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Judgment
O R D E R
Per: Justice Rakesh Kumar Jain:
14.10.2022: This appeal is directed against the order dated 23.08.2021 passed by the Adjudicating Authority (National Company Law Tribunal, Guwahati Bench) by which an application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (in short ‘Code’) by the Appellant ‘Damayanti Tea Industries’ for the initiation of Corporate Insolvency Resolution Process (in short ‘CIRP’) against the Corporate Debtor ‘M/s Bochapathar Tea Estates Pvt. Ltd.’ for the default in making the repayment of the advance availed by it, has been dismissed.
In brief, the case set up by the Appellant is that it had advanced an amount of Rs. 2,35,00,000 on interest @ 16% per annum in view of the agreement executed between the parties on 01.02.2017 and the said amount has been shown in the books of accounts of the Respondent in the nature of loan. However, the Adjudicating Authority rejected the case of the Appellant on the ground that the amount advanced was towards purchase of the green tea leaves and was to be adjusted into the price of the supply of green tea leaves by the Respondent.
Counsel for the Appellant has vehemently argued that the amount of advance has been so reflected in the books of accounts of the Respondent in the nature of loan and in this regard, he has referred to Pg. 166 of the memo of appeal wherein it is mentioned that “Damayanti Tea Industries Balance as on 31st March 2017 is Rs 8472,870. It is in the nature of loan and interest @ 16% is paid to them. But shown as other current liabilities”
On the other hand, Counsel for the Respondent has submitted that the amount of advance is the part of the agreement dated 01.02.2017 which was given by the Appellant to the Respondent for purchase of green tea leaves and it was agreed between the parties that this amount shall carry an interest @ 16% per annum. The said amount shall be adjusted towards the supply of green tea leaves by the Respondent from time to time, therefore, it was not the loan amount which though has a component of interest rather it was an amount given by the Appellant to the Respondent as an advance for the purchase of 12.50 lakh Kgs. of the quality green tea leaves from the period March, 2017 to December, 2017.
We have heard Counsel for the parties and perused the record with their able assistance.
6 The issue involved in this case is as to whether the amount of Rs. 2,35,00,000, given as an advance by the Appellant to the Respondent to purchase green tea leaves and was carrying interest @ 16% per annum is an amount of loan or was the payment towards the purchase of quality green tea leaves, would fall within the definition of financial debt?
In this regard, reference could be had to the agreement in which it was categorically averred that “And whereas the parties hereto have proposed to enter into an agreement whereby the party of the Second Part will supply quality green leaves to the tune of 12,50,000 kgs. Approximately (as per Annexure 11), to the party of the First Part, during the period from March, 2017 to December, 2017. And whereas the party of the First Part will pay a sum of Rs. 2,35,00,000/- as per Annexure 11 in total to the Party of the second part on different dates as mutually agreed in between themselves as advance amount towards purchase of the green tea leaves and the said amount shall carry on interest at the rate of 16% per annum and shall be adjusted towards supply of green tea leaves by the party of the second part from time to time as detailed herein under.”
The argument of the Appellant that the said amount has been shown as loan at Pg. 166 cuts no ice because the amount of Rs. 2,35,00,000/- was paid by the Appellant to the Respondent as an advance to purchase 12.50 lakh Kgs of quality green tea leaves between the period March, 2017 to December, 2017 and the said amount was also carrying interest @ 16% per annum which was to be adjusted by the Respondent towards the supply of quality green tea leaves towards the payment from time to time.
Thus, in view of the aforesaid facts and circumstances, the amount involved does not fall within the ambit of financial debt which is so defined under Section 5(8) of the Code and as such the application filed under Section 7 of the Code was not maintainable. Hence, we do not find any merit in the present appeal and the same is hereby dismissed. No costs.