National Company Law Appellate Tribunal
Sakthi International Pvt Ltd vs Pandi Devi Oil Pvt. Ltd on 15 November, 2022
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
CHENNAI BENCH
Company Appeal (AT) (CH) (Ins) No. 230 of 2021
[Arising out of Order dated 27.04.2021 passed by the Adjudicating
Authority/National Company Law Tribunal, Division Bench-II, Chennai
in IBA/1087/2019]
IN THE MATTER OF:
M/s. Shakti International Pvt. Ltd.
303 B, Alpha Main Street,
Hiranandani Business Park, ...Appellant
Powai, Mumbai-400076.
Versus
M/s. Pandi Devi Oil Pvt. Ltd.
Old Thirubhavanai Pondicherry,
Pondicherry-605107. ...Respondent
Present:
For Appellant : Mr. Thriyambak J. Kannan, Advocate
Ms. Annapoorani, Advocate
Ms. Hareepriya, Advocate.
For Respondent : Mr. Pardeep Dahiya, Advocate
J U D G M E N T
(Virtual Mode) (15.11.2022) NARESH SALECHA, MEMBER (TECHNICAL) The Present Appeal is filed against the 'impugned order' dated 27.04.2021 passed in IBA/1087/2019 by the 'Adjudicating Authority' (National Company Law Tribunal, Division Bench-II, Chennai), whereby, the 'Adjudicating Authority' dismissed the Petition filed under the Insolvency & Bankruptcy Code, 2016 (in short 'I &B Code, 2016). Company Appeal (AT) (CH) (Ins) No. 230 of 2021 1 of 23 Brief Fact:
2. In the present appeal, before this Appellate Tribunal M/s Shakti International Pvt. Ltd. is the 'Appellant' as 'Financial Creditor' and M/s Pandi Devi Oil Pvt. Ltd. is the 'Respondent' as 'Corporate Debtor'.
A High Seas Sale Agreement was executed between the 'Appellant' and the 'Respondent' dated 23.04.2012, wherein the Appellant agreed to import crude palm oil in bulk of 500 MTs on behalf of the 'Respondent' for consideration of US Dollars 1191.25 per Metric Ton CNF/Chennai.
3. The 'Appellant' granted a loan amount of Rs.1,84,00,000/- to the Respondent vide an agreement (also referred to as "Loan Agreement") dated 09.04.2012. The said Loan Agreement was renewed vide a "Loan Renewal and Working Capital Loan Agreement" dated 21.03.2013 and the repayment period was extended until 30.06.2013. The 'Appellant' also agreed to grant a further loan to meet the working capital requirements of the 'Respondent' to the extent of Rs. 71,00,000/-.
4. It has been brought out that due to outstanding dues payable by the 'Respondent', the 'Appellant' initiated Arbitration proceedings for Rs. 5,25,00,000/- along with interest and thereafter, the 'Memorandum of Understanding' was entered into between the parties dated 21.03.2013 for the payment of the outstanding dues by the 'Respondent' on account of the "Loan Agreement" as well as the "High Seas Sales Agreement". Based on the consent terms entered between the parties, the 'Arbitral Award' was passed dated 18.03.2015. The 'Respondent' preferred a petition to set aside against Company Appeal (AT) (CH) (Ins) No. 230 of 2021 2 of 23 the 'Arbitral Award' under Section 34 of the 'Arbitration and Conciliation Act, 1996'. The Hon'ble High Court of Bombay passed an order in Arb Petition No. 999 of 2016 dismissing the petition filed by the 'Respondent' by way of an order dated 17.02.2017.
5. The 'Respondent' failed to make payment of the outstanding dues to the 'Appellant'. The 'Appellant' therefore, filed an Application under Section 7 of the I & B Code, 2016 against the 'Respondent' for default amount with interest of Rs. 11,09,69,769/- from 12.10.2015. By way of the 'Impugned Order' dated 27.04.2021, the Appellant's herein application was dismissed by the 'Adjudicating Authority'.
