Adhunik Corporation Limited vs Shivam India Limited

Per Bidisha Banerjee, Member (Judicial):

The Court convened through hybrid mode.

Ld. Sr. Counsel /Counsels for the parties were heard at length.

This Petition has been taken out for a fresh hearing on remand from Hon’ble NCLAT vide its order dated 19.02.2025.

Ld. Sr. Counsel for the Financial Creditor would submit that Hon’ble NCLAT in Company Appeal (AT) (Insolvency) No. 1427 of 2023 dated 19th February, 2025 had already held that Adhunik Corporation Limited (ACL) is a financial creditor in accordance with I&B Code, 2016.

Further, the Hon’ble NCLAT has directed this Tribunal to satisfy itself only on the following issues:

It is further submitted that a total financial debt of INR 42,47,32,067.00 (Rupees Forty Two Crore Forty-seven Lakh Thirty-two Thousand and Sixty-seven only) is due and payable by Corporate Debtor to the Financial Creditor and the same is arising out of the following:

Additional Financial assistance granted by Financial Creditor in the form:

Bank account statements of the SBI account of Corporate Debtor (in short CD) [Ref. Page Nos. 39-257 of IA 767 of 2025] clearly shows that only a sum of Rs. 2,95,37,441.38 (Indian Rupees Two Crore Ninety Five Lakh Thirty Seven Thousand Four Hundred and Forty-one and Thirty-eight paisa only) was received by the Financial Creditor towards sales commission in terms of the Agreement dated 23^rd June, 2020 as under (Bank Statements of Financial Creditor at page Nos. 43-79 of the petition):

The Hon’ble Appellate Tribunal has at para 20 of its judgment dated 19^th February, 2025 clearly observed that “there is sufficient material on record to prove that there was disbursal of funds by the Appellant to the Corporate Debtor in their account. The bank transaction details have been placed at page 248-284 of Appeal Paper Book ("APB" in short) to substantiate their contention that money was actually disbursed to the Corporate Debtor, which was in dire financial straits, towards working capital to make the Corporate Debtor operational. Receipt of this amount has also not been denied by the Corporate Debtor." [Ref. para 20 of Hon’ble NCLAT judgment in Company Appeal (AT) (Insolvency) No. 1427 of 2023].

In view of the above, it is amply clear that Financial Debt in the present case has crossed the threshold limit prescribed under Section 4 of the 1 & B Code, 2016 and is well above the threshold of INR 1 Crore. Accordingly, the present petition under Section 7 of the I & B Code, 2016 is maintainable and in view of the failure of Corporate Debtor to repay the financial debt, the present petition is liable to be admitted.

It is undisputed that CD was in a poor financial condition and was unable to pay the electricity bills to continue operations and consequently, the plant was closed for 6 months.

In view of the poor financial condition of CD, Financial Creditor agreed to extended financial assistance to CD on interim basis (Page Nos. 33-34 of petition). It was duly understood and agreed to between the parties that the said financial debt was to be refunded by the CD to the Financial Creditor on demand (Page Nos. 33-34 of petition).

The Financial Creditor recalled the financial assistance extended to CD and forthwith demanded repayment of the financial debt by its notice dated 11^th October 2021 (Page No.190 of petition).

As CD failed to repay the financial debt owed to Financial Creditor in terms of the notice, the date of default in making repayment towards the financial debt is 11th October 2021 (Page No. 16 of petition).

In view of the above, there is no dispute on disbursement of financial assistance, as well as express demand made by Financial Creditor for repayment of the financial debt on 11^th October, 2021.

It is urged that the Corporate Debtor, having failed to repay the financial debt, has committed default under the I & B Code, 2016 and consequently is liable to undergo CIRP.

It is submitted that in accordance with Section 7 (4) read with Section 7 (5) (a) of the I & B Code, 2016, once the Adjudicating Authority is satisfied that there is financial debt and default, an application under Section 7 of the I & B Code 2016 must be admitted. Reference is made to the celebrated decisions:

Further that, it is trite law that non-payment of even a part of debt when it becomes due and payable will amount to default on the part of a Corporate Debtor. In such a case, an order of admission under Section 7 of I & B Code, 2016 must follow (Refer para 11 of M. Suresh Kumar Reddy v. Canara Bank, (2023) 8 SCC 387).

