TMI Blog2020 (7) TMI 678X X X X Extracts X X X X X X X X Extracts X X X X ..... these terms and conditions, we are totally amused as to on what basis the corporate debtor could claim that this is a transaction of sale and purchase of tea and not of financing. There are no substance in the plea of the corporate debtor that it is not a financial debt within the meaning of section 5(8) of the IBC, 2016 for the simple reason that it also carries interest, whereas, in our considered opinion, if the money is given even without interest, still it has time value of money as it results into an economic advantage to the borrower at free of cost over a period of time when the value of money decreases due to inflation. The transactions of loan/advance are specifically covered under section 5(8)(a) as these have been borrowed against interest. Even, considering the fact of repayment of loan to one of the financial creditors and other surrounding circumstances as well, such claim made by the corporate debtor appears to be of no help particularly when no other material/documentary evidence has been brought on record to show that the tenure of the loan has been extended. Thus, in the background of the facts and circumstances and applicable legal position, as discussed herein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 16-8-2014 20,00,000 23-12-2014 2,90,00,000 23-12-2014 75,00,000 24-12-2014 85,00,000 Second financial creditor, i. e., Navnita Tradefin P. Ltd., gave a loan of ₹ 2,10,00,000 in the following manner : Rs. 20-2-2015 1,00,00,000 24-2-2015 50,00,000 25-2-2015 50,00,000 17-4-2015 10,00,000 Third financial creditor, i. e., Sudhir Credit P. Ltd., gave a loan of ₹ 3,00,00,000 in the following manner : Rs. 27-1-2014 50,00,000 28-1-2014 1,00,00,000 29-1-2014 50,00,000 30-1-2014 20,00,000 5-2-2014 40,00,000 7-2-2014 40,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eques. 9. As regards the second financial creditor, it was contended that a similar agreement dated February 18, 2015 had been executed whereby the corporate debtor was responsible to repay the entire loan by March 31, 2016. A post-dated cheque for ₹ 50,00,000 was sent vide letter dated February 20, 2015 ; another post-dated cheque for ₹ 2,50,00,000 was also sent along with letter dated February 26, 2015. Two post-dated cheques of ₹ 50,00,000 each were also given vide letter dated February 18, 2015. However, on failure to honour its commitment by the corporate debtor, the operational creditor on August 4, 2017 and August 11, 2017 sought confirmation of balance outstanding from the corporate debtor which was done, but interest liability was not confirmed. Fresh post-dated cheques were also given. Proceedings under section 138 of the Negotiable Instruments Act, 1881 vide notice dated October 21, 2017 were initiated which were pending. Our attention was also drawn to the various clauses of the deed of agreement dated February 18, 2015 and promissory note given by the corporate debtor. Our attention was also drawn to the copies of the confirmation letters and post- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and other terms will be as mutually decided upon . Thus, on the basis of this understanding, learned counsel vehemently argued that the loan had not become due and payable and, therefore, the first ingredient itself was not complied with to file this application. 16. As regards the third objection, he drew our attention to page No. 87 and contended that no board resolution/power of attorney/authorisation was given to file the application jointly. It was also contended that no seal of the company was affixed and, therefore, in the background of these facts, according to learned counsel, the application was defective and did not meet the filing requirements and consequently, the same was liable to be dismissed. In this regard, he placed reliance on the decision of the hon'ble National Company Law Appellate Tribunal in the case of Poloygit. 17. In the rejoinder, learned counsel for the financial creditor again emphasised on the basis of agreement and other documentary evidences submitted that it was a case of temporary finance and it carried interest, hence, it was a case of financial debt. It was also contended that the lenders were not in the business of buying and selling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been borrowed against interest. Even, considering the fact of repayment of loan to one of the financial creditors and other surrounding circumstances as well, such claim made by the corporate debtor appears to be of no help particularly when no other material/documentary evidence has been brought on record to show that the tenure of the loan has been extended. Thus, in the background of the facts and circumstances and applicable legal position, as discussed herein above, we are of the considered view that the transaction is of the nature of financial debt within the meaning of provisions of section 5(8) and 5(8)(a) of the IBC, 2016. 19. Although the nature of the transaction as of a financial debt based upon the interest element and other aspects has already been identified, yet we consider it pertinent to answer the contention raised by the corporate debtor that such transaction is in regard to the sale and purchase of tea. It is not in dispute that the amount has been given as advance, then, the effect in the hands of the corporate debtor is that it amounts to borrowing for commercial purpose. Therefore, as per section 5(8)(f) of the IBC, 2016, this transaction has got the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Once it is so, it cannot be said that the debt has not been disbursed against the consideration for the time value of the money. The interests of such stakeholders cannot be said to be in conflict with the interests of the company. Enhancement of assets, increase in production and the growth in profits, share value or equity ensures to the benefit of such stake holders and that is the time value of the money constituting the consideration for disbursement of such amount raised as debt with obligation on the part of company to discharge the same. Viewed thus, it can be said without any amount of contradiction that in such cases the amount taken by the company is in the nature of a financial debt. 21. We further hold that in view of the subsequent decision of the hon'ble Supreme Court in the case of Pioneer Urban Land and Infrastructure Ltd. v. Union of India reported in [2019] 217 Comp Cas 1 (SC) ; [2019] 8 SCC 416, the decision placed reliance on by the corporate debtor is not binding. In the said decision, the hon'ble Supreme Court, while interpreting the concept of time value of money, has held that a transaction does not necessarily need to culminate into money bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... announcement in accordance with sections 13 and 15 of the IBC, 2016. (iii) Moratorium is declared for the purposes referred to in section 14 of the Insolvency and Bankruptcy Code, 2016. The IRP shall cause a public announcement of the initiation of the corporate insolvency resolution pro cess and call for the submission of claims under section 15. The public announcement referred to in clause (b) of sub-section (1) of section 15 of the Insolvency and Bankruptcy Code, 2016 shall be made immediately. (iv) Moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 prohibits the following : (a) The institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority ; (b) Transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein ; (c) Any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitization and Reconstruction of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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