DCM Shriram Credit & Investment Limited vs M/s. The Maharaja Salt Works Company Private Limited

As per payment schedule, the first instalment was due by respondent to Applicant on 30.9.2020 and thereafter, the respondent was to make payment of Rs. 43,87,500 by 31.3.2021.

However, the respondent failed to supply the contracted quantity to DCM Shriram Limited which resulted in the default in the payment as per the Schedule. As against the supply of 2 Lakh MT per year till today, respondent hardly supplied 30,831 MT over a period from April 2020 to 31st May 2023 to DCM Shriram Limited and only a payment of Rs. 9,35,000/- (Rs. 4,40,000 towards principal and Rs. 4,95,000 towards interest) have been made as against the repayment schedule and apart from that no other payment was made by the Corporate Debtor.

The Applicant raised demand from the respondent.

As per the case of respondent, respondent had a meeting with DCM Shriram Limited and requested them to take the burden of interest to the extent of Rs.2.22 crores upon themselves which according to them they have agreed subject to terms and conditions as incorporated in the said minutes.

However, the respondent failed to fulfil its obligations agreed to in the said Minutes. Hence, the minutes dated 31.7.2021 lost its significance.

It is stated that there is a financial debt and the Corporate Debtor has committed a default in respect of that financial debt. It is further submitted that the default has occurred on 1.4.2021 and has continued thereafter, despite revision in repayment schedule, the Corporate Debtor failed to refund the amount as stipulated therein.

It is submitted by the Applicant that the Applicant lastly issued Recall Notice dated 6.3.2023 and thereafter, Corrigendum Notice dated 14.3.2023 to Recall Notice dated 6.3.2023 to the respondent.

The First contention of the Respondent is that an Arbitration Proceeding is pending between the Applicant and the Respondent at the Arbitration Tribunal Delhi. There are OMPs filed i.c. O.MP. No. 90/2023 and O.M.P(COM)105/2023 before the Hon'ble High Court and vide order dated 14.04.2023 Hon'ble Delhi H.C. records that the dispute so raised in the said O.M.P are arbitrable in nature. vide order dated 22.03.2023 Hon'ble Delhi H.C. appointed Ld. Sole Arbitrator to adjudicate the alleged claims of DCM Shriram Ltd. The nature of transaction being composite and arbitral in nature and till the time the same is not adjudicated as under the arbitration Tribunal the application made under 7 is needed to be rejected.

That the Applicant is not a Financial Creditor. It is submitted that the Applicant does not fall within the definition of Financial Creditor as defined u/s 5(7) of the code because of two reasons:

The transaction entered between the parties herein is not in the nature of 'financial debt' as defined under section 5(8) of the code and

the Applicant having breached the contract between the parties, is disentitled from claiming any relief before the Hon'ble Tribunal.

That there is no consideration for the time value of money. It is submitted that that the joint reading of the Agreement for Supply of Industrial Grade Salt, Tentative Supply and Repayment Schedule to the Loan Agreement (which was revised from time to time on 26.03.2021, 31.07.2021, 17.11.2021, 23.12.2021 and 17.02.2022 considering the ground situation and technical and the Tripartite Agreement (Clause No.3) it can be said that there is no fixed period for repayment of loan or completion of supply agreement which are tentative in nature and resulting in extending the period of supply thereby the repayment being tentative in nature This leads to the conclusion that the nature of transaction has no relevance as regard to time value of money.

That there is absence of any debt and restricting of arrangement. It is submitted that there is no debt against the present alleged Corporate Debtor which is contrary to the submissions of the Applicant, the inter alia, the alleged CORPORATE DEBTOR has to make recovery of Rs. 30.66 cr from the present Applicant and Rs 21.75 cr counter claim against DCM Shriram Ltd. That the order passed in No. O. M. P. (1) (COMM.)-90/ 2023, it is crystal clear that the agreement signed between Applicant and the Respondent and DCM Shriram Ltd is still in existence, therefore Applicant herein cannot recall the said loan agreement signed between Applicant and respondent.

That there is breach of Rupee Loan Agreement by Applicant for Disbursal of the amount. It is submitted that the petition has been filed by the Applicant to takeover the land of the Replying Respondent by fraudulently initiating CIRP against it. I say that the company petition is nothing but a dishonest attempt by the Applicant at the behest of its holding company i.e. DCM shriram Ltd to defer its liability and its duties specified in the various agreements executed between the Applicant, Respondent and DCM Shriram Itd and hence need to rejected at its as section 7 of IBC no such application is maintainable under the ground of default of Applicant for disbursement of loan as per the schedule II of the rupee loan.