Ld. Sr. Counsel would assert that while the Hon'ble Appellate Tribunal vide its judgment dated 19th February 2025, directed this Adjudicating Authority to satisfy itself only upon the issues the financial debt has crossed the threshold limit? and (ii) the financial debt has become due and payable? during the course of hearing, the Ld. Advocate for CD has traversed outside the scope and ambit determined by the Hon'ble Appellate Tribunal for adjudication of the present petition and despite refusal of this Hon'ble Tribunal to allow any additional document at the stage of final hearing of the petition, the Corporate Debtor has instituted I.A. (IBC) No. 767/KB/2025 to further derail the proceedings.

That the following dates would clearly show the mala fide of the Corporate Debtor:

As such, I.A. (IBC) No. 767/KB/2025 has been sought to be instituted by Corporate Debtor almost after 3 years of filing of reply to the petition.

That without prejudice to the rights of Financial Creditor, in order to ensure that the matter is heard by this Hon'ble Tribunal and to further prevent the corporate debtor from further delaying the proceedings, the Financial Creditor did not object to the documents sought to be placed on record by I.A. (IBC) No. 767/KB/2025.

At hearing Ld. Counsel Mr. Rishav Banerjee appearing for the Corporate Debtor would invite our attention to the memorandum dated 23.06.2020 entered between the Adhunik Corporation Limited, whether the Financial Creditor and Shivam India Limited, the Corporate Debtor. The said terms and conditions mentioned therein are as under:

Placing the above, Ld. Counsel Mr. Rishav Banerjee would submit that it would evident from the Agreement above that the Financial Creditor had agreed to infuse funds in the interim to Shivam and to facilitate operations to make its unit operative. The said unit had manufacturing facility for Billets, Rolling Mill for finished products like bar and rods in coil form, billets and other steel products and the same is located at Raturia, Angadpur Industrial Area, Dist-Paschim Bardhaman, Durgaur 713 215, West Bengal.

It was further submitted that the Agreement mentions that the entire funds was infused by Adhunik Corporation Limited is fully refundable in the event of Shivam fails to earn from its operation.

The Agreement also states that the unit shall be run and operated in terms of MoA by Shivam as may be decided by Adhunik Corporation Limited subject to a maximum period of five (5) years. As per the Agreement Adhunik Corporation Limited shall supply raw materials to Shivam for manufacturing hot rolled finished products as well as billets through induction furnace route to be subsequently charged in rolling mill in hot charging process and the left-out billet not charged will be sold.

It was also agreed upon that during the term of the MoA, Adhunik Corporation Limited shall remove entire finished products, coils and billets for disposal at the prevailing market prices and it shall be entitled to the following charges / commission out of the sale proceeds:

For Hot-rolled finished products and coils – Rs. 600/- per ton; and

For Induction Furnace sale-able Billets – Rs. 300/- per ton.

Adhunik shall also be fully entitled to remove By-products like MIS-Rolls and end-cutting etc.

Adhunik shall also be entitled to deduct from the sale proceeds the said commission and cost of raw materials. Operational costs and selling costs and after meeting all the costs provided, Adhunik Corporation Limited shall make available the surplus to Shivam for meeting the cost of further operation in the said unit.

Adhunik Corporation Limited shall also provide within the seventh day of each calendar month provide monthly statement of Shivam for its operations and upto date.

Further right of the Adhunik Corporation Limited on the basis of the Agreement encompasses that all finished product made out of such materials shall at all times be the property of Adhunik Corporation Limited even the authorised share capital of Shivam and paid up share capital shall be with written consent of Adhunik Corporation Limited. It further provides that till such sums are fully repaid by Shivam to Adhunik Corporation Limited, Adhunik Corporation Limited shall be entitled to exercise lien over all materials supplied by Adhunik Corporation Limited to Shivam and also on all finished products manufactured by Shivam.