6. Aggrieved by the 'Impugned Order', the 'Appellant' has preferred the present appeal before this Appellate Tribunal.
Appellant's Submissions:
7. The Learned Counsel for the Appellant gave facts and briefs of the present appeal. It has been brought out that the 'Respondent' failed to pay outstanding dues and the default amount is Rs.11,09,69,769/- from 12.10.2015 along with interest.
8. The Learned Counsel for the Appellant submitted that the 'Appellant' granted a loan amount of Rs.1,84,00,000/- to the 'Respondent' by way of an agreement dated 09.04.2012. Subsequent to the "Loan Agreement", a "High Seas Sale Agreement" was executed between the 'Appellant' and the 'Respondent' dated 23.04.2012, wherein the 'Appellant' agreed to import Company Appeal (AT) (CH) (Ins) No. 230 of 2021 3 of 23 crude palm oil in bulk for and on behalf of the 'Respondent' for a consideration of USD 1191.25 per metric ton and it was agreed that any default under this "High Seas Sale Agreement" would constitute an operational debt.
9. The Learned Counsel for the Appellant stated that the Loan Agreement was renewed by way of a "Loan Renewal and Working Capital Loan Agreement" dated 21.03.2013 executed between the parties, and the repayment period was extended until 30.06.2013. The Learned Counsel for the Appellant pointed out that in the said renewal of "Loan Agreement", the 'Appellant' also agreed to grant a further loan to meet the working capital requirements of the 'Respondent' to the extent of Rs. 71,00,000/- out of which Rs.35,00,000/- to be paid directly to Suraj Agro Infrastructure (India) Pvt. Ltd. on behalf of the 'Respondent' to make payment of the storage charges.
10. The Learned Counsel for the Appellant clarified that the loan as provided under the Loan Agreement was with an interest at 2.5% per month. The Learned Counsel for the Appellant further pointed out that the 'Respondent' at no time disputed aspects regarding the "Loan Agreement".
11. The Learned Counsel for the Appellant brought to the notice of this Appellate Tribunal that due to the failure of the 'Respondent' to make payment under the "Loan Agreement", the 'Appellant' initiated arbitration proceedings against the 'Respondent' and based on consent terms entered between the parties, an 'Arbitral Award' was passed on 18.03.2015. The Company Appeal (AT) (CH) (Ins) No. 230 of 2021 4 of 23 'Arbitral Award' was communicated to the parties by way of Procedural Order dated 30.07.2015.
12. The Learned Counsel for the Appellant submitted that a 'Memorandum of Understanding' ('MoU') was also entered into between the parties dated 23.03.2013 for repayment of the outstanding dues by the 'Respondent' to the Appellant. The Learned Counsel for the Appellant further pointed out that the terms of the 'MoU' clearly mentioned the outstanding principal payable on the part of the 'Respondent' towards: importing under the "High Seas Sale Agreement" of Rs. 3,34,08,049/- and the Loan Agreement of Rs. 1,84,00,000/- and Working Capital Loan of Rs. 71,00,000/- and interest there upon.
13. The Learned Counsel for the Appellant clarified that due to default in the payment of the dues under the "Loan Agreement", a legal notice was sent by the 'Appellant' to the 'Respondent' demanding payment on 21.01.2016.
14. The Learned Counsel for the Appellant further stated that the 'Respondent' preferred a petition to set aside against the 'Arbitral Award' under Section 34 of the "Arbitration and Conciliation Act,1996", however the Hon'ble High Court of Bombay passed an order in Arb Petition No. 999 of 2016 dismissing the petition filed by the 'Respondent' by way of an order dated 17.02.2017. The Learned Counsel for the Appellant explained that the 'Respondent' was entitled to file an appeal against the order dated 17.02.2017 under Section 37 of the "Arbitration and Conciliation Act, 1996" within 120 Company Appeal (AT) (CH) (Ins) No. 230 of 2021 5 of 23 days from 17.02.2017 but no appeal has been filed and therefore, the award has become final and is binding on the 'Respondent'.
15. The Learned Counsel for the Appellant pleaded that the Section 7 application for initiation of 'Corporate Insolvency Resolution Process' against the 'Respondent' was filed before the 'Adjudicating Authority' in IBA/1087/2019 but the same was dismissed vide 'Impugned Order ' dated 27.04.2021 on the ground that there is no financial debt.
