TMI Blog2020 (7) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... ts entirety which enjoins upon the parties their respective duties and obligations as well as their rights. As rightly pointed out by Counsel for the Corporate Debtor the Franchise Agreement or for that matter any document which the parties have chosen to rely on, cannot be read in piecemeal and has to be read as a whole which is a well established legal principle - It is also further seen that the responsibility of running the Store, even though clauses in relation to the same was heavily relied upon by the Counsel for the Petitioner is placed upon the Franchisor, it is required to be seen that the said clauses when Franchise Agreement read as a whole is provided more as a protective measure with a view to protect its trade name and mark and also normally order to have a uniformity and consistency in relation to the Stores operated at several places including the one in the present one and in the circumstances the said clauses cannot be read in isolation viz., 9.1. The standard as prescribed in relation to the quality, quantity or otherwise taking into consideration the expectancy of the user public when the trade name Fipola is associated any adverse usage by the Franch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scloses name of the proposed Interim Resolution Professional viz., Mrs. Vijayakumari Natarajan, who is having Registration No.IBBI/IPA-001/IP-P00972/2017-2018/11602. 5. Part IV of the prescribed Application discloses that the amount claimed is in a sum of ₹ 3,38,09,878/- on the date of filing the petition and the said amount is claimed to be in default. 6. Part V of the prescribed Application discloses the documents to which the Petitioner seeks to rely upon for establishing the claim as a 'financial debt' which includes inter alia the Franchise Agreement dated 31.05.2018 as well as the statement of accounts as on 10.04.2019 annexed with the Petition as Annexure I (D). The submission made by the Petitioner is that the Petitioner and the Respondent viz., Corporate Debtor had entered into a Franchise Agreement dated 31.05.2018 wherein on good faith a sum of ₹ 5,90,000/- has been paid as franchise fee on 04.06.2018 and that investments were also made by way of financial investments in a sum of ₹ 65 lakhs for which Return on Investment to the Petitioner was also promised. 7. In addition, the Petitioner was also required to make an investment of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 3,38,09,878/-, particulars of which is as disclosed at annexure I (B) of the Petition. 10. From the record of the proceedings it is seen that on 25.09.2019 under the circumstances stated in the said order, the Corporate Debtor had been set as ex parte. However, it is seen that in relation to the Application filed in MA/1265/2019 preferred by the Corporate Debtor seeking to set aside the ex parte order dated 25.09.2019, the said Application had been allowed by this Tribunal vide order dated 10.12.2019 subject to the payment of a cost of ₹ 10,000/- to the Counsel for the Petitioner. Since the above order was abided on the part of the Corporate Debtor, the ex parte order was set aside and the Corporate Debtor was allowed to contest the case on merits and the reply as filed by the Corporate Debtor was also taken on record. Pursuant to the same, the matter was adjourned to 20.11.2019. 11. From the reply as filed by the Corporate Debtor, the following contentions have been raised by the Corporate Debtor viz., that the 'debt' which is claimed to be in default cannot be considered as a debt within the provisions of Section 5 (8) of IBC, 2016 for the reason that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed / liable to be repaid by the Franchisor on an equal monthly instalment basis (termed as minimum guaranteed ROI), within a maximum period of 36 months from the commencement date. In a likely occasion of repayment of entire Franchisee Investment in less than 36 months (due to effect of 10% of monthly Nett Turnover or minimum guaranteed ROI whichever is higher payment factor) thereafter the monthly ROI shall be confined to only 10% of the monthly turnover for the remaining period of the Franchise Agreement. 8.2 ROI shall be computed by the Franchisee upon receipt of credible net turnover figures from the Franchisor submitted on or before 2nd of every succeeding month from the commencement date and respective invoice for the previous month shall be raised by the Franchisee on or before 5th of every month. Thus monthly ROI (10% of monthly Nett Turnover or minimum guaranteed ROI as per Schedule 1 / Final Receipt / Addendum, whichever is higher, as explained in above 8.1) shall be paid by the Franchisor to the Franchisee strictly on or before the 10th of the same month. Any delay in payment of promised monthly ROI to the Franchisee shall attract compounding interest at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed is required to be treated as a 'financial debt' and that the payment of said 'financial debt' which stood defaulted and hence this Petition will lie before this Tribunal under IBC, 2016 in view of the ROI promised month after month being a consideration for time value to money not being remitted by the Corporate Debtor and in the circumstances the debt will be considered as 'financial debt' falling within the confines of Section 5 (8) (f) of IBC, 2016 and the Petition is hence maintainable before this Tribunal and the jurisdiction of this Tribunal to entertain this Petition cannot be questioned by the Corporate Debtor. 