TMI Blog2023 (8) TMI 1304X X X X Extracts X X X X X X X X Extracts X X X X ..... gent and the Principal , is to be gathered from the nature of the Contract , its Terms and Conditions , and the Terminology , used by the Parties , is not decisive of the Legal Relationship , as per decision of the Hon ble Supreme Court of India in Snow White Industrial Corporation, Madras v. Collector of Central Excise, Madras [ 1989 (4) TMI 81 - SUPREME COURT ]. It is to be remembered that the Proceedings , under I B Code, 2016, are summary in nature , and it is not a Debt Enforcement Procedure . An Adjudicating Authority / Tribunal , is not a Recovery Forum or Court and it does not determine any Claim or Suit , in Summary Proceeding . No wonder, the objective of the I B Code , is to consolidate , and amend the laws , relating to reorganisation and insolvency resolution of corporate persons , partnership firms and individuals , in a time bound manner for maximization of value of assets of such persons , to promote entrepreneurship , availability of credit and balance the interests of all the stakeholders , including alteration in the priority of payment of government dues , and to establish an Insolvency and Bankruptcy Fund, and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy and Bankruptcy (Application to Adjudicating Authority) Rules 2016, passed by the Adjudicating Authority ( National Company Law Tribunal , Division Bench I, Chennai). 2. Earlier, the Adjudicating Authority ( National Company Law Tribunal , Division Bench I, Chennai), while passing the impugned order , dated 11.01.2021, in IBA / 1166 / 2019 (Filed by the Petitioner / Financial Creditor ), under Section 7 of the I B Code, 2016, read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, at Paragraph Nos. 13 14, had observed the following: 13. It is to be seen herein that there is no financial contract which is seen on record in order to establish that the relationship between the Financial Creditor and the Corporate Debtor herein in order for the Applicant to qualify as a Financial Creditor . 14. Further as already stated the alleged Financial Creditor herein has filed present Application in terms of the powers given under Clause 15 Del Credere Agency Agreement wherein the powers have been delegated to the Agent which is the Financial Creditor herein to initiate legal proceedings in case of a default made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. It is represented on behalf of the Appellant, that it is solely responsible , to the Principal for payments , in respect of the Sale of the Products , which is evident in Clause 7 of the Agreement. In the event of Person / Party , instructed or recommended by the Appellant, failing to pay the Sum(s), to whom supplies were made by the Principal, the Appellant has to pay such amounts to the Principal . 7. The Learned Counsel for the Appellant / Petitioner, points out that the Appellant , had recommended the Respondent / Corporate Debtor , for supplies of PVC Suspension Resin, and on the basis of the recommendations, the Principal , had effected supplies to the Respondent / Corporate Debtor, who had not made payment. However, the Respondent / Corporate Debtor , had made payments, by way of interest , to the Appellant . In reality, the Respondent / Corporate Debtor , through email dated 15.03.2019, had acknowledged its Liability , to pay the amount. 8. The stand of the Appellant is that, it issued Recall Notice , on 24.07.2019, demanding a Sum of Rs.1,23,14,186/-, which remained Outstanding , as 20.07.2019, within 7 days from the date of receipt of the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... five Debit Notes , and they run as under: S.No. Debit Note No Date of Debit Note Debit Note Amount (Rs.) Date of Payment Details evidencing payment Page No. 1 33 19.09.2014 1302/- 12.03.2015 Cheque No.961737 558 2 34 19.09.2014 13216/- 12.03.2015 Cheque No.961737 559 3 40 14.11.2014 8322/- 12.03.2015 Cheque No.961737 563 4 47 26.11.2014 163143.80 12.03.2015 Cheque No.961737 564 5 55 22.12.2014 2836/- 12.03.2015 Cheque No.961737 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Stamps22, which have been consistently followed by this Court: (AC pp. 105-06) .. The word include is very generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute; and when it is so used these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include. But the word include is susceptible of another construction, which may become imperative, if the context of the Act is sufficient to shew that it was not merely employed for the purpose of adding to the natural significance of the words or expressions defined. It may be equivalent to mean and include , and in that case it may afford an exhaustive explanation of the meaning which, for the purposes of the Act, must invariably be attached to these words or expressions. 