16. The Learned Counsel for the Appellant assailed the conduct of the 'Respondent' who has also taken contradictory stands in respect of the repayment of the amount under the "Loan Agreement". The Learned Counsel for the Appellant stated that the 'Respondent' in their counter has mentioned that the loan amount was repaid on 04.04.2012 even though the "Loan Agreement" itself was dated 09.04.2012;
17. The Learned Counsel for the Appellant stated that the "Loan Agreement"
and the "High Seas Sale Agreement" are two different contracts and that the relief sought for by the 'Appellant' is under the "Loan Agreement". The outstanding due payable by the 'Respondent' was on account of the 'Loan Agreement' entered into between the parties and had nothing to do with the "High Seas Sale Agreement". Further, the 'MoU' dated 21.03.2013 clearly distinguishes the dues payable under the Loan Agreement and the high seas sale agreement. Clause 7 of the 'MoU' provides dues under the "High Seas Sale Agreement" as Rs. 3,34,08,049/-, "Loan Agreement" as Company Appeal (AT) (CH) (Ins) No. 230 of 2021 6 of 23 Rs.1,84,00,000/- and the working capital loan as Rs. 71,00,000/- and interest there upon.
18. The Learned Counsel for the Appellant stated that the Bombay High Court has upheld the 'Arbitral Award' dated 18.03.2015. The initiation of the arbitration proceedings owing to the non - payment of the loan pursuant to the Loan Agreement amounts to a 'default' under the I & B Code, 2016 and the further non - payment of the 'Arbitral Award' which confirms the 'default' of the 'financial debt' under the "Loan Agreement" also constitutes a 'default' under the I & B Code, 2016.
19. The Learned Counsel for the Appellant assailed the contention of the 'Respondent' on the letters of credit being given in favour of the 'Appellant' being irrelevant to the present dispute as ledger accounts filed by the 'Appellant' clearly state that the said letters of credit are prior to the passing of the 'Arbitral Award'. The Learned Counsel for the Appellant stated that contentions of the 'Respondent' disputing the amounts payable to the 'Appellant' on the basis of decree passed by the Munsif Court in Pondicherry pertaining to the rights of the parties in the 'MoU' dated 19.03.2015 since the present claim arises from the 'Arbitral Award' and not the 'MoU'.
20. The Learned Counsel for the Appellate cited the Judgment of this Appellate Tribunal passed in Annapurna Infrastructure Pvt. Ltd. v. SORIL Infra Resources Ltd., 2017 SCC Online NCLAT 380, held that failure to pay money as per award is default under Section 8(1) read with Section 3(12) Company Appeal (AT) (CH) (Ins) No. 230 of 2021 7 of 23 of the I & B Code, 2016 and pendency of execution proceedings in respect of an award is not a bar to the 'Corporate Insolvency Resolution Process'.
21. The Learned Counsel for the Appellant further stated that above judgment was also upheld in Urgo Capital Limited v. Bangalore Dehydration and Drying (Company Appeal (AT) (Insolvency) No. 984 of 2019, where this Appellate Tribunal held that decree holders can file for 'Corporate Insolvency Resolution Process'
22. The Learned Counsel for the Appellant further stated in the light of the above judgments and the fact that the 'Arbitral Award' has become final on account of the appeal being dismissed in Arb Petition No.999 of 2016 by way of an order dated 17.02.2017. The Learned Counsel for the Appellant further stated that as of today, the 'Respondent' has defaulted in respect of a financial debt owed to the 'Appellant'. Therefore, there is an existence of default on the face of it by the 'Respondent'.
23. The Learned Counsel for the Appellant pleaded that the 'impugned order' dated 27.04.2021 needs to be set aside and his appeal may be allowed. Respondent's Submissions:
24. The Learned Counsel for the Respondent stated that appeal is baseless and devoid of any merit and therefore should be dismissed. The Learned Counsel further mentioned that the 'Adjudicating Authority' has done complete due diligence and after considering all relevant facts of the case has Company Appeal (AT) (CH) (Ins) No. 230 of 2021 8 of 23 come to right decision contained in the 'impugned order'. The Learned Counsel for the Respondent further stated that the 'Appellant' had filed the application under Section 7 of the I & B Code, 2016 claiming itself to be a 'Financial Creditor' which is not true and does not collaborate with the facts and the evidence.