That there is fraud by DCM Shriram Ltd. and Applicant in Collation. It is submitted that as per section 65 of the IBC action need to be take on the persons / company who initiates the CIRP with fraudulent or malicious intent by dismissing the application made under section 7 application and by imposing the penalty for such offence as defined in above section since it is clear that Respondent along with its sister concern DCM Shriram Itd has played fraud on the Replying Respondent and entangle into the entering into contracts and allegedly create a default and then trying to take over the unit no 2 situated at vesramedi of the Replying Respondent and played fraud by changing the content of Annexure D of supply agreement vii. That there is illegal act of threatening and manhandling and depositing of blank dated cheques though nothing is due and sending illegal recall notice which bad in law. viii. That Breach of Rule 4(3) of the I&B (Application to Adjudicating Authority) Rules, 2016. The Respondent further states that the application filed by the Applicant is against the rules and regulations under the Insolvency Code and the NCLT rules. The Respondent states that the Applicant has served a copy of the application before filing it with the registry of the Hon'ble Tribunal whereas as per the mandatory rules, the Respondent ought to supply that copy to the Applicant which is filed with the Hon'ble Tribunal. Therefore, service of the application filed by the Applicant has to be done after filing the same with Hon'ble Tribunal and not before filing of the application. That as per Rule 4(3) of the 1 & (Application to Adjudicating Authority) Rules, 2016, the Applicant shall dispatch forthwith, a copy of the application filed with the Adjudicating Authority, by registered post or speed post to the registered office of the alleged corporate debtor. Therefore, instead of serving the filed copy of the application, the Applicant has served a copy of the application before filing it which is in breach of Rule 4(3).

That collusion with DCM Shriram Ltd. under composite Agreement. It is submitted that the entire arrangement with the Replying Respondent was to entangle the Replying Respondent by Applicant and its sister concern DCM Shriram Ltd since they have acted in collusion and hand in glove to usurp the unit of the Replying Respondent by allegedly creating default like scenario and then making an application under CIRP to the your honourable tribunal to take over the unit under alleged default by the Replying Respondent the above can the stated for the following reasons:

That out of Limitation & section 10 A cannot be used a shelter and alleged date of default. The entire application of the Applicant is out of limitation and it is barred by limitation. It is submitted that Replying Respondent has stated the date of default as 01.04.2021 as per his whims and wishes. As per their own admission in the recall notice dated 06.03.2023 paragraph no.11, the default has occurred from the date of inception of contract i.e. 03.03.2020 and going by such admission statement by the Applicant itself, it becomes crystal clear that the application is barred by limitation of 3 years from the date of default.

That the alleged date of default is false/incorrect. It is submitted that the first disbursal has been made by the Respondent on 21.03.2020 as regard to the additional loan of 1.5 cr and last disbursal was made by the Respondent on 18.07.2022 as regard to the 10cr development loan. From the contents of company petition preferred by the Respondent, it is evident that disbursal has been made by the Respondent after the purported date of default i.e. 30.09.2020. The focal point of the code is default in fulfilling repayment obligations of a corporate entity, where a 'default' as defined under section 3(12) of the code has occurred. Furthermore,

That the Petition is out of limitation and is barred by limitation. Respondent has stated the date of default as 01.04.2021 as per his whims and wishes. As per their own admission in the recall notice dated 06.03.2023 paragraph no.11, the default has occurred from the date of inception of the contract i.e. 03.03.2020 and going by such admission statement by the Applicant itself, it becomes crystal clear that the application is barred by limitation of 3 years from the date of right to apply accrues or as per the alleged default date which the Applicant had concealed i.e. 01.04.2020 date of the alleged first date of disbursal on the additional loan of Rs 1.5 cr from the date of filing of an application under IBC. It is stated that the 3 years have been elapsed.

That initiation of CIRP against the Corporate Debtor would be contrary to the scope and objective of the code.

It is submitted that as per the agreements executed between the Applicant, Respondent and DCM, the liability to pay the dues of the Applicant was of DCM and not of the Respondent. Respondent has been in this business for over four decades and it has never defaulted in any of its debts before any bank or any party. The intent of the Code is resolving the sick and distressed companies through CIRP. The intent was never to put fully functional, solvent company into insolvency, which has the potential business and making revenues to meet its liabilities or else it will put good companies to insolvency which can be proved from the financial of the respondent and that the respondent will produce its financial as and when required.

That this Tribunal is not a Recovery Forum. The Applicant triggering insolvency process for recovering monies and taking over the entire operations of the Respondent under various agreements is not warranted. Corporate Insolvency Resolution Process cannot be initiated for recovery of money.

It is stated that there is no arbitration agreement between the Applicant and the Respondent. The arbitration filed against the Applicant is just to frustrate the proceedings before this Tribunal.

It is submitted that the Respondent sometime in the year February & March 2020 through its Directors, approached Applicant for assistance in obtaining a Rupee Loan facility to the extent of INR 10