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TMI Blog2024 (1) TMI 1396X X X X Extracts X X X X X X X X Extracts X X X X ..... i, Bench -VI (in short 'Adjudicating Authority') in IB- 763/(ND)/2021 where the Adjudicating Authority accepted the application of the Respondent No. 1 i.e., M/s Uno Minda Limited (Formerly known as M/s Minda Industries Limited ) filed under Section 7 of the Code and Corporate Insolvency Resolution Process (in short 'CIRP') was initiated against the Corporate Debtor. 2. Heard, the Counsel for the Parties and perused the record made available including the cited judgements. 3. It is the case of the Appellant that the Corporate Debtors was incorporated on 23.08.2012 and is engaged in the business of manufacturing aluminium die casts, whereas the Respondent No. 1 is engaged in the business of supplying automotive solutions to original equipment manufacturers (in short 'OEM'). 4. The Appellant submitted that the Corporate Debtor and the Respondent No. 1 had good business relationship with each other for long time and sometime during December, 2020 the Corporate Debtor and its Promoters including the Appellant herein approached the Respondent No. 1 with an offer to sale 100% stake in the Corporate Debtor along with the only asset if the Corporate Debtor situated at Narsapura Unit. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... moters Group issued the deed of guarantee dated 14.05.2021 in favour of Respondent No. 1. 8. The Appellant submitted that all transactions were happening between the Respondent No 1 and the Promoters and not with the Corporate Debtor as such no financial assistance was availed by the Corporate Debtor from the Respondent No.1. 9. The Appellant brought out that as agreed with the Respondent No. 1 the Corporate Debtor continued to purchase various goods from its suppliers and the Respondent No. 1 provided support to the Corporate Debtor in acquiring such goods required for operation and between April, 2021 to May, 2021 certain payments were made by the Respondent No. 1 amounting to Rs. 1.15 Crores. However, due to financial distress of the Corporate Debtor, the same could not be repaid to the Respondent No. 1. 10. The Appellant brought out that the Respondent No. 1 issued a notice terminating the BSA and calling upon the Promoters group to repay Rs. 1.43 Crores as outstanding amount in terms of Clause 2.5 of BSA along with interest @ 18% per annum. 11. The Appellant admitted that they could not reply such notice of the Respondent No. 1 however, on 10th June, 2022 the Corporate Deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t No. 1. 18. The Appellant argued that except the BSA, the Respondent No. 1 was also incharge of the Corporate Debtor both in respect to company affairs and financial affairs and as such the Respondent No. 1 cannot assume the character of the Financial Creditor. 19. Concluding his arguments, the Appellant requested this Appellate Tribunal to dismiss the Impugned Order. 20. Per contra, the Respondent No. 1 denied all the averments of the Appellant treating these as mischievous, misleading and without any substance; with the sole purpose to derail the resolution process of the Corporate Debtor. 21. The Respondent No. 1 gave the entire sequence of the case including financial assistance provided to the Corporate Debtor and the subsequent events which led to filing the application under Section 7 of the Code purely due to failure of the Corporate Debtor in meeting his obligations. 22. The Respondent No. 1 denied the averments of the Appellant that debt arising out of BSA is an operational debt and not financial debt since no disbursement was made by the Respondent No. 1 to the Corporate Debtor. It is the case of the Respondent No. 1 that the Appellant never disputed the execution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ters Group from their accounts, which has also not been disputed even by the Appellant. 28. The Respondent No. 1 also highlighted Clause 2.5 of BSA which very clearly includes both the Corporate Debtor as well as the Promoters to make the payments and similarly clause 18.7 of the SPA also defines joint and several liability on both the Corporate Debtor as well as the Promoters. As such the Corporate Debtor and the Promoters which jointly and severally responsible for the financial debt it owes to the Respondent No. 1. 29. The Respondent No. 1 denied that he was looking after the management of the Corporate Debtor and submitted that Clause 3.2 of BSA was incorporated only to protect the financial interest of the Respondent No. l, which provided that any withdrawal and borrowing of money or operation of the bank account of the Corporate Debtor was required to be approved by two persons one from the Corporate Debtor and one from the Respondent No. 1. In this connection, the Respondent No. 1 submitted that the authorised personal of the Corporate Debtor refused to sign the cheque to be issued in favour of the Respondent No. 1 towards repayment of the financial debt. 30. Concluding h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account shall require approvals by two people, one from the Unicast personnel group and other from the Minda group. Deed of Pledge dated 14.05.2021 The deed refers to Minda as lender and Unicast as borrower. * Recital A - The Lender has, at the request of the Borrower, agreed at its sole discretion to make available to the Borrower the Financial Assistance, on the terms and conditions set out in the Financing Document (defined hereinafter), Business Support Agreement and other Financing Documents at the sole discretion of Lender. * Clause 1.1 - Financial Assistance, means assistance provided under Facility Agreement and/or Business Support Agreement or otherwise. * Financing Document means Facility Agreement, Business Support Agreement and any document executed between Borrowers, Borrowers' affiliate and lender, Lenders Affiliate and its Promoters. * Clause 2 - The Pledgors hereby confirm that for securing the due repayment of the Financial Assistance in accordance with the terms of the respective Financing Department and Business Support Agreement together with interest and any other monies payable thereon by the Borrower to the Lender, the Pledgors hereby pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or to the corporate debtor; 5. Definitions. - (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; (8) "financial debt" means a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money and includes *** (20) "operational creditor" means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred; (21) "operational debt" means a claim in respect of the provision of goods or services including employment or a debt in respect of the 2 [payment] of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority;" (Emphasis Supplies) 35. From above, it becomes clear that the financial debt means debt along with interest, if any, which is disbursed. From this, it emerges that interest is not sine-qua non, therefore, interest may or may not be payable by the Corporate Debtor and it is understanding between the parties which is significant and relevant to ascertain the existenc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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