TMI Blog2019 (11) TMI 1425X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Prateek Seksaria along with Advocate Nitesh Jain, Advocate Atul Jain and Advocate Shambhavi Pandey ORDER Rajesh Sharma, 1. This is an application being C.P. (IB) No. 2953/NCLT/MB/2019 filed by Allied Silica Limited, the Operational Creditor / Applicant, under section 9 of Insolvency Bankruptcy Code, 2016 (I B Code) against Tata Chemicals Limited, Corporate Debtor, for initiating Corporate Insolvency Resolution Process (CIRP). 2. The application is filed by Mr Manmohan Singh Jain, Director, of the Operational Creditor, claiming a total default of ₹58,00,00,000/- (Rupees Fifty Eight Crore Only) along with interest of ₹10,44,00,000/- (Rupees Ten Crore and Forty Four Lakh Only) as on 17.06.2019. 3. The Applicant submitted that the Applicant and the Corporate Debtor entered into a Business Transfer Agreement dated 07.04.2018 (hereinafter referred as BTA ), and pursuant to the said agreement the Applicant transferred, and Corporate Debtor acquired the undertaking (Precipitated Silica Plant), as a going concern on Slump Sale Basis, in compliance with the provisions of Section 2(42C) of the Income Tax Act, 1961 (hereinafter referred as IT Act ). Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in its Books of Accounts evidencing the receipt of part payment (₹65,19,00,000/-), Tranche I payment and Tranche II payment. 6. The Applicant submitted that despite the possession of the undertaking being handed over to the Corporate Debtor from 18.06.2018, the Corporate Debtor failed to remit the balance payment of agreed consideration for Slump Sale of ₹123,00,00,000/- and the Corporate Debtor attempted to combine the consideration for the Slump Sale and consideration for the Additional Works much against a key element of the definition of Slump Sale under Section 2(42C) of the IT Act. The Applicant submitted that upon failure of the Corporate Debtor to remit the balance consideration of ₹58,00,00,000/- for the transfer of undertaking on Slump Sale basis, the Applicant sent a Notice dated 13.05.2019 to the Corporate Debtor and requested to release the balance consideration due along with interest. The Applicant further submitted that upon refusal of the Corporate Debtor to pay the requested balance consideration, the Applicant proceeded and sent Demand Notice in Form 3 dated 03.06.2019 and Demand Notice in Form 4 dated 22.06.2019 to the Corporate Debtor unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... costs borne by the Corporate Debtor on account of noncompletion of Tranche II conditions precedent by the Applicant. The Corporate Debtor further submitted that the fact of adjustment of Tranche III payment was agreed mutually between the parties which was recorded in Letter dated 08.01.2019. The Corporate Debtor submitted that all the requisite amounts under the BTA were duly paid to the Applicant and no outstanding debt is due to the Applicant as on the date of present application. The Corporate Debtor submitted that, claim of balance consideration of ₹58,00,00,000/- was only raised by the Applicant for the first time in its letter dated 13.05.2019, after a period of one year from the execution of BTA and payment of Closing Balance Consideration of ₹65,19,00,000/-, and thus the Applicant is consciously misinterpreting the BTA to extort money from the Corporate Debtor. Therefore, the present application deserves to be dismissed. The copies of the documents mentioned supra are annexed to the Affidavit in Reply of the Corporate Debtor. 9. We have heard the arguments of counsels for the parties and have perused the records. 10. On detail perusal of the Business Tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sheer financial duress caused by the unexpected delay in completing the negotiation, due diligence and the time taken for getting the amendments required from the Tamil Nadu Pollution Control Board, that left ASL Team with very little option at the time of execution of BTA but to accept the splitting of the payment of the purchase consideration into tranches spread over one year. An unnatural and unusual condition of delayed and arbitrary splitting of mutually agreed consideration for transfer of undertaking, which had been determined about 9 months earlier, was unfairly and unjustly inflicted on ASL by TCL, knowing very well that the financial stress that KGCL was undergoing left it with very litter option but to accept all the conditions imposed through the BTA. (emphasis supplied) Therefore, from the above admissions made by the Applicant, it is clear that Applicant was well aware of, and agreed that, Transfer Consideration for BTA of ₹123,00,00,000/- be divided into parts, as more specifically mentioned in the BTA. c. Also, the above contention of the Applicant is not supported by any documentary evidence. The primary document relied upon by the parties is Busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the reasonable opinion of the Transferee, the Transferor shall be entitled to receive an amount up to INR 6,00,00,000 (Indian Rupees six crores) within a period of 10 (Ten) Business Days from the date of issuance of Tranche III CP Satisfaction Notice ( Tranche III Balance Consideration ) (Emphasis supplied) Therefore, as per BTA total Transfer Consideration for transfer of undertaking on Slump Sale Basis was ₹123,00,00,000/-, which was to be paid in parts as mentioned above. From the admissions made by the Applicant vide above mentioned emails and letters and as also reflected from the Ledger Accounts annexed by the Applicant, the Transfer Consideration under BTA was duly paid by the Corporate Debtor to the Applicant. d. The Applicant also contended that definition of Slump Sale does not provide room for apportionment of sale consideration and lump sum consideration has to be paid in one single payment rather than in instalments. The definition of Slump Sale as per Section 2(42C) of the IT Act, is as follows: slump sale means the transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to the ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch notice or invoice in relation to such dispute (Section 8(2)(a)). What is important is that the existence of the dispute and/or the suit or arbitration proceeding must be pre-existing - i.e. it must exist before the receipt of the demand notice or invoice, as the case may be. (emphasis supplied) b. Also, it is pertinent to note that under Section 5(6) of the I B Code, 2016 the word dispute is defined as: dispute includes a suit or arbitration proceedings relating to (a) the existence of the amount of debt; (b) the quality of goods or service; or (c) the breach of a representation or warranty; c. Therefore, on perusal of the documents submitted by the parties, it is evident from the letter dated 08.01.2019 which is signed by both the parties, that the Applicant had failed to complete the Tranche II Conditions Precedent as a result of which the Corporate Debtor had exercised its right under the BTA and set-off and adjusted the Tranche III payment of ₹6,00,00,000/-. It is further evident from the letter of Corporate Debtor dated 06.03.2019, wherein the Corporate Debtor had demanded refund from the Applicant of ₹15.01 crores along with interest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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