48. This Court in the case of Associated Indem Mechanical (P) Ltd. vs. W.B. Small Industries Development Corpn. Ltd.23 while construing the definition of the term premises as provided under Section 2(c) of the W.B. Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21) 17. It goes without saying that interpretation of a word or expression must depend on the text and the context. The resort to the word includes by the legislature often shows the intention of the legislature that it wanted to give extensive and enlarged meaning to such expression. Sometimes, however, the context may suggest that word includes may have been designed to mean means . The setting, context and object of an enactment may provide sufficient guidance for interpretation of the word includes for the purposes of such enactment. 18. Section 2(1)(m) which enumerates four categories, namely, (i) a firm whether registered or not; (ii) a Hindu Undivided Family; (iii) a cooperative society; and (iv) every other association of persons whether registered under the Societies Registration Act, 1860 (21 of 1860) or not while defining person cannot be held to be restrictive and confined to these four categories as it is not said in terms that person shall mean one or other of the things which are enumerated, but that it shall include them. 19. The General Clauses Act, 1897 in Section 3(42) defines person : 3. (42) person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voices, under which, Supplies , were effected to the Corporate Debtor , and that the Corporate Debtor , had paid Interest , for the said Payment , and that the Corporate Debtor , had acknowledged its Liability , and hence, this will have an effect of Commercial Borrowing , and will attract Section 5(8) of the I B Code, 2016. 20. The Learned Counsel for the Appellant / Petitioner, refers to the Order dated 06.06.2019 of the Adjudicating Authority (National Company Law Tribunal, Hyderabad Bench, in IA No. 397 of 2019 in CP (IB) No. 315 / 7 / HDB / 2018, between Gowra Petrochem Pvt. Ltd. v. Ashok Polymers Ltd., wherein, at Paragraphs 20 21, it is observed as under: 20. RP and IRP present. They filed a memo dated 04.06.2019 stating that all the expenses of CIRP are paid to the IRP RP by the COC of the Ashok Polymers Limited and there are no pending CIRP expenses to be paid. 21. This Tribunal by exercising powers under Section 12A of the Code R/W regulations 30A of IBC (Corporate Insolvency Resolution Process) Regulations 2016, approved the application for withdrawal. 21. The Learned Counsel for the Appellant / Petitioner, adverts to the Order dated 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , defines debt , meaning a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt . Default: 27. Section 3 (12) of the Code , defines default , meaning non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not 1[paid] by the debtor or the corporate debtor, as the case may be . Financial Creditor: 28. Section 5 (7) of the Code, defines financial creditor , meaning any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to . Financial Debt: 29. Section 5 (8) of the Code , defines financial debt , meaning 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; (b) any amount raised by acceptance under any acceptance credit facility or its de-materialised equivalent; (c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument; (d) the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Del Credere Agency Agreement , dated 04.04.2017, entered into between M/s. Chemplast Sanmar Limited , and M/s. Madras Chemicals Polymers ( Appellant / Firm ), represented by its Proprietor Mr. Ashok Gupta (the Agent ), in Clause 1, it is mentioned that the Company , hereby appoints M/s. Madras Chemicals Polymers ( Agent , as Del Credere Agent ), to sell the said Products, manufactured by the Company , on principal to principal basis , in the City of Chennai and its Suburbs, Tamil Nadu, and Customers, nominated by Chemplast , on a non-exclusive basis . 33. In fact, the Clause 5 of the Agreement , enjoins that the Company shall effect supplies of the Said Products only to the party/ies recommended / instructed by the Agent , in writing. The Company shall raise the Invoice/s in the name/s of the said party/ies and send the same to the Agent for collection / realising payments. 34. In fact, the Clause 7 of the Agreement , enjoins that the Agent, shall be personally liable to the Company for payments towards sale of the Said Products to party/ies instructed/recommended by the Agent. The Agent hereby agrees to submit to the Company an unconditional and irr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and indeed, paid interest , for the Sums, which are paid, on behalf of the Corporate Debtor , to the ultimate supplier . 