TaxTMI 
TaxTMI 
2026 (1) TMI 394
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....mpugned order has been passed in a mechanical manner without truly appreciating the peculiar facts of the case. That the submissions made by the Counsel for the Appellant at the time of final arguments have also not been properly recorded by the Ld. Adjudicating Authority while passing the impugned order. Adjudicating Authority completely ignored the Email dated 27.12.2019 sent by the Director of the Respondent company acknowledging the debt of the Appellant which is directly covered by the proviso of Section 18 of Limitation Act and even if the date of default is taken from this date of email dated 27.12.2019 then also the petition is filed on 22.10.2022, which is well within the limitation period of 3 years. Hence this appeal. Brief facts of the case: 3. The brief facts of the case are given below: (i) That the Appellant company is engaged in the business of selling and distributing automotive paints and other automotive refinished products. (ii) The Respondent is also a registered company engaged in the business of automotive body shop and paint booth. (iii) An agreement was entered into between the Appellant and Respondent, on 21.11.2017, whereb....
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....te Debtor on 28.10.2022. (x) Adjudicating Authority in the Impugned Order decided that the Appellants qualify as financial creditors of the Respondent in the given set of facts and circumstances on record, but rejected the insolvency petition of the Appellant on the sole ground of limitation erroneously. The present appeal has been filed against the said dismissal of Section 7 petition. Submissions of the Appellant 4. Ld. Counsel submitted that the Appellant being the Financial Creditor of the Corporate Debtor i.e., Stan Cars Pvt Ltd, is aggrieved by the impugned order dated 04-07-2023 passed by the Ld. Adjudicating Authority in the CP (IB) 812 (ND) of 2022 under Section 7 of the Code filed by the Appellant. 5. Ld. Counsel for the Appellant submitted that his Company is in the business of selling and distributing of automotive paints and other automotive refinish products under the brand name "Sikkens". The Respondents are carrying out the business of automotive paint shop and paint booth under the name and style of M/s Stan Cars Pvt Ltd. 6. Ld. Counsel stated that on 21.11.2017, the parties entered into a contract, whereby the Respondent was to purchase substa....
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....due to the slowdown in the auto industry, were bound to recover and the respondent shall carry out the sales as per the terms of agreement, which categorically states that the respondent is referring to the aforementioned agreement, wherein the default had occurred in the very first year of its existence that is 21.11.2018. It is the submission of the Appellant that in view of acknowledgement vide email dated 27.12.2019, as per section 18 of the Limitation Act, the time period was bound to be computed from 27.12.2019. 11. Ld. Counsel further submitted that the above mentioned correspondence received from the respondent clearly attract section 18 of the limitation act. which is reproduced here in under for the kind perusal of this Hon'ble Tribunal: "18. Effect of acknowledgment in writing. - (1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be c....
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....lity may not be indicated in words. Words used in the acknowledgment must, however, indicate the existence of jural relationship between the parties such as that of debtor and creditor, and it must appear that the statement is made with the intention to admit such jural relationship. Such intention can be inferred by implication from the nature of the admission, and need not be expressed in words. If the statement is fairly clear then the intention to admit jural relationship may be implied from it. The admission in question need not be express but must be made in circumstances and in words from which the Court can reasonably infer that the person making the admission intended to refer to a subsisting liability as at the date of the statement. In construing words used in the statements made in writing on which a plea of acknowledgment rests oral evidence has been expressly excluded but surrounding circumstances can always be considered. Stated generally courts lean in favour of a liberal construction of such statements though it does not mean that where no admission is made one should be inferred, or where a statement was made clearly without intending to admit the existence of jur....
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....ecember 27, 2019, will not amount to the admission of debt as there is no admission of any outstanding amount as debt by the Respondents herein, and it is misrepresented by the Appellant as admission by the Respondent. 20. Ld. Counsel submits that the alleged claim of the Appellant emanates entirely from the agreement dated November 21, 2017. He stated that the agreement dated November 11, 2017 being relied upon by the appellant is not validly executed; as there are the Appellant, the Respondent and the Third Party' as mentioned in the Recital, namely M/s P.R. Hardware & Paint Store. The Agreement was however not signed by the Third Party', namely M/s P.R. Hardware & Paint Store and no "witnesses' have signed the Agreement, rendering the Agreement invalid. 21. Ld. Counsel stated that the authenticity of the agreement already challenged by way of a Civil Suit by the Respondent. The veracity and authenticity of the Agreement has been challenged by instituting a civil suit before the Ld. Civil Judge (Senior Division). Ludhiana way back on November 10, 2021, namely Stan Cars Pvt. Ltd. v. Akzo Nobel India Ltd. bearing CS/8944/2021 ("Civil Suit"). The Civil Suit had bee....