Shivam shall not be permitted to effect sale of any finished goods made at its factory during the term of the MoA without specific written consent of Adhunik Corporation Limited. Adhunik Corporation Limited shall also keep their 69.42% shareholding in Shivam, however, Shivam will be in charge of plant and machinery and factory unit and operate the plant as per scheduled production given by Adhunik Corporation Limited even the men and workers of Shivam would act in terms of the instructions and supervision of Adhunik Corporation Limited and Shivam shall not be entitled to terminate the MoA during its validity period.

Placing the above, Ld. Counsel Mr. Rishav Banerjee would submit that by way of this agreement Adhunik Corporation Limited has already agreed to get the entire share of profits by way of commission from sale and costs of raw materials. In addition to above, Adhunik Corporation Limited has sold the finished product to its related concerns for unlawful gain and therefore, in absence of any clause that Shivam shall be obliged to repay Adhunik Corporation Limited in any manner other than through commission from sale and costs of raw materials and other operational costs, Shivam is not obligated to repay Adhunik Corporation Limited in any other manner whatsoever.

Mr. Banerjee further submits that amounts infused by the Financial Creditor has been adjusted against the sale proceeds as well as commission already earned by the Financial Creditor and therefore, Corporate Debtor is not entitled to make any further repayment to the Financial Creditor. Referring to para 13 of the Petition where an amount of 23.13 Crores is shown as profit earned from sale, again received from sale and profit earned of Rs. 46.22 Crores. It is submitted that the Corporate Debtor earned not a single farthing and therefore, the Petition is speculative and oppressive, the figures given in the part (iv) of the Petition are imaginary and the petition should be dismissed as no debt is due and payable by the Corporate Debtor to Financial Creditor.

However, adjustment of commission left against repayment done to Adhunik on account of infusion of funds and supply of raw materials has not been provided to substantiate the claim of Corporate Debtor that the amount to be repaid stands fully adjusted against sale proceeds and commission.

It is urged that the Hon'ble Appellate Tribunal by its judgment dated 19th February 2025 has categorically held that Agreement dated 23rd June 2020 is not a business agreement (para 27 of the said Judgment) between the parties and as such "the infusion of funds was a transaction which has direct bearing on the business carried out by the Corporate Debtor, raising of the amount through the above agreement has the commercial effect of borrowing. The clauses of the MoA contain clear indication that the infusion of funds was being done with the intent of earning profits and the investments was therefore for consideration for the time value of money. Therefore, this transaction has the contours of a borrowing as contemplated under Section 5(8) of IBC. The investments made by the Appellant-Financial Creditor was with an eye for consideration for time value of money and therefore the transaction had commercial effect of borrowing." (para 26 of judgment).

Under the terms of Agreement dated 23rd June 2020, the plant, machineries, and factory unit were all under the control (Clause 17 of MoA, Page No. 37 of petition) and as such Financial Creditor cannot be held liable for any losses or damages on account of business operations of Corporate Debtor, if any.

In accordance with the express understanding recorded in Clause 18 of MoA dated 23rd June 2020 (Page No. 37 of petition), it was duly agreed and decided that the FC shall have no liabilities with regard to the operations of the plant, machineries and factory of CD.

In accordance with the terms and conditions of the MoA dated 23rd June 2020, CD was obligated to:

Thus, the dishonest claims alleged by CD are not maintainable and are mere ploy to mislead the Tribunal.

Reliance over Clause 7 of MoA dated 23^rd June, 2020 (Page No. 35 of the Petition) has been made in order to make out a baseless case that the Financial Debt owed to FC has been repaid upon sales conducted in furtherance of MoA.

A miserable attempt has been made by CD to interpret a phrase of Clause 7 of MoA dated 23rd June 2020 (Page Nops. 35-36 of petition) in isolation, contrary to the trite principles that a document has to be read as a whole.

Heavy reliance has been placed on the following portion of Clause 7 of MoA dated 23rd June 2020 (Page Nos. 35-36 of petition):

It is the fraudulent case of CD that in terms of the above, FC has deducted the entire financial debt owed to CD and as such, nothing is due and payable to FC in as much as CD has not been paid even a single penny from the sale proceeds (Para 3 (r) of reply).