39. At this stage, this Tribunal , pertinently points out that the Appellant, had issued a Legal Notice , dated 24.07.2019, to the Respondent / Corporate Debtor , stating that the Appellant , is the Authorised Del Credere Agent of M/s. Chemplast Sanmar Limited (a Company manufacturing PVC Suspension Resin), and further that the perusal of the Invoice, raised by M/s. Chemplast Sanmar Limited, raised on the Respondent , will reveal that the payment, in respect of the Invoices , shall be made in favour of the Appellant (a Proprietorship Concern ), and that, the Appellant , had paid the Amounts , detailed in the attached Annexure to M/s. Chemplast Sanmar Limited, in terms of the Invoice, the Amount, needs to be paid, within 10 days from the Date of Invoice , and in the event of failure, the same carried Interest at 21% per annum , but the Appellant restricts the same to 18% per annum. 40. In effect the Legal Notice , dated 24.07.2019 of the Appellant, mentions that the Respondent , is liable to pay a sum of Rs.1,23,14,186.94/- in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Terminology , used by the Parties , is not decisive of the Legal Relationship , as per decision of the Hon ble Supreme Court of India in Snow White Industrial Corporation, Madras v. Collector of Central Excise, Madras, AIR 1989 SC 1555. 46. In fact, the use of the word Agent , is not conclusive . The actual relationship between the Parties , must be decided with reference to all the circumstances of each case, as per decision Firm Pursottam Das Ganpati Rai v. Gulab Khan, reported in AIR 1963, Pat 407. 47. It is to be pointed out that Clause 8 of the Del Credere Agency Agreement , dated 04.04.2017, between M/s. Chemplast Sanmar Limited and the Madras Chemicals Polymers (Firm) - Appellant / Petitioner, proceeds to the effect the Agent shall make their own arrangements, at their own cost, for collecting payments from the parties to whom the Company has effected / despatched supplies based on the recommendations / instructions of the Agent. Payment shall be effected by way of Cheque/s or Demand Draft/s drawn in favour of the Company, payable at Chennai . 48. Further, Clause 12 of the Del Credere Agency Agreement , dated 04.04.2017, between the Parties enjoins th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of value of assets of such persons , to promote entrepreneurship , availability of credit and balance the interests of all the stakeholders , including alteration in the priority of payment of government dues , and to establish an Insolvency and Bankruptcy Fund, and matters connected therewith or incidental thereto . 53. Also that, it must be borne in mind that the I B Code, 2016 , seeks to provide for designating the National Company Law Tribunal , and the Debt Recovery Tribunal , as the Adjudicating Authorities , for Corporate Persons , and Firms , and Individuals , respectively, for Resolution of Insolvency , Liquidation and Bankruptcy . 54. The Invoice No.0100784974 dated 22.06.2017 in the name of M/s. Chemplast Sanmar Limited, mentions the Customer s name as M/s. Vijay Aqua Pipes (P) Ltd, and in Delivery / Consignee s Column, it is mentioned as Vijay Aqua Pipes (P) Ltd., Tiruvallur. 55. In the aforesaid Invoice dated 22.06.2017, it is unequivocally mentioned that Payment , in respect of this Invoice , should be made only in favour of Agent Madras Chemicals Polymers ( Appellant / Petitioner ). The Invoice value is mentioned as Rs1,337,915/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Operational Debt , as per Section 5(21) of the I B Code, 2016 and hence, Section 9 of the I B Code, 2016, attracts in an unambiguous manner . Viewed in that perspective, the Debt , in the present case, cannot be termed as Financial Debt , as per Section 5 (8) of the I B Code, 2016, in the considered opinion of this Tribunal . 61. It is relevantly pointed out that in the instant case, the Appellant / Petitioner , had issued a Legal Notice , dated 24.07.2019, to the Respondent / Corporate Debtor , and not issued a Legal Notice , demanding payment under Sub-section 1 of Section 8 of the Code . 62. Section 9 (1) of the Code , mentions that after the expiry of period of ten days, from the date of delivery of the notice or invoice , demanding payment , under Sub-section 1 of Section 8 of the Code . If the Operational Creditor , had not receive payment , from the Corporate Debtor or Notice of the Dispute , under Sub-section 2 of Section 8, the Operational Creditor , may file an Application , before the Adjudicating Authority , for initiating a Corporate Insolvency Resolution Process . 63. Admittedly, in respect of the occurrence of a Default , ..... X X X X Extracts X X X X X X X X Extracts X X X X
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