25. The Learned Counsel for the Respondent emphasised that as per the requirement of law under the I & B Code, 2016 and as held by Hon'ble Supreme Court of India in the case of Innoventive Industries Ltd. Vs ICICI Bank, (2018) 1 SCC 407, the ' Adjudicating Authority' had to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred.
26. The Learned Counsel for the Respondent assailed the conduct of the 'Appellant' who filed an application under Section 7 of the I & B Code, 2016 as well as the Appeal preferred by the 'Appellant' as an abuse of process of law and an attempt to initiate the insolvency resolution process against a solvent company fraudulently and with malicious intent.
27. The Learned Counsel for the Respondent emphasised that the 'Appellant' has also not filed with the application record of default with the information utility or such other record or evidence of default. Company Appeal (AT) (CH) (Ins) No. 230 of 2021 9 of 23
28. The Learned Counsel for the Respondent mentioned that the 'Appellant' had not filed any statement of its bank account/s with the application to establish the disbursement of any of the amounts mentioned in the application nor to establish what the 'Appellant' received back from the 'Respondent'.
29. The Learned Counsel for the Respondent assailed conduct of the 'Respondent' and alleged that the 'Ledger Book' entries treating these as highly manipulated and self-serving statements of accounts prepared by the 'Appellant' with wrong intent. The Learned Counsel for the Respondent further pointed out that nowhere in the Ledger Book entries in respect of "High Seas Sale Agreement" dated 23.04.2012, the 'Appellant' had shown payments received against LCs opened by the 'Respondent'. The 'Appellant' had received Rs. 2,62,55,926.00 on 22.06.2012 and Rs. 42,76,466.12 on 30.06.2012, however, the 'Appellant' has not shown any of these payments received from the 'Respondent' in the 'Ledger Book' entries which indicates wrong intent of the 'Appellant' and that the alleged 'Ledger Book' entries of the application are bogus and manipulated statement of accounts and therefore can't be relied upon.
30. The Learned Counsel for the Respondent clarified that there was no debt due to the 'Appellant' as the 'Respondent' has made the entire payment due under the "High Seas Sale Agreement" dated 23.04.2012, alleged loan agreement dated 09.04.2012, alleged "Loan Renewal and Working Capital Loan Agreement" dated 21.03.2013. The Learned Counsel for the Respondent further pointed out that on 04.04.2012, the 'Appellant' had Company Appeal (AT) (CH) (Ins) No. 230 of 2021 10 of 23 transferred the 'Respondent' an amount of Rs. 1,84,00,000 through RTGS and on 04.04.2012 itself the 'Respondent' had given back a total amount of Rs.1,25,00,000/- in five transactions of Rs. 25,00,000/- each via RTGS.
31. The Learned Counsel for the Respondent stated that the ' Appellant' with mala-fide intention has not mentioned about the payments made by the 'Respondent' in the application under Section 7. The Learned Counsel for the Respondent further mentioned that as per the alleged " Loan Renewal and Working Capital Loan Agreement" dated 21.03.2013 against the amount of Rs. 71,00,000/- mentioned in this agreement, the 'Appellant' had given only Rs. 35,00,000.00 on 08.04.2013 and on the same date i.e 08.04.2013, there was an excess credit of Rs. 41,75,085.00 in favour of the 'Respondent'. The Learned Counsel for the Respondent submitted that the " Calculation Memo" depicting the payments made by the 'Respondent' clearly show that by suppressing the above LC-I and LC-II amounts, the 'Appellant' has wrongly depicted to show as if the 'Appellant' to have a debit of 5.25 Crores but as per the " Calculation Memo" in consonance with "High Seas Sale Agreement" dated 23.04.2012 and the alleged loan agreement dated 09.04.2012, that an amount of Rs. 12,35,300.00 is to the credit of the 'Respondent'.
