TMI Blog2022 (2) TMI 363X X X X Extracts X X X X X X X X Extracts X X X X ..... lso in default. Hence the debt owed to the Financial Creditor by the Corporate Debtor is above the threshold value and payable in default and it satisfies the definition under section 3(12) of the IBC regarding default - It is considered sufficient for admission of a section 7 application that the Applicant/Petitioner is able to establish the existence of a Debt and the Corporate Debtor s default, and if the Application is complete in all aspects. This debt is in default and payable to the Appellant, and hence section 7 application ought to have been admitted - Appeal allowed. - Company Appeal (AT) (Ins) No. 936 of 2020 - - - Dated:- 7-2-2022 - (Justice Ashok Bhushan) Chairperson And (Dr. Alok Srivastava) Member (Technical) For the Appellant : Mr. Kairav Trivedi, PCA For the Respondent : Mr. Pavan Godiawala and MS Vishnu Sankar, Advocates JUDGMENT (VIRTUAL MODE) [Per.: Dr. Alok Srivastava, Member (Technical)] This appeal has been filed under section 61(1) of Insolvency and Bankruptcy Code, 2016 (hereafter called IBC) against the order dated 24.6.2020 passed by NCLT, Ahmedabad (the Adjudicating Authority) in CP (IB) No. 804/7/NCLT/AHM/2019 (her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of ₹ 50 lakhs from BDH Industries for its project. He has referred specifically to Paragraphs 4 and 5 of this letter, to claim that the funds provided by BDH Industries to MRPL were in the nature of financial assistance. 6. Further, the Learned Counsel for Appellant has referred to letter dated 28th March 2014 sent by MRPL to BDH Industries (attached at page 86 of the Appeal Paperbook, Vol. I) wherein MRPL has requested that since it was unable to procure requisite export orders it is unable to make repayment and it seeks last extension, in addition to four extensions already granted to MRPL, vide letters dated 26.7.2012, 23.12.2012, 25.6.2013 and 29.8.2013. He has also referred to an email dated 13th December 2016 sent by MRPL to BDH Industries attaching the accounts ledger along with interest calculation at the rate of 15% per year for the financial years 2011 to 2016. Furthermore, he has referred to the ledger accounts at pages 88 93 of Appeal Paperbook, Vol. I to claim that repayment of the funds loaned by BDH Industries were being made by MRPL and another email dated 20th December 2016 (attached at page 94 of the Appeal Paperbook, Vol. I)) sent by MRPL to BDH Indus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bligation in respect of a claim which is due from any person and includes a financial debt and operational debt. Section 3(12) default means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not paid by the debtor or the corporate debtor, as the case may be. Xxx xxx xxx Section 5(7) financial creditor means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to. Section 5(8) financial debt means a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money and includes (a) money borrowed against the payment of interest. 10. We now examine the MOU dated 7.12.2011 to see whether it is in the form a loan agreement or is merely an agreement as business arrangement between two companies. This MOU is an agreement between the four parties viz. Mars Remedies Private Limited (First Party), BDH Industries Limited acting through its Executive Director Shri Suresh Chandra Kachhara (Second Party), Shri M.Y. Karbhari (Third Party) and Shri Yogendra Patel of Mars Remedies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als and packing materials only after delivery of the same is received in the factory premises of the MRPL and details of the same, in writing, is provided to BDH along with requisition for payments. 13. Thus, it is clear that BDH Industries is to make payments for purchases of orders related to raw-materials and packaging materials only after delivery of the same in the factory of MRPL. This means no advance payment even for raw-materials and packing materials is to be done, but BDH Industries shall make payments only after delivery of raw-material and packing materials in the factory premises of MRPL. 14. Clauses (10) and (11) detail the mode and schedule of payments, and in particular clause (11) outlines that 60% of the value of orders placed by BDH Industries to be exclusively utilized for procurement of raw materials and packing materials, next 20% of total payment shall be made on completion of the shipment of the products and the balance 20% on and after receipt of the full and final payment against each such export sales. Further, Clause (15) is about sharing of profit margin and credit cycle (which means the total number of days) and margin of profit when the cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranteeing the assistance on the assets stated in Para 5 of the letter. Thus, it is amply clear that even if there is no explicit agreement regarding provision of loan by BDH Industries to MRPL, this letter itself constitutes a document which is proof of a loan being provided by BDH Industries to MRPL. 19. Further, in letter dated 28 March 2014 addressed by MRPL to BDH Industries (attached at page 86 of the Appeal paperbook Vol. 1), the MRPL has requested for further extension granted to repay the loan. It has stated that it will not be able to repay on 31.3.2014 as it has not yet completed WHO/GMP compliance and therefore is not able to procure export orders. The extensions already granted by BDH Industries for repayment have also been mentioned in four letters viz. 26.7.2012, 23.12.2012, 25.6.2013 and 29.8.2013 and the Corporate Debtor has further requested grant of last extension upto 31st May, 2014 whereafter it has given liberty to the financial creditor/BDH Industries to dispose of the shares and deposit the cheques for balance amount. Thereafter vide e-mail dated 13th December 2016 addressed by MRPL to BDH Industries the accounts ledger with interest calculation at 15% per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PL). The section 7 application submitted to the Adjudicating Authority (attached at pp. 115-120 of Appeal paperbook Vol. I). clearly states the above mentioned demand notices. However, the amounts mentioned in the Demand Notices Part-IV of section 7 application are different. We are not concerned with the exact amount of debt at the stage of admission of section 7 application. It would suffice for the purpose of admission of section 7 application, if the debt is above threshold value of ₹ 1 lakh. Therefore, we find that the debt is in excess of ₹ 1 lakh of threshold value and also in default. Hence the debt owed to the Financial Creditor by the Corporate Debtor is above the threshold value and payable in default and it satisfies the definition under section 3(12) of the IBC regarding default 23. In the judgment delivered on 03.01.2022 by NCLAT in the matter of Jayanthi Ravi v Chemizol Additives Pvt Ltd, [TA No. 117/2021, Company Appeal (AT) (Insolvency) No. 553/2020] 022), it was held that it is adequate for the Appellant to establish the existence of financial debt via record of the loan transaction in the minutes of the meeting of the board of directors and the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ledgement of debt could be surmised from balance sheets of the corporate debtor, it stands to reason that a letter which admits and acknowledges debt should also be considered as evidence of debt as is the case in the instant appeal. 26. We are quite clear that while there was an MOU entered into between BDH Industries and MRPL dated 7.12.2011, it was in the nature of an arrangement made by Appellant/BDH Industries and Respondent/MRPL to carry out business together and the rights and responsibilities of the parties to source raw materials, manufacture pharmaceuticals and allied products, procure export orders, make supplies and obtain payments and penalty to be imposed in the event of late payments has all been stipulated in the MOU. Therefore, we conclude that the said MOU does not provide evidence of loanin question being taken by the corporate debtor from the financial creditor. 27. We find that letter dated 27.12. 2011 sent by MRPL to BDH Industries is an adequate proof of financial assistance being sought by MRPL/Corporate Debtor from BDH Industries/financial creditor which was agreed to and disbursed by the Appellant/Financial Creditor to the Respondent/Corporate Debtor ..... 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