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2022 (8) TMI 881 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , NEW DELHIMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - Financial Debt or not - existence of debt and dispute or not - whether the amount given by the so-called Financial Creditor (Appellant) to the Corporate Debtor (Respondent) is a financial debt under the IBC, and if it is so, then is the repayment of the debt in respect of the claim in default and due and payable to the Appellant? - HELD THAT:- It is clear from the pleadings and documents submitted by the parties that the Foreign Contract was entered into between the buyer Networth Trading Pte Limited and seller PEC Ltd. on 2.11.2010. Thereafter, for fulfillment of this contact, an agreement (referred as ‘Associate Buyer Agreement’) was signed on the next day i.e. 3.11.2010 between the Appellant and Respondent. The Foreign Contract is regarding procurement and shipment of 1,00,000 WMTS ± 5% at seller’s option of iron ore fines from Mormugao Port, India to a port in China. The payment condition included on the contract mentions that the buyer shall arrange payment within 7 days from the date of dispatch of documents from seller bank. Thus, payment is to be made by the buyer Networth Trading Pte Ltd. to the seller PEC Ltd. after shipment from Mormugao Port in India - The Foreign Contract also stipulates that the Associate Supplier shall abide by the terms and conditions of the foreign contract and foreign contract shall form an integral and inseparable part of this agreement i.e. Associate Supplier agreement (reference clause 4 of the Associate Supplier Agreement). Thus, it is abundantly clear that a buyer-seller contract was entered into between the Networth Trading Pte Limited, Singapore and PEC Limited on 2.11.2010 and in furtherance of contract, PEC entered into an agreement with the Associate Supplier Phulchand Exports Pvt. Ltd. (Respondent) through a separate agreement dated 3.11.2010. The financial assistance provided to the Associate Supplier by PEC Ltd. is to fulfill, perform and discharge the obligations and responsibilities of PEC under the foreign contract. It is clear that the amount provided by PEC as financial assistance, and claimed by it as financial debt under IBC, is basically for purchase, shipment and export of iron ore fines in fulfilment of the foreign contract. This amount is certainly not an amount given by PEC Ltd. as a financial creditor to a corporate entity M/s Phulchand Exports to ensure its overall financial viability. An examination of the debt given as advance by PEC Ltd. in the light of the definitions provided in sub-section 11 of section 3 and clause (f) of sub-section 8 of section 5 of the IBC makes it clear that while the amount advanced by PEC to M/s. Phulchand Exports Pvt. Ltd. would be a debt under the definition given section 3(11) of the IBC, it should have the commercial effect of borrowing, and more so a borrowing that helps in ensuring financial viability of the corporate debtor for it to qualify as ‘financial debt’ under the IBC. Therefore, the amount provided by PEC Ltd. as interest-bearing advance to the Respondent does not qualify to be a ‘financial debt’ as defined under the IBC. The amount as claimed by the Appellant does not fall in the category of ‘financial debt’ as defined in the IBC - the Adjudicating Authority has not erred in passing the Impugned Order, whereby the Section 7 application of the Appellant has been dismissed. Appeal dismissed.
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