32. The Learned Counsel for the Respondent refuted the claim that the 'Appellant' is a 'Financial Creditor' for the amount claimed under the "Arbitral Award" dated 18.03.2015. The Learned Counsel for the Respondent Company Appeal (AT) (CH) (Ins) No. 230 of 2021 11 of 23 further stated that the ' Appellant' has mainly laid stress upon the consent award dated 18.03.2015 for filing the application under Section 7 of the I & B Code, 2016 claiming itself to be a 'Financial Creditor'. The Learned Counsel for the Respondent further mentioned that as per settled position of law that the amount claimed under the decree (award) is an adjudicated amount and not a debt disbursed against the consideration for the time value of money and does not fall within the ambit of any of the clauses enumerated under Section 5(8) of the I & B Code, 2016. The Learned Counsel for the Respondent placed the Reliance on the Judgment dated 09.12.2019 passed by this 'Appellate Tribunal' in Company Appeal (AT) (Insolvency) No. 1329 of 2019 and Judgment dated 14.08.2020 passed by this 'Appellate Tribunal' in Company Appeal (AT) (Insolvency) No. 452 of 2020.
33. The Learned Counsel for the Respondent emphasised that in view of the High Seas Sale Agreement dated 23.04.2012, and the payments made by the Respondent thereof goes on to show that the 'Appellant' had received Rs. 45,21,858/- in excess of the invoice raised by it. The following payments were made by the 'Respondent' towards the "High Seas Sale Agreement" i.e. Rs. 68,52,263/- as EMD and Rs. 3,05,32,392/- Vide LC Nos. ILC 36/2012 dated 21.06.2012 and 8100ILCDA120023 dated 28.06.2012.
34. The Learned Counsel for the Respondent submitted that the "High Seas Sale Agreement" entered into by both the parties was the source Company Appeal (AT) (CH) (Ins) No. 230 of 2021 12 of 23 document and the amount credited to the account of the ' Appellant' was in excess of the invoices raised by it. The Learned Counsel for the Respondent further submitted that the "Loan Agreement" entered into was on the request of the 'Appellant' and the amount paid by the ' Appellant' was in the form of discharging its dues pertaining to ongoing business transactions.
35. The Learned Counsel for the Respondent concluded with plea to dismiss the Appeal filed by the 'Appellant' with cost as the Appeal is being devoid of any merits.
Findings
36. Heard Learned Counsel for the 'Appellant' and the 'Respondent' and also perused record made available to us. Several issues have been raised in the Appeal which are required to be deliberated upon before coming to final conclusion.
(I) (a) What is nature of relationship between the 'Appellant'-
M/s Shakti International Pvt. Ltd. and the 'Respondent'- M/s Pandi Devi Oil Pvt. Ltd.
(b) Whether above relationship is to be treated as 'Buyer'/'Seller' in commercial transactions or as 'Financial Creditor' and 'Corporate Debtor'.
(II) Whether the "High Seas Sale Agreement" dated 23.04.2012 is to be treated as source document or ought to be considered along with other two agreements i.e. "Loan Agreement" dated 09.04.2021 "Loan Renewal and Company Appeal (AT) (CH) (Ins) No. 230 of 2021 13 of 23 Working Capital Loan Agreement" dated 21.03.2013 as part of full documentation.
(III) Whether the 'Arbitral Award' dated 18.03.2015 based on consent terms dated 18.03.2015 is subject to subsequent 'MoU' dated 19.03.2015 entered into between the 'Appellant' and the 'Respondent' to give effect to consent term dated 18.03.2015.
Issue No. (I)
(a) What is nature of relationship between the 'Appellant'- M/s Shakti International Pvt. Ltd. and the 'Respondent'- M/s Pandi Devi Oil Pvt. Ltd.
(b) Whether above relationship is to be treated as 'Buyer'/'Seller' in commercial transactions or as 'Financial Creditor' and 'Corporate Debtor'.
• Appellant- M/s Shakti International Pvt. Ltd. ("SIPL") is in business of importing, exporting, buying, selling, supplying, dealing in edible as well as non-edible oils etc. Respondent- M/s Pandi Devi Oil Pvt. Ltd. ("PDOPL") is engaged in business of importing crude palm oils, trading, running factory/plant for the same.
• In terms of export-import policy, "PDOPL" as buyer, entered into "High Seas Sale Agreement" with "SIPL" on 23.04.2012 whereby SIPL agreed to arrange import crude palm oil of 500 MT+ 2% of the said commodity on agreed upon terms including 1.20% Company Appeal (AT) (CH) (Ins) No. 230 of 2021 14 of 23 "SIPL" trade margin on CNF along with interest on CNF @ 18%/ 24% per annum as per pre-determined agreement for different period. "PDOPL" as buyer was also supposed to make Earnest Money Deposit @15% of value of cargo with "SIPL" as seller. • At the request of "PDOPL" Rs. 1,84,00,000/-was given by "SIPL" as a loan. However, the agreement to give effect of such loan was signed on 09.04.2012. According to this Agreement, loan was to be repaid on or before 30.11.2012. The Loan was subject to interest @2.5% on outstanding. Personal Guarantee of Managing Director of "PDOPL" Mr. R. Vijayarajan and Mr. R. Pandlyarajan were also executed in favour of "SIPL" on behalf of "PDOPL" on 09.04.2012.
• However, "PDOPL" could not pay entire sum of the "Loan Agreement" including interest before 30.11.2012 as per "Loan Agreement" and therefore both parties agreed to enter into a fresh agreement termed as "Loan Renewal and Working Capital Loan Agreement" dated 21.03.2013. This "Renewal Agreement"
also provided for additional loan of Rs. 71,00,000/- as Working Capital Loan. Along with this "Renewal Agreement", both parties entered into 'Memorandum of Understanding' on 21.03.2013. This 'MoU' covered/mentioned "High Seas Sale Agreement", "Loan Agreement", Earnest Money Deposit etc. One important Company Appeal (AT) (CH) (Ins) No. 230 of 2021 15 of 23 clause 5 of the said 'MoU' (Page- 3 of 'MoU' dated 21.03.2013) reads as under:-
"5. However, the Party of the Second Part failed to fulfil its obligation under the Loan Agreement as well as under High Seas Sale Agreement that of making the payment to the Party of the First Part and to lift the commodity from the tanks wherein it was arranged to have them stored"
• Similarly, Para 5 and 6 at page 5 of the said "MoU" further reads as under:-
"5. The Party of the Second Part hereby agrees that as soon as the Commodity is processed and ready to be sold, the Party of the Second Part shall sell the same in the market under the supervision of the Party of the First Part and direct all such proceeds generated from the sale of the said Commodity, in the favour of the Party of the First Part.
6. In furtherance to the above mentioned Clauses 4 and 5, the Parties hereby agree that the Party of the Second Part shall sell the said Commodity directly to a third party, however such a transaction shall take place under the supervision of the Party of the First Part and the Party of the Second Part shall proceed with finalizing the sale only after having obtained written consent from the Party of the First Part."
• From the reading of these agreements i.e. "High Seas Sale Agreement", "Loan Agreement", "Loan Renewal and Working Company Appeal (AT) (CH) (Ins) No. 230 of 2021 16 of 23 Capital Loan Agreement" along with "Memorandum of Understanding" dated 21.03.2013, it is apparent that the relationship between the 'Appellant' and the 'Respondent' is of 'Buyer' and 'Seller' and not as 'Financial Creditor' and 'Corporate Debtor'.
• This Appellate Tribunal consciously has gone into "Loan Agreement" and subsequent fresh "Loan Renewal and Working Capital Loan Agreement". It is observed that although the Rs. 1,84,00,000/-was disbursed on 04.04.2012, however the formal agreement for the same was entered subsequently on 09.04.2012. From the averments of the 'Respondent', this 'Appellate Tribunal' notes alleged contention and circumstances as made out by the 'Respondent' which reads as under
'Since the Appellant was facing some difficulties in closing his books of accounts due to the transfer of large amounts from its bank account, the Appellant requested the Respondent to sign a loan agreement dated 09.04.2012.' • Prima-facie "Loan Agreement" as subsequent "Renewal Agreement" were entered into to facilitate successful completion of the original Master Agreement i.e. "High Seas Sale Agreement". It is also observed that the 'MoU' makes reasonably clear the relationship between the 'Appellant' and the 'Respondent' as 'Buyer' and 'Seller' in course of normal Company Appeal (AT) (CH) (Ins) No. 230 of 2021 17 of 23 commercial transactions rather than as pure 'Financial Creditor' and 'Corporate Debtor'.
