TMI Blog2021 (2) TMI 305X X X X Extracts X X X X X X X X Extracts X X X X ..... termination of the binding term sheet thus triggers the liability of refund of moneys as agreed under Clause 13 of the Term Sheet. The token amount was agreed was transferred by the Petitioner to the Corporate Debtor upon execution of the Term Sheet and therefore, as such upon termination of the Term Sheet, the token amount is to be repaid as agreed under Clause 13 and can be construed as the part of the Operational Debt and part services rendered to the Corporate Debtor in accordance with mutual obligations set out in the Term Sheet. The binding Term Sheet dated 2nd August, 2018 clearly stipulates the obligation of the Petitioner to pay the money to the Corporate Debtor at the time of execution of the Term Sheet and hence, the liability of refund of such monies paid is well defined in the case of termination of the Term Sheet. Therefore, the Corporate Debtor is liable to refund the token amount to the Petitioner which is part of the services provided to the Corporate Debtor. The Petition filed by the Operational Creditor is on proper Form 5, as prescribed under the Adjudicating Authority Rules and is complete - Petition under sub-section (2) of Section 9 of I B Code, 2016 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption also clearly stipulated that in the event of failure to execute the Development Management Agreement between the parties, the said Term Sheet will stand automatically terminated subject to the Corporate Debtor repaying the advance amount along with the interest @ 15 % p.a. within 60 days of the termination of the Term Sheet and at the rate of 24 % p.a. after 60 days of termination of the Term Sheet. The Petitioner has enclosed a Bank Statement dated 03.08.2018 showing the transfer of money to the Corporate Debtor. 5. As per the Term Sheet on failure to execute the Development Management Agreement within 60 days, the said Term Sheet will automatically be terminated unless mutually extended in writing. Post execution of Term Sheet between September 2018 to October 2018, emails were exchanged between respective advocates of the parties to enable the Petitioner to seek the title documents and information pertaining to the said property and also authorize the publication of public notice investigating title to the said property of the Corporate Debtor. Further emails were exchanged to share the draft of Development Management Agreement. 6. Meetings were held between the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred certain damages and hence, there is serious bonafied dispute between the parties. Reply of the Corporate Debtor to the Petition: 11. The Corporate Debtor filed his Reply and sought for rejection of the Petition on the following grounds: a. In terms of Clause 17 of the Term Sheet, the Term Sheet will automatically be terminated in the event the parties fail to execute the Development Management Agreement within 60 days of the execution of the Term Sheet unless extended in writing. However, the Corporate Debtor states that the Term Sheet was in fact extended by the parties conduct in view of the correspondence exchanged between the parties and their Counsels. The parties were negotiating the terms and conditions of the Development Management Agreement till December, 2018 and despite the time line set out for execution of the Development Management Agreement, the Petitioner constantly called upon the Corporate Debtor to complete the title diligence. As such, series of trail mails were exchanged dated 23.10.2018, 17.11.2018, 30.11.2018 and 18.12.2018. The Corporate Debtor hence claims that in view of exchange of emails/ letters between the parties the Term Sheet is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heavy financial losses including its compliances qua the consent terms filed before the Hon'ble Bombay High Court. The Corporate Debtor also mentions that the Corporate Debtor has paid an amount of ₹ 50 lacs to Mr. Jignesh Hirani, a broker, upon the receipt of money paid under the Term Sheet which has caused loss to the Corporate Debtor. Rejoinder by the Petitioner: 12. The Petitioner filed the Rejoinder as against the Reply of the Corporate Debtor and raised the following contentions: a. The petitioner submits that the Corporate Debtor has clearly admitted its liability to pay an advance money of ₹ 2.51 crores along with interest @ 24 % p.a. under the deed of cancellation circulated by the Corporate Debtor on 05.08.2019 and hence, the Corporate Debtor has not shown any justification to retain such advance money. b. As per the Term Sheet dated 02.08.2018, it is construed that upon failure to execute the Development Management Agreement within 60 days, the Term Sheet would automatically stand terminated unless mutually extended between the parties. c. In the reply to Demand Notice, the Corporate Debtor for the first time alleged that there is a bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Corporate Debtor itself shows that is admission of liability of payment of refund of monies. 14. Written Submissions of the Corporate Debtor: a. The Corporate Debtor claims that the Petitioner is not an Operational Creditor under Section 5(20) of the Code and the amount claimed is not an operational debt. b. It is admitted fact that the Petitioner has not provided any goods and services under Term Sheet despite being obligated to do so the amount claimed therefore cannot qualified to be an Operational Debt. The Term Sheet is in the nature of a Joint Development Agreement, where the Petitioner and the Corporate Debtor would share the receivables from the said Project and is not entitled to a fixed fee. c. The Corporate Debtor further claims that the Term Sheet is in the nature of concluded contract duly signed between the parties and non-execution of Development Management Agreement does not execute the performance of the obligations undertaken by the parties under the Term Sheet. d. The parties have not agreed to the mutual agreement of the Term Sheet as alleged by the Petitioner. e. There is a pre-existing and bonafide dispute between the parties and the Corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Term Sheet @ 24 % p.a. in case of signing after 60 days. Clause 13 is as follows: Token amount- A sum of ₹ 2.51 crores shall be paid by the project Manager to the owner at the time of signing this Term Sheet as the Token amount with Cheque No. 039955 drawn on Axis Bank, dated 2nd August, 2018. In case of Termination of this Term sheet, the owner shall be liable to pay an interest on the token amount at a rate of 15 % p.a. in case of Termination within 60 days of signing the Terms sheet and at rate of 24 % p.a. in case of Termination after 60 days of signing the Term Sheet. d. It is also agreed by the parties that as per the Clause 15, the parties would execute the Development Management Agreement on or before expiry of 2 months from signing of its Term Sheet. The parties have also agreed at Clause 17 that in case of failure of execution of Development Management Agreement within 60 days, the Term Sheet will automatically be terminated unless mutually extended in writing. e. The point for legal consideration arising in this matter is whether the Petitioner is an Operational Creditor as agreed under the terms of binging Term Sheet dated 02.08.2018 and w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ils between the parties cannot tantamount and deem extension of binding Term Sheet between the parties. k. This can be further evidenced from the fact that the Deed of Cancellation was emailed by the Corporate Debtor representative Mr. Jignesh Hirani vide email dated 5.08.2019 to the Petitioner which confirmed that both the parties have decided not to proceed with the transaction under the Term Sheet and have agreed to cancel/ repudiate the Term Sheet. The Corporate Debtor had also admitted to refund the amounts paid in advance by the Petitioner as soon as the fresh transaction is crystallized with the prospective investor. The said Deed of Cancellation was revised by the Petitioner wherein the Petitioner has sought payment of immediate refund of money. However, the said Deed of Cancellation was never executed between the parties and hence, the Petitioner issued the letters dated 08.08.2019, 03.07.2019 and the demand notice under Section 8 of the Code dated 31.08.2019 seeking refund of moneys from the Corporate Debtor. Conclusion: 16. The binding Term Sheet dated 2nd August 2018 is a mere understanding between the parties which captures the basic commercial terms an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uptcy Code, 2016 for initiation of corporate insolvency resolution process against the Corporate Debtor deserves to be admitted. 21. This Petition is filed under Section 9 of I B Code, 2016 by Sunteck Realty Limited against Goodwill Theatres Private Limited for initiating corporate insolvency resolution process is admitted. We further declare moratorium under Section 14 of I B Code with consequential directions as below: a) This Bench prohibits 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 otherauthority; transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any activity under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; the recovery of any property by an owner or lessor where such property is occupied by or in possession of the corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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