TMI Blog2021 (1) TMI 1162X X X X Extracts X X X X X X X X Extracts X X X X ..... y is not for time value of money as the crux and essence of the agreement. Interest paid by the Corporate Debtor is incidental to the blocking of deposit amount and is a resultant consequence. Also, the claim of the Applicant to be considered a financial debt in terms of the code must fall under any of the category mentioned Section 5(8) (a) to (i). After analysing Form 26 AS annexed by the Applicant vide dairy no. 1967/2019, it is noted that the Corporate Debtor had deducted tax under Section 194A and 194H of the Income Tax Act, 1961 for FY 2013-14 and 2014-15 and for FY 2015-16 tax was deducted under Section 194A and 194J. Section 194A deals with interest other than interest on securities. Section 194H deals with income by way of commission or brokerage and Section 194 J deals with fees for professional or technical services - The above observation shows that the Corporate Debtor had deducted tax against the interest on the amount provided by the Applicant. On the other hand, the Applicant has failed to submit sufficient documents to establish that the amount was borrowed by the Corporate Debtor for commercial purpose, as it is nowhere mentioned in the letters dated 01.04.2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C F agent w.e.f. 1st Oct 13. The brief details of terms and conditions are as follows: l. You shall be responsible for: i) Managing our Ranchi depot 19C godown and deal with Jharkhand State Bey. Corpn. Ltd. (JSBCL) for obtaining necessary documentation i.e. OFS, excise permits, passes etc. for dispatch of our consignments to various depots of JSBCL in the State of Jharkhand. ii) Arranging funds to meet day-to-day expenses for - loading/unloading etc. iii) Payment of remuneration to staff/merchandisers at depot as per approval of this office. iv) Reimbursing scheme rebate to retailers in Jharkhand as per the details duly approved and sent from this office from time to time. 2. You shall open an account and provide adequate funds to cover the operational and other expenses required for running of the depot. 3. You will send monthly details of expenses along with your debit notes on monthly basis. 4. Settlement of all the investment made shall be done periodically at the end of each quarter. 5. We shall fix your remuneration shortly after review of sales in the first 3 months. This letter is being sent in duplicate and you ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovide you interest on ₹ 7,85,850/- @ 21% per annum. Please acknowledge receipt and as a token of your acceptance of above terms and conditions. Please sign duplicate copy of this letter and return the same to us for our records. 5. As per the Applicant, an amount of ₹ 53,15,052/- was already provided in five tranches between 11.03.2014 to 19.03.2014 and remaining amount of ₹ 7,85,850/- was provided on 30.04.2014. 6. As per the Applicant, the Corporate Debtor had executed another agreement dated 01.04.2015 with same terms and condition as that of agreement dated 01.04.2014 except the clause with respect to deposit, which as follows: 10. You have to deposit minimum security of ₹ 53,15,000/- with the Company which will carry interest @ 21% p.a. We will provide you interest on ₹ 32,85,850/- @21% per annum. As stated above an amount of ₹ 61,00,850/- (₹ 53,15,000/- + ₹ 7,85,850/-) was already provided by the Applicant in the year 2014. The remaining deposit amount of ₹ 25,00,000/- was adjusted from the funds provided by the Applicant under letter dated 09.01.2014. 7. As per the Applicant, the Applicant has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the purview of financial debt in order to compute extent of financial debt in CoC. 10. Being aggrieved by the rejection to classify an amount of ₹ 1,41,39,410/- as financial debt, the Applicant has filed the present Interlocutory Application to set-aside the rejection of claim dated 18.03.2019 by the RP and declare the Applicant as a financial creditor. 11. The RP submits that it is evident from Clause 10 of letter dated 01.04.2014 that the amount of ₹ 53,15,000/- have been transferred by the Applicant for the purpose of security deposit. Also the Applicant has-never bought to the knowledge of RP, the C F agreement dated 09.01.2014 before filing of this Application. As per the RP, even a bare perusal of C F Agreement demonstrates the debt of the Applicant as operational debt because the Applicant has been appointed as C F agent to look after the operations of the Corporate Debtor s depot. However, the Applicant in its rejoinder has denied that the agreement dated 09.01.2014 has any bearing on the nature of the financial debt given by the Applicant to the Corporate Debtor, which was not part of the funds previously provided under the said agreement bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncial debt is disbursement for consideration of time value of money. 18. We have heard the submissions made by the parties and perused the record. It is an undisputed fact that the Applicant has provided the amount in terms of letter dated 01.04.2014 and 01.04.2015 and such amount along with interest is due from the Corporate Debtor. The documents filed by the Applicant show that in order to avail the services from the Applicant, the Corporate Debtor has appointed Applicant as sales promoter and accepted security deposit. Deposit is not the mainstay of the agreement for any funds in respect of business purposes. It is only an incidence of the agreement for services, Unlike as stated in order passed by a bench of this Adjudicating Authority in IA No, 02/JPR/2018 dated 28.09.2018, it is not even related to agency agreement. It is evident that the agreement between the party is not for time value of money as the crux and essence of the agreement. Interest paid by the Corporate Debtor is incidental to the blocking of deposit amount and is a resultant consequence. Also, the claim of the Applicant to be considered a financial debt in terms of the code must fall under any of the catego ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cating Authority) Rules, 2016. 20. Undoubtedly such security deposit is returnable and represents a future obligation. The treatment of said security deposit in the financial statement of the Corporate Debtor for period 01.07.2014 to 30.06.2015 annexed by the Applicant in rejoinder is not evidently obvious so as to straight-away validate Applicant s contention of deducing by implication. The Corporate Debtor in its balance sheet for year ended 31.03.2016 and 30.03.2017 has shown security deposits under the head non-current liabilities whereas in the balance sheet for year ended 31.03.2018, under the head current liabilities there are two items, one is unsecured borrowing through intercorporate deposit and the other is security deposit. However, from none of the financial statements is it lucidly and unequivocally clear that such security deposit and/ or intercorporate deposit includes the amount provided by the Applicant under the appointment letters dated 01.04.2014 and 01.04.2015. In any case, classification of any sum of money under current or non-current liability is not indicative of its actual use/ purpose. 21. Further after analysing Form 26 AS annexed by the Applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Application no detailed initial agreement is available. Also, there is no addendum or fresh documentation explaining changing nature of agreement/ engagement, from depot management to sales promotion. Within the facts narrated by the Applicant, it is difficult to ascertain the extent and type of services. These could be vastly different from what is stated in the letters of engagement or even as claimed by the Applicant. 24. Scope and canvass of the agreement cannot be left to the imagination, There is no visibility into the nitty-gritty or character of the avowed agreement. The wording is rather flavourless. If the agreement reflected something else initially and then changed hue and colour, there is no explicit indication or documentation in this regard. There has to be legally valid supporting corroboration. Mere assertion about different character of understanding while referring to documents reflecting something else is itself suspicious. It cannot be that a flimsy document is created between parties to suit convenience of interpretation or twist implication altogether. In legal terms a person cannot approbate and reprobate at the same time. 25. Merely intercorporate ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
