 7 Application there are details with regard to payment of USD 1.5 Million which was transferred to the US Company by the Financial Creditor as share application money. We may also look into the Reply of the Corporate Debtor which was filed in the Section 7 Application to find out what was the case taken by the Corporate Debtor regarding payment of Rs.3.5 crores. In Para 5 of the Reply following has been stated:- "5. That it is pertinent to mention that the Applicant and the corporate debtor entered into an agreement dated 04.12.2016, wherein both the parties agreed to bid for equal equity participation to acquire M/s Sona BLW Precision Forge Inc. It is amusing to note that the money disbursed for shared participation to acquire a foreign company is being called as a short term loan and eventually a financial debt to invoke the jurisdiction of this Hon'ble T....
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.... 3.4 Similar AR has also committed and agreed that if there is any shortfall in $1.5 M (item 3.1) he will make up any shortfall from his own internal sources of funds." 13. The above Agreement which is agreement relied by both the parties unequivocally contains the acknowledgement of Corporate Debtor towards liability to refund the amount of Rs.3.5 crore to the Financial Creditor and the Agreement mentions the mechanism to return the amount. The Agreement Clause 3.3 also mentions giving an IDBI cheque of Rs.3.5 crore to the Financial Creditor which raise clear presumption of owing debt by the Corporate Debtor to the Financial Creditor. The above Agreement between the parties makes it clear that the Corporate Debtor has acknowledged the liability to refund aforesaid amount of Rs.3.5 crore. The acknowledgement to refund the aforesaid amount of Rs.3.5 crore also proves that amount of Rs.3.5 crore was a financial debt. 14. We may also notice in this context the email dated 12.03.2018 which has been issued by the Appellant - Director of the Corporate Debtor to Mr. J. P. Aggarwal, Director of the Financial Creditor. The said email acknowledge payment of USD 1.5 Million as well as ....
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....amount of Rs.3.5 crore was a 'Short Term Loan' given to Corporate Debtor by the Financial Creditor. In the email Director also conceded that maximum interest which can be considered is only 12%. 17. The Adjudicating Authority also referred to the Balance Sheet of the year 2017-18. In the Balance Sheet of the year 2017-18, the amount of Rs.3.5 crore was mentioned under the classification of 'Borrowing' as 'Unsecured Borrowing'. The Respondent No.1 has also referred to the Independent Auditor's Report which were part of the Balance Sheet 2017- 18. In the Independent Auditor's Report under Note 2.6 - Short-Term Borrowing the amount of Rs.3.5 crore has been mentioned as on 31.03.2017. There being no dispute of disbursement of Rs.3.5 crore by the Financial Creditor to the Corporate Debtor, Short-Term Borrowing of Rs.3.5 crore mentioned in the Audited Balance Sheet fully relates with the amount received from the Financial Creditor. When we look into the Agreement dated 21.10.2017, the email dated 12.03.2018 and 28.05.2018 referred above as well as Balance Sheet for the year 2017-18, it becomes clear that the amount of Rs.3.5 crore which was disbursed by the Financial Creditor to th....
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....equity shares was never given to the Financial Creditor. Thus, the case of the Appellant that amount of Rs.3.5 crore be treated as investment only towards purchase of equity share is not supported from the record rather materials including acknowledgement of the Corporate Debtor clearly prove that the aforesaid amount comes within the definition of 'financial debt' under Section 5(8)(f) of the I&B Code. We, thus, are satisfied that the amount of Rs.3.5 crore is a 'financial debt' and application filed under Section 7 was fully maintainable by the Financial Creditor. Question 2 19. Shri Maninder Singh, learned counsel for the Appellant has contended that the contingency for filing application under Section 7 has not arisen for the Financial Creditor under the Agreement dated 14.07.2018. The Corporate Debtor never received amount of USD 0.80 Million which was to be paid by the Investor - Ajay Kumar Jain, hence, the occasion for payment of Rs.3.5 crores has never arisen. He submits that payment of Rs.3.5 crores to the Financial Creditor as per Agreement dated 14.07.2018 which was a contingent contract being covered under Section 33 of the Contract Act, such contract cannot be en....
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....onal ownership units in the first party, the third party or his relatives, associates or his companies has agreed to invest further 5.2 million USD in the First Party by July, 2019 through his own accounts/ family members accounts and through his partnership firm M/s Himani International (23/3 East Patel Nagar, New Delhi - 110008). The funds put in by the Third Party shall be used to pay off the following liabilities: (i) Mr. Jai Prakash Aggarwal along with his family members Mr. Sandip and Mrs. Sumitra Aggarwal and his company M/s Reckon Industries Ltd. 1.40 Million USD (ii) UTICA Leaseco. LLC Address: 905, South Boluevard East, Rochester Hills, Michigan - 48307. 2.5 Million USD (iii) Mr. Kartick Rajput 0.502866 million USD (iv) Warm Forging Pvt. Ltd. Bhiwadi, India. Address: SPL 238 B&C, Kahrani Industrial Area, Bhiwadi, Rajasthan, 301019 0.80 Million USD (v) Other Current Liability of First Party 0.20 million USD Total 5.4028 Million USD The Second Party has assured the Third Party that there is no other loan/liability except as mentioned above. On receipt of 0.80 million USD Warm Forging s....