• In view of above detailed discussions, this 'Appellate Tribunal' do not find any error in the 'impugned order' whereby the 'Appellant' has not been treated as 'Financial Creditor' and in effect Section 7 Application under I & B Code, 2016 the 'Appellant' was not entertained.
Issue No. (II) Whether the "High Seas Sale Agreement" dated 23.04.2012 is to be treated as source document or ought to be considered along with other two agreements i.e. "Loan Agreement"
dated 09.04.2021 "Loan Renewal and Working Capital Loan Agreement"
dated 21.03.2013 as part of full documentation.
• "PDOPL" and "SIPL" entered into "High Seas Sale Agreement" on 23.04.2012. According to this agreement, "SIPL" agreed to import crude palm oil of 500 MT and supply the same to "PDOPL" with cost plus 1.20% "SIPL" trade margin on CNF along with interest on CNF @ 18%/ 24% per annum as per pre- determined agreement for different period. This clearly establishes that "High Seas Sale Agreement" was the main document/ agreement which governed the transaction between the 'Appellant' as seller and the 'Respondent' as buyer of the crude palm oil. To facilitate the same transactions the 'Appellant' agreed to give financial assistance by way of loan of Company Appeal (AT) (CH) (Ins) No. 230 of 2021 18 of 23 Rs. 1,84,00,000/- to the 'Respondent' on interest. On alleged failure to repay the same of further "Renewal Agreement" was entered into which has proviso for additional working capital loan of Rs. 71,00,000/-.
• Although, "Loan Agreement" was subsequent an independent agreement however in the given circumstances and from averments made, it looks like that this was part of commercial conditions and financial arrangements between the 'Appellant' and the 'Respondent'. Both the parties have alleged outstanding dues from each other. The 'Appellant' has claimed on non- payment dues of the loan amount along with interest in addition to the subsequent Rs. 35,00,000/- paid to M/s Suraj Agro Instructure (India) Pvt. Ltd. on behalf of the 'Respondent' as part clearance of the 'Respondent' rental area of their warehouse as per "Loan Renewal and Working Capital Agreement". On the other hand, the 'Respondent' as given calculation memo in the counter statement dated 12.10.2021 according to which there is alleged excess amount payable in favour of the 'Respondent'. The 'Respondent' has claimed that out of Rs. 1,84,00,000/- transferred to the 'Respondent', on the same i.e. on 04.04.2012 Rs. 1,25,00,000/- was transferred back by the 'Respondent' in account of the 'Appellant'. It has further been mentioned that all outstanding payment has been made.
Company Appeal (AT) (CH) (Ins) No. 230 of 2021 19 of 23 • From the 'impugned order' 27.04.2021 it is seen that the 'Adjudicating Authority' had detailed examination of all the record and heard the submissions by both the parties in course of various stages of 17 hearings. It is for neither expected nor desirable for this 'Appellate Tribunal' to go into detailed of various claims and counter claims based on the alleged 'Ledger Accounts' of both the parties which evidently has been scrutinised in details and gone into by the 'Adjudicating Authority'.
• This 'Appellate Tribunal' observes that the 'Adjudicating Authority' has treated "High Seas Sale Agreement" as a source documents. Looking to the detailed examination done by the 'Adjudicating Authority' and elaborate discussions in the preceding paragraphs, this 'Appellate Tribunal' comes to the conclusion that the 'Adjudicating Authority' has not erred in treating "High Seas Sale Agreement" as source document and other two agreements can be treated as part of full documentation.
Issue No. (III) Whether the 'Arbitral Award' based on consent terms is subject to subsequent 'MoU' dated 19.03.2015 entered into between 'Appellant' and 'Respondent' to give effect to consent term.
• It is observed that the 'Appellant' initiated Arbitration proceedings against the 'Respondent' for claim of Company Appeal (AT) (CH) (Ins) No. 230 of 2021 20 of 23 Rs. 5,25,00,000/- along with interest due to non-payment and outstanding dues arising out of "Loan Agreement", "Loan Renewal and Working Capital Loan Agreement" along with 'MoU' dated 21.03.2013.
• Based on the consent terms agreed between the 'Appellant' and the 'Respondent' on 18.03.2015, the 'Arbitral Tribunal' presided by Hon'ble Justice F.I.Rebello- Former Chief Justice High Court of Allahabad gave the 'Arbitral Award' on 18.03.2015. The 'Arbitral Award' was communicated to the parties by procedure order sheets of arbitration proceedings dated 30.07.2015. The Arbitral Award was challenged by the 'Respondent', however the same was dismissed by Bombay High Court.
• From the averments made during proceedings, this 'Appellate Tribunal' observed that subsequent to settlement/consent term dated 18.03.2015, both the parties agreed to sign 'MoU' dated 19.03.2015 to give effect to consent terms. It has been brought to the notice of this 'Appellate Tribunal' that as per this 'MoU', in view of financial difficulties of the 'Respondent', the 'Appellant' agreed to run Respondent's plant/factory independently. The 'Appellant' also further agreed to give advance of Rs. 25,00,000/- to the 'Respondent' for overhauling/ revamping plant and machinery. The 'Respondent'' agreed for a minimum turnover of 3,000 MTS per month for the entire 'MoU' period so Company Appeal (AT) (CH) (Ins) No. 230 of 2021 21 of 23 that proceeds can be used for making payment of Rs. 5,25,00,000/- along with interest to the 'Appellant'. According to Para 15.8 of 'MoU' dated 19.03.2015, "all prior agreements and all prior negotiations representations and communications relating to the same subject are superseded by this MoU".
• The Respondent has alleged that the 'Appellant' has not kept their part agreed upon both the parties in the 'MoU' including giving advance for Rs. 25,00,000/- and rendering assistance to keep the plant into operation as per 'MoU'.
• This Appellate Tribunal observes that reading all above, it seems that consent term was converted into 'MoU' dated 19.03.2015 which apparently has again been disputed by allegations by both parties of not fulfilling their terms. It can therefore be presumed that the 'Arbitral Award' based on consent terms is subject to subsequent 'MoU' dated 19.03.2015 entered into between the 'Appellant' and the 'Respondent' to give effect to consent term. This Appellate Tribunal, otherwise, do not find any prima-facie valid/ solid reasons for parties to sign 'MoU' on 19.03.2015 just after one day of signing of 'Arbitral Award' dated 18.03.2015 which in turn was based on consent terms dated 18.03.2015, other than to give effect and ensure implementation of consent terms. It is therefore felt that the 'Arbitral Award' based on consent terms is subject to subsequent 'MoU' dated Company Appeal (AT) (CH) (Ins) No. 230 of 2021 22 of 23 19.03.2015 entered into between the 'Appellant' and the 'Respondent' to give effect to consent term.
37. This 'Appellate Tribunal' also conscious of the fact that the I & B Code, 2016 is primarily for resolution and keeping the company/ corporate debtor in running condition as far as possible. In catena of judgements, it has been held that the 'Corporate Insolvency Resolution Process' should not be used as recovery mechanism. Adequate alternative legal recourse and platforms including 'Civil Courts' are available to enforce their respective claims.
38. Therefore, this 'Appellate Tribunal', is of the considered opinion that there is no error in the 'impugned order' dated 27.04.2021, passed by the 'Adjudicating Authority'. `Appeal', is `devoid of any merit' and stand dismissed. No costs. Liberty is however given to the parties to take alternate legal remedies, if required, `feasible' and of course in accordance with Law, and in the manner known to Law, for their `Claims', if any. The connected pending `Interlocutory Applications', if any, are Closed.
[Justice M. Venugopal] Member (Judicial) [Naresh Salecha] Member (Technical) Simran Company Appeal (AT) (CH) (Ins) No. 230 of 2021 23 of 23