27. In order to appreciate costs, infusions and expenses mentioned in Clause 7 of MoA dated 23rd June 2020 (Page No. 35-36 of petition), it is crucial to read Clause 5, 6 & 7 in entirety.

The only limited role of FC in terms of MoA dated 23rd June 2020 was to "supply raw materials as per the production schedule of the Unit" (Clause 5 Page No. 34 of petition).

On a conjoint reading of Clause 5, 6 and 7 of MoA dated 23rd June 2020 (Page Nos. 34-36 of petition) it is apparently clear that Clause 7 of MoA (Page Nos. 35-36 of petition) refers to costs, expenses and infusions made by FC in order to supply the raw materials to CD.

The said portion of Clause 7 of MoA (Page Nos. 35-36 of petition) in no manner mean to include repayment of financial debt.

The MoA dated 23rd June 2020 is silent on repayment of the financial debt, debt was extended on an interim basis and the same shall be fully refundable save and except the clear understanding between the parties that the financial (last recital page Nos. 33-34 of petition).

It is no more res integra that by "Commercial Practice', any Loan, Loan term or otherwise, in the absence of any Agreement for Repayment', falls due and payable on demand', made by the 'Creditor" (para 65 of Mahmod Alam Khan, Shareholder and Suspended Director of M/s. Golconda Textiles Pvt. Ltd. vs. Mahmod Alam Khan & Anr. (Company Appeal (AT) (CH) (Ins) No. 30 of 2023)].

In the present case, notice for demand of repayment of financial debt was issued to CD on 11^th October, 2021 (page 185-191 of the petition) and as such, CD defaulted in making repayment of the financial debt.

It is the whimsical case of CD that the SBI Bank account bearing number as 36737087161 is still in exclusive control of FC (para 3 (q) of reply). However, no evidence has been placed on record by CD to substantiate or prove such baseless allegations.

It is an admitted position of fact that the State Bank of India (SBI) Bank Account bearing number as 36737087161 is in the name of CD. It is further not in dispute that the said bank account was already in existence at the time of execution of MoA dated 23.06.2020 (para 3(q) of the reply).

Pursuant to execution of MoA dated 23rd June 2020, one Mr. Jugal Kishore Agarwal, official of FC, was one of the joint signatory with one Mr. Pandey of CD in the said bank account, however, at no point in time did FC had unilateral/singular control over the said bank account bearing number as 36737087161.

On the contrary, CD had unilateral and exclusive control over the SBI Bank Account bearing number as 36737087161 through Net Banking, in as much as the said SBI Bank Account was already in existence prior to execution of MoA dated 23rd June 2020.

The fact that Net Banking Facilities were availed for the said SBI Bank Account bearing number as 36737087161 is evident from the fact that online payments have been remitted from the said SBI Bank Account to FC's bank account for initial period of sales commission as under:

In view of the above, it is amply clear that:

On perusal and examination of the bank statements, i.e., (a) HDFC Bank Statement for the period between 2020 2021 (Page Nos. 39-122 of LA 30 767 of 2025); and (b) SBI Bank Statement for the period between July 2020 to March 2021 (@pg. 123-257 of IA 767 of 2025), except a few transactions, all the transactions have been done through RTGS/ NEFT/online-payment mode by the CD.

CD has falsely deposed on affidavit in its reply (para 3(u) of reply) that CD never received any payment from FC out of the sale proceeds. the bank statements clearly go on to show that CD has transferred a sum of INR 30,05,88,069 (Indian Rupees Thirty Crore Five Lakh Eighty-Eight Thousand and Sixty Nine only) in its HDFC Bank Account from the SBI Bank Account by way of 116 online transactions. A chart of payments made from SBI Account of CD to HDFC account of CD is annexed and marked as Annexure-A.

It is alleged that submissions of CD that FC was in possession of the entire sale proceeds in furtherance of to were under the control of the FC is baseless and deserves to be dismissed and set aside in limini for the following reasons:

Clause 4 of the MoA dated 23^rd June, 2020 (Page 34 of the Petition) expressly stipulates that “the said Unit shall be run and operated in terms of this MoA by CD”. The unit was to be run and operated by CD in accordance with recommendations made by FC.

