TMI Blog2019 (4) TMI 1845X X X X Extracts X X X X X X X X Extracts X X X X ..... ON'BLE MEMBER (J) For the Petitioner: Shri Pulkit Deora and Ms. Nandini Sinha, Advocates For the Respondent: Mr. Rajesh Agarwal Ms. Sishmita Kumari, Advocates JUDGMENT M.M. KUMAR, PRESIDENT Mr. K.N. Mahesh Prasad claiming to be 'financial creditor' has filed this petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for brevity 'the Code') read with rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (for brevity 'the Rules') with a prayer for initiation of Corporate Insolvency Resolution Process in respect of respondent company, MedinnBelle Herbalcare Private Limited, who is claimed to be the corporate debtor. 2. The Corporate Debtor-MedinnBelle Herbalcare Private Limited was incorporated on 02.02.1996. The identification number of the Corporate Debtor is U74239DL1996PTC076006 and its registered office is situated at Plot No. 13, Road No. 35F/F, West Punjabi Bagh, Near New Delhi, West Delhi-110026. 3. The petitioner has proposed the name of Resolution Professional, Shri Madan Lal Aggarwal, #3004, SF, SBI Officers Housing Society, Sector 49D, Chandigar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . on the fees payable. 5. Subsequently a deal was pursued by the Corporate Debtor with one Piramal Enterprises Limited (for brevity 'Piramal') wherein the Corporate Debtor was advised by Pirarnal to acquire an infringing trademark called NPD Endure Mass . As the Corporate Debtor was falling short of the liquid funds required to pay for acquisition of NPD Endure Mass and also required some external funding support, it approached to the applicant and requested him to lend them a sum of ₹ 1.70 (one crore seventy lakh). Later an amount of ₹ 1.70 crore was lent by the Financial Creditor to the Corporate Debtor vide memorandum of understanding dated 16.01.2018 (Annexure I-H) executed between the Financial Creditor and the Corporate Debtor. It would be beneficial to read the relevant portion of the said memorandum of understanding and the same read as under:- As a pre condition to the acquisition, Piramal requires Medinn to acquire an infringing trademark called NPD Endura Mass . In order to pay for this consideration towards acquisition of NPD Endura Mass, Medinn is falling short of the liquid funds required and requires some external funding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court of Metropolitan Magistrate at Esplande, Mumbai. In response to the aforesaid notic e Respondent has filed reply dated 28.05.2018. An email dated 30.04.2018 was also sent by the Financial Creditor requesting the Corporate Debtor to repay the aforesaid loan amount within a period of seven days. Copies of the legal notice dated 28.04.2018 and reply thereto have been placed on record [Annexure I-I(Colly)]. 9. Copy of Bank statement of HDFC Bank along with confirmation given by the Bank regarding aforesaid loan disbursed by the petitioner by way of RTGS in the account of the Corporate Debtor has been placed on record (Annexure I-E F). Further a chart relating to computation of amount of default and dates of default has also been placed on record (Annexure I-C). 10. The precise case of the Petitioner is that the total amount in default and due to the financial creditor by the corporate debtor as on 01.06.2018 is Rs. 11. Learned counsel for the Corporate Debtor has opposed the admission of the petition by asserting that:- (i) The Respondent is the manufacturer of farnous brand Endura Mass since 01.02.2001. In August 2009 fact came in his knowledge that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amal. As a part of said deal both the aforesaid cases i.e. civil suit filed by Mr. Chetwani and FIR lodged by the Respondent was to withdraw. In said deal the Respondent paid a handsome amount to purchase trade mark namely 'NPD Endura Mass' to Mr. Chetwani. It is stated that in the entire deal with Mr. Chetwani and Mrs. Sonia Sanjay Chetwani, petitioner was a key person and the Respondent was never ever any occasion to talk with those persons as the petitioner stated them that if the Respondent attempted to talk directly with them then the main deal with Pirarnal may fail. Copies of letter/email dated 01.09.2017 written by the petitioner to the Respondent and letter dated 06.12.2017 written by the petitioner to Piramal have been placed on record (Annexure R-4 R-5) highlighting that all had written in pursuance to the aforesaid deal as well as for the purpose to win deep confidence of the Respondent. (v) As per the petitioner both aforesaid persons demanded ₹ 50 crores for the purpose to finalize the deal with the Respondent of his product 'NPD Endura Mass'. During protracted mediation, the petitioner stated that Mr. Chetwani has agreed to finalize said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company issued a legal notice dated 23.06.2018 (Annexure R-7) to Piramal calling upon it to complete the aforesaid contract within a period of three months otherwise the Respondent would initiate proceeding both criminal and civil including for recovery of an arnount of ₹ 3.95 crores which were paid by the Respondent to Mr. Chetwani. Response to said notice was given by Piramal vide letter dated 10.07.2018 (Annexure R-8) denying the facts as stated in the notice. (xi) Substantiating the allegations, it has been asserted that the petitioner is not a financial creditor nor any arnount is due or payable to him. 12. A rejoinder to the reply has been filed by the Financial Creditor reiterating the submissions made in the petition and controverting the assertions made in the reply. In para 1 of the rejoinder it has been submitted that criminal complaint dated 25.05.2018 filed by the Respondent against the petitioner is clearly a counterblast to the notice issued under Section 138 of Negotiable Instrument Act by the petitioner on 28.04.2018. It has then submitted that the petitioner, for the conclusion of the deal with Piramal granted a short-term loan, amounting to ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent with him. It is then averred that the loan arnount of ₹ 1.7 crores was advanced by the Petitioner to the Respondent against time value of money in the form of interest of ₹ 10 lacs, as paid by the Respondent in advance on 15.11.2017. 14. Without going into any factual controversy and the lengthy pleadings, which we consider not necessary or even if the case of the petitioner is regarded to be true, the question which emerges for determination is whether the amount paid by the petitioner is covered by Section 5(8) of the Insolvency Bankruptcy Code. Admittedly, there is no document on record to show that interest is payable on the arnount and the loan is covered by Section 5(8) of the Insolvency Bankruptcy Code. 15. We have heard Ld. Counsel for the parties at the considerable length. We confronted Ld. Counsel for the petitioner with a query as to how the petitioner would be covered by the expression 'Financial Creditor' and the expression 'Financial Debt' within the meaning of the term used in Section 7 read with Section 5 (7) (8) of the Insolvency Bankruptcy Code. Ld. Counsel for the petitioner lowered his eyes and was not able t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority when a default has occurred. Explanation - For the purposes of this sub-section, a default includes a default in respect of a financial debt owed not only to the applicant financial creditor but to any other financial creditor of the corporate debtor. (2) The financial creditor shall make an application under sub-section (1) in such form and manner and accompanied with such fee as may be prescribed. (3) The financial creditor shall, along with the application furnish (a) record of the default recorded with the information utility or such other record or evidence of default as may be specified; (b) the name of the resolution professional proposed to act as an interim resolution professional; and (c) any other information as may be specified by the Board From a bare perusal of Section 7 of the IBC, it is patent that the insolvency process can be triggered at the instance of a Financial Creditor individually or jointly against a corporate debtor when default has occurred. The first question arises for consideration is as to who is a 'Financial Creditor'. In order to ascertain the meaning of that expression we have to examine its def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words of Section 5(8) of the IBC. It is true that there are complex financial instruments which may not provide a happy situation to decipher the true nature and meaning of a transaction. It is pertinent to point out that the concept 'Financial Debt' as envisaged under Section 5(8) of the IBC is distinctly different than the one prevalent in England as provided in its Insolvency Act, 1986 and the 'Rules' framed thereunder. It appears that in England there is no exclusive element of disbursement of debt laced with the consideration for the time value of money. However, forward sale or purchase agreement as contemplated by Section - 5(8)(f) may or may not be regarded as a financial transaction. A forward contract to sell product at the end of a specified period is not a financial contract. It is essentially a contract for sale of specified goods. It is true that some time financial transactions are seemingly restructured as sale and repurchase. Any repurchase and reverse repo transaction are sometimes used as devices for raising money. In a transaction of this nature an entity may require liquidity against an asset and the financer in return sell it back by way of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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