20. In opposition, Learned Counsel for the Respondent / Corporate Debtor relied upon the Franchise Agreement and points out to the promise on which the Agreement was entered into available at Page No.28 of the typed set filed and as extracted hereunder:- A. The Franchisor is in the business of meat and fish retail. The Franchisor, in order to meet the growing demands of the public, is desirous of establishing several stores through franchise partners to stock, display, sell and support its products. B. The Franchisee is desirou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cant possession of the Store Premises back to the Landlord. 23. It is further pointed out by Counsel for the Corporate Debtor that in clause 7 of Franchise Agreement in relation to utilization of the Franchisee Investment, the same reads as follows:- The Franchisor, in regular consultation with the Franchisee, shall judiciously advise deployment and utilisation of the Franchisee Investment by obtaining proper invoices / receipts in favour of the Franchisee, towards the following. 7.1.1 nominate and employ designers and contractors for the conversion of the premises into a Store; 7.1.3 acquire in the name of the Franchisee, install and maintain all equipment and fit-out items that are necessary for the Store to function efficiently; 7.1.4 purchase, install, operate and maintain computer, network connectivity and other IT hardware and software systems as may be required for effective recording sales transactions, billing, collection of monies from customers, etc. 7.2 Whenever required the Franchisor shall obtain all the necessary licenses, permissions, permits, statutory orders, sanction letters, NOC's etc., from any / all authorities in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ojected. 26. In addition, Learned Counsel for the Corporate Debtor also pointed out in relation to the filing made by the Financial Creditor dated 05.11.2019 wherein the income tax returns for the financial year 2019-2020 along with the financial statement as well as the ledger statement of the Corporate Debtor in the Petitioner's book have been provided in the additional typed set of the documents. Particular attention of this Tribunal is drawn to page No.6 which according to Counsel for Respondent establishes that even in the books of the Financial Creditor / Petitioner as against the account of the Corporate Debtor, what has been provided is in the nature of professional services and not debited as a financial charge / interest recoverable from the Corporate Debtor. Consistently, it is also brought to the notice of this Tribunal that a sum of ₹ 2,05,840/- has been debited by the Financial Creditor in the account of the Corporate Debtor only under the heading 'professional services' and voucher type being disclosed in the ledger statement is reflected as Sales and not as interest on return of investment / financial interest. 27 It is further highlighted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Franchisee and all the other clauses can only be considered as ancillary to the said motive including Franchisee investment committed and to be used for specific purposes for the benefit of the Franchise Store and not for the individual benefit of the Corporate Debtor. At best the Franchise Agreement if at all can be considered as a joint venture where the Franchisor makes available its trade name and expertise in the trade to be exploited by the venture, whereas the Franchisee is required to provide support including financial support to the Joint Venture. Clause 2.1 of the Franchise Agreement makes it abundantly clear allowing the Franchisee the right to derive profits from the venture. Further in relation to the same it is to be noted that payment of ₹ 5,00,000/- is required to be made as the Franchisee fee also establishes the above aspect. It is also required to be seen that the Franchise Investment in relation to a sum of ₹ 65 lakhs is required to be utilized as per clause 7.1 as extracted above for the purpose of the Store which is required to be established at the address as noted above (in paragraph supra). 32. It is also further seen that the responsibili ..... X X X X Extracts X X X X X X X X Extracts X X X X
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