In accordance with the MoA, FC was obligated to only "supply raw materials as per the production schedule of the Unit” (Clause 5 pp. 34 of petition).

The role of FC was that of a mere observer (Clause 6 page No. 35 of petition) in order to secure its financial exposure. Clause 6 of MoA dated 23 June 2020 (page No. 35 of petition) clearly shows that FC did not have any or decision making power in CD and the limited the scope of FC was to only observe, monitor or oversee the operations of CD.

The CD has failed to place on record even an indirect evidence to support its baseless and whimsical submissions which are only an afterthought in order to wriggle out of its obligations.

CD has further vehemently argued that no sums have been received by CD in furtherance to Agreement dated 23 June 2020.

However, it is a matter of record, as apparent from the statements (Page Nos. 123-257 of IA 767 of 2025) that a cumulative sum of INR 219,10,11,939.00 (Indian Rupees Two Hundred and Nineteen Crore Ten Lakh Eleven Thousand Nine Hundred and Thirty Nine only) has been received in the SBI Bank Account of CD after execution of the Agreement dated 23 June 2020 until March 2021, , i.e. in accordance with the statements placed on record by CD. A chart indicating payments received in SBI Barik Account of CD as attached and marked as Annexure-B.

In accordance with the GST Returns filed on behalf of the CD, cumulative sales to the tune of INR 232,72,21,221.00 (Indian Rupees Two Hundred and Thirty-Two Crore Seventy-Two Lakh Twenty-One Thousand Two Hundred and Twenty One only) has been reported by the CD itself. As such, CD is estopped from raising such false and fraudulent misrepresentation.

It is submitted that the CD has relied upon Board Resolution dated 11^th November 2024 (Page 304 of IA 767/25) as well letter issued to SB dated 18^th November 2024 (Page No. 305 of LA 767/25), wherein request for change is authorized signatories for the Bank Account tearing under a 36737087161. At the relevant point in time, the following were joint signatories:

All transactions from the said bank account were made through online mode and the user-id and password of the account were always in the control of CD and all transactions were made through such user-id and password without OTP transactions. Therefore, it is the baseless and incongruent case of CD that FC had complete control over the said SBI Bank Account bearing number as 36737087161.

In view of the above, it is amply clear that:-

a. Authorized representative of FC was only a joint signatory for namesake and did not have any unilateral or exclusive control over the SBI Bank Account bearing number as 36737087161;

b. All transactions were made through user-id and password in exclusive control of CD.

CD has relied upon the pending arbitral proceedings as defence to admission of Corporate Insolvency Resolution Process.

It is well established principle of law that presence of an arbitration clause does not prevent commencement of CIRP under Section 7 of the 1 & B Code, 2016. (Dinesh Chand Jain and Ors v. Fabulous Buildcon (P) Ltd. and Ors. ((IB)-37 (PB)/2018) and Reliance Commercial Credit Limited v. Ved Cellulose Ltd (C.P. No. (IB)-156(PB)/2017).

Further, It is trite law that a pre-existing dispute between the Financial Creditor and Corporate Debtor does not bar a petition under Section 7 of the I & B Code, 2016 to be entertained [(para 11 of Punjab National Bank (International) Limited us. M/s. MBL (MP) Toll Road Company Limited (C.P. (IB) No. 423/PB/2023) and para 11 of Karan Goel Vs. Pashupati Jewellers [2019] 156 SCL 653 (NCLAT)).

In view of the above, it is prayed that Corporate Insolvency Resolution Process of Shivam India Limited be commenced by this Tribunal.

The parties were heard at length and perused the records.

The relevant extract of the judgment of Hon’ble NCLAT would be as under:

It transpires from a bare perusal of the order passed by this Appellate Forum that it has already found:

Existence of debt which was “due and payable”

The “debt” is in nature of a “financial debt” and the Appellant (The Petitioner herein) is a Financial Creditor.

What is left to be determined is whether “the Financial Debt has crossed the threshold limit and has become due and payable.

We have considered the rival contentions and perused the records.

Analysis and findings:

As this Petition is being heard on remand, it would be useful to quote an extract of the Judgment of the Hon’ble NCLAT as under:

The order passed by this Tribunal on 11.10.2023 in the first round records the following:

However, this time in course of hearing neither the financial assistance given by the Financial Creditor Adhunik Corporation Limited to the Corporate Debtor Shivam India Limited nor the supply of raw materials by the Financial Creditor Adhunik Corporation Limited to the Corporate Debtor Shivam India Limited has been specifically denied by the Corporate Debtor. As such on both the counts, Adhunik Corporation Limited dons the hat of Creditor and on both the counts the debtor Shivam India Limited was liable to repay its Creditor, the Adhunik Corporation Limited.

The Financial Creditor had provided the following chart to demonstrate computation of dues Corporate Debtor owes to the Financial Creditor:

There is nothing on record to show that the Financial Creditor has got its entire loan satisfied from commission out of sales. The Corporate Debtor has not produced sufficient bank statements to show that the commission earned by the Financial Creditor from sales meets the entire loan disbursed and cost of raw materials supplied by the Financial Creditor. Hence, we are not in a position to arrive at any figures different from what has been projected by the Financial Creditor. Hence an amount much more than threshold is unpaid and there is a debt and default in repayment.

We have noted that the chart of disbursements furnished by the Financial Creditor has not been disputed. Supporting bank statements are available on record. Since, the date of disbursements do not give a course of action, and it is the demand that gives the cause of action which is 11.10.2021, the petition is not hit by the bar of Section 10A.

Given the fact that “debt” and “default” stands already established, there is nothing on record to demonstrate that the Corporate Debtor has already repaid the Creditor, and the “debt” is duly discharged or that the “debt” and “default” does not meet the threshold.

Since the order passed by this Adjudicating Authority in CP(IB)No. 323/KB/2021 on 11.10.2023 was set aside, it would be relevant to quote an extract of the said order passed by this Adjudicating Authority on the said date.

It transpired at hearing that Hon’ble NCLAT has already given its finding that “the financial assistance given by the appellant” Adhunik Corporation Limited, the Financial Creditor in CP(IB)No. 323/KB/2021 “has a clear element of a commercial effect of borrowing and therefore qualifies to be treated as financial debt and the appellant is a Financial Creditor in terms of statutory provisions of IBC”.

Thus the exercise that had to be undertaken by this Adjudicating Authority is only to determine

Whether default has occurred;

Whether the “debt which was due and payable” has remained unpaid and

Whether the “financial debt has crossed the threshold limit”;

At hearing, Ld. Sr. Advocate Mr. Joy Saha appearing for the Financial Creditor would submit that there are two components to the debt, one being financial assistance and the other being supply of raw materials. The financial assistance is of Rs. 34 Crores. This Adjudicating Authority in its order dated 11.10.2023 has already held that there is a debt and default but it found that the debt was not a financial debt. Hon’ble NCLAT has discarded the finding of this Adjudicating Authority and hold that the debt is a financial debt. The findings of Hon’ble NCLAT on being challenged before the Hon’ble Apex Court, the challenge to the findings met with dismissal and hence have attained a finality.

Ld. Counsel Mr. Rishav Banerjee appearing for the Corporate Debtor submitted that after invoking the arbitration Clause, the Financial Creditor had filed this Section 7 Petition. As already noted, it does not impose a bar in considering a Petition filed under Section 7 of the Code.

Accordingly, the Petition deserves to be admitted.

In terms of the foregoing discussions, we ALLOW the application bearing Company Petition (IB) No. 323/KB/2021 filed under Section 7 of the I&B Code, and accordingly, we order the initiation of Corporate Insolvency Resolution Process (CIR Process) in respect of the Corporate Debtor and pass the following Orders:

C.P.(IB)/323(KB)2021 to come up on 24.09.2025 for filing the progress report.

The Registry is directed to send e-mail copies of the order forthwith to all the parties and their Ld. Counsel for information and for taking necessary steps.

Urgent certified copies of this Order, if applied for with the Registry of this Adjudicating Authority, be supplied to the parties upon compliance with all requisite formalities.