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2020 (2) TMI 633

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..... lending for time value of money for the loan which the Financial Creditor was advancing. On the basis of the amounts advanced in 2016 - 2017 itself, considering the fact that the Corporate Debtor has not paid the amounts claimed, which are clearly more than ₹ 1 Lakh, we find there is debt and default and that no error could be said to be there in the Impugned Order admitting the Section 7 proceedings filed by the Financial Creditor - Respondent No.1 - Appeal dismissed. - Company Appeal (AT) (INS) NO. 212 OF 2019 - Dated:- 4-9-2019 - Justice S.J. Mukhopadhaya, Chairperson, A.I.S. Cheema, Judicial Member And Kanthi Narahari, Technical Member Vineet Arora, Vidhan Vyas, Akshat and Gauri P. Desai, Advs. for the Appellant. Vaibhav Mahajan, Siddhant Gupta and Ravneet Singh, Advs. for the Respondent. JUDGMENT A.I.S. Cheema, Respondent No.1 - M/s. Tuf Metallurgical (P) Ltd. (Financial Creditor) filed Application under Section 7 of Insolvency and Bankruptcy Code, 2016 (IBC - in short) against Respondent No.2 - M/s. Albus India Ltd. (Corporate Debtor), before the Adjudicating Authority (National Company Law Tribunal, New Delhi Bench) vide (IB)-1089(ND)/2018 which has been admitted by th .....

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..... ich is produced by the Corporate Debtor. According to Corporate Debtor, the money received from the Financial Creditor was with regard to supplies of future material and there was no disbursement of amount against time value of money to qualify as financial debt under the IBC. It is claimed that the Corporate Debtor was in financial difficulty in 2016 and the Financial Creditor was informed, inability to supply raw material. In order to tide over the financial crisis of the Corporate Debtor, the Financial Creditor offered advance payments for future supplies of material and as the supply was taking more time, the Corporate Debtor executed Promissory Notes only by way of security. According to the Corporate Debtor, as per the terms of the Agreement dated 4th April, 2017, the Financial Creditor was to have first right to procure from the Corporate Debtor on priority basis a minimum of 500 MT of Low Carbon Ferro Chrome per month and if the Corporate Debtor supplied material directly to 3rd parties, the Financial Creditor was entitled to commission of 3 - 5 percent of the billed amounts. The Corporate Debtor claimed before the Adjudicating Authority that Loan 1 was wrongly being stated .....

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..... eement dated 4th April, 2017 was that the Corporate Debtor was producing Low Carbon Ferro Chrome for which the Financial Creditor was the buyer and subsequent seller in the open market and for which the Corporate Debtor was to get margin. The Corporate Debtor was required to pay commission to the Financial Creditor at 3 - 5 percent of the billed amount as mutually agreed. The transaction was in the nature of business arrangement and thus, it is claimed that there was no financial debt. 7. The Respondent No.1 - Financial Creditor has argued that the Financial Creditor had advanced ₹ 2,23,14,261/- and there was further loan of ₹ 5 Crores. The Financial Creditor referred to Promissory Note dated 17th April, 2017 (Page - 68 of the Reply - Diary No.11325) regarding the Loan 2 which the Appellant is claiming to be payment of demurrage. The Financial Creditor has referred to letter dated 5th April, 2018 (Page 110 of Reply - Diary No. 11325) which reads as follows:- "It is hereby confirmed that a sum of ₹ 1,13,46,653 (equivalent to US$177,291.45 as per the then applicable/prevailing exchange rate) is due/payable to M/s. TUF Metallurgical Pvt. Ltd. on account of 18.76 .....

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..... ement" dated 4th April, 2017 clearly referred to the Corporate Debtor as "borrower" and to the Financial Creditor as "lender". It is mentioned in the document (relevant portions of which are) as under:- 'WHEREAS the Borrower has approached the Lender for a financial assistance in the form of a loan of a sum of INR 5,00,00,000/- (Rs. Five Crores Only) [hereinafter referred to as "the Financial Assistance or Loan"] (to be secured fully through personal guarantees of all the individual directors of the Borrower Company and further assured for its timely repayment through its Promissory Note(s) duly supported by un-dated cheque(s) to stand further as repayment guarantee in addition to the un-dated cheque(s) of the individual directors given in support of & to corroborate their individual personal guarantee - as per the specific description and details as encapsulated through "Annexure-A" forming an integral part of this Agreement……………………. Furthermore, the said Finance Facility/Loan is subject to performance of the borrower as per conditions mentioned herein and in case of failur .....

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..... . In case, actual production is less than 500 MT in a month, Lender will have the right to review this agreement and invoke other rights under the agreement." 9. The above Agreement dated 4th April, 2017 is followed by the Promissory Note executed on behalf of the Corporate Debtor acknowledging the "short term urgent unavoidable loan". Not only this record shows that sister concern of the Corporate Debtor had Board of Meeting dated 31st August, 2017 (Page 109 of the Reply - Diary No.11325) and offered security and equitable mortgage to the Financial Creditor (Page 107 of the same Reply) and even these documents make it clear that the transaction between the Financial Creditor and the Corporate Debtor was that of financial debt. 10. Section 5(8) of the IBC describes financial debt as under:- "(8) "financial debt" means a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money and includes- (a) money borrowed against the payment of interest; (b) any amount raised by acceptance under any acceptance credit facility or its de-materialised equivalent; (c) any amount raised pursuant to any note purchase facili .....

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..... ow that it was advance to be adjusted against price of future goods to be supplied (as is being tried to be claimed by the Corporate Debtor). The Agreement dated 4th April, 2017 read with the Promissory Note dated 17.04.2017 showed that interest was also payable. There is no substance in the argument of the Appellant that the subsequent Promissory Note cannot be looked into for considering the relationship. When the Financial Creditor gave advance to keep the Corporate Debtor running, to ensure that its raw material becomes available to the Financial Creditor, it was clearly a case of borrowing/lending for time value of money for the loan which the Financial Creditor was advancing. 11. The record before the Adjudicating Authority and even this Appeal (Para 7.C) shows the Corporate Debtor admitting at least receipt of ₹ 2,51,44,385/- between October, 2016 to March, 2017. Even what is said to be demurrage, the letter dated 5th April, 2018 clearly showed that the Corporate Debtor accepted that on its part, there was liability to pay ₹ 1,13,46,653/- and that the Financial Creditor was incurring demurrage on behalf of the Corporate Debtor. For deciding the present matter, we .....

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