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....led to provide particulars of financial debt (Documents, records and evidence of default) as required by part-V of Form-1 and has stated that the requirements of Part-V are "Not Applicable on the Petition before Hon'ble Adjudicating Authority, without providing any reasoning for such non-applicability. 26. The Ld. Counsel further submits that incomplete financial details have been given in the petition filed under Section 7. The amount stipulated in the purported Agreement does not coincide with the payment allegedly made, as seen from the following:- (i) Clause I of the purported Agreement requires the Appellant to extend a trade advance of up to Rs. 2,53,50,000/-. (ii) Clause 3 of the purported Agreement requires the Respondent to execute a promissory note payable on demand amounting to Rs. 2,53,50,000/-. (iii) However, the amount allegedly paid by the Appellant sums up to only Rs. 2,40,50,000 (Rs. 1,62,50,000 paid on December 21, 2017 and Rs. 78,00,000 paid on January 31, 2018). (iv) The account statements furnished at in the appeal reflecting transfer of Rs. 2,40,50,000 are extracts of larger documents. The said larger documents have n....
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....red in terms of the Agreement • CD has always duly paid the FC in terms of the business understanding between the parties • FC seeking specific performance of a contract (Agreement) while alleging breach of the same. • Furthermore FC cannot seek specific performance of a contract under the guise of the Code. 7. Clause 7 (@ Pg. 66) Trade advance to be adjusted as trade discount as follows- Year Target (Rs.) as per Schedule I Discount (%) Amount adjusted from trade advance of Rs.2,53,00,000 1. 70,00,000 11 27,83,000 2. 1,08,00,000 18 40,48,000 3. 1,30,00,000 20 50,60,000 4. 1,55,00,000 24 60,72,000 5. 1,87,00,000 29 73,37,000 Total 6,50,00,000 100 2,53,00,000 • Trade advance extended, to be adjusted as a Trade Discount. It is only an adjustment and does not have the commercial effect of a borrowing 28. Ld. Counsel submitted that Appellant cannot seek specific performance of the contract under the guise of the code. The Appellant has sought specific performance of the purported Agreement, for having claimed a sum of amount arisin....
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....nt or Operational Creditor as claimed by the Respondent. This issue has been adjudicated by the Adjudicating Authority holding that the Appellant is a Financial Creditor. The impugned order is a well-reasoned order taking into the consideration submission of both the parties and their respective legal citations and based on the same it has held that the appellant is a Financial Creditor. 34. The second issue relates to the limitation period and Ld. Tribunal decided that the Section 7 petition filed by the Appellant under the Code was filed beyond the limitation period prescribed from the date of default and hence the said petition was not maintainable. 35. It is the submission of the Appellant that the limitation period has not been correctly computed by the Adjudicating Authority and it is their submission that their petition under Section 7 was filed well within time and the same should have been admitted. 36. We first take the issue of status of the Appellant i.e. whether the Appellant is Financial or Operational Creditor. The Adjudicating Authority has held that Appellant is a Financial Creditor as claimed by the Appellant. The Respondent on the other hand has again ar....
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....ovided however, that STAN CARS would be entitled to carry forward the value of the excess Products purchase orders placed with AKZO (in respect of which payment has been received by AKZO in terms of clause 5 hereof) during a particular year, over and above the Product purchase order requirements as stipulated for that year under Schedule 1, to meet up with the deficit in the Product purchase order for any subsequent year(s) Provided further that the amount of trade advance remaining unadjusted shall be deemed to be a loan extended by AKZO to STAN CARS, in respect of which, an interest @ 1% per month (12% per annum) shall be paid by STAN CARS to AKZO calculated from the date of release of the trade advance in terms of clause 1 hereof till the date of actual repayment thereof." (Emphasis supplied) 38. The Clause 2 states the objective of the trade advance which is basically for installation of capital equipment at Respondent site so as to enable it to carry on its business with new and improved means. 39. Para 4 basically provides the monthly quantum of purchase order to be placed with the appellant or its dealer. 40. Clause 7 of the agreement is most crucial whi....
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....l dated 27.12.2019, a plain reading of the document does not show clear cut acknowledgement of debt by the Respondent, it only mentions about poor business conditions and other difficulties. We are not inclined to accept this email as acknowledgement of debt. 45. The second contention of the Appellant relates to the exemption of Covid-19 period by Hon'ble Supreme Court. We have noted that the limitation period from 15.03.2020 to 31.05.2022 has been excluded by the Hon'ble Supreme Court for all purposes vide their suo motu Writ Petition (C) No.-3 of 2020 vide their Order dated 10.01,2022. The directions of Hon'ble SC in the Suo-Motu case (supra) are extracted below: "I. The order dated 23.03.2020 is restored and in continuation of the subsequent orders dated 08.03.2021, 27.04.2021 and 23.09.2021, it is directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi-judicial proceedings. II. Consequently, the balance period of limitation remaining as on 03.10.2021, if any, shall become available with effect from 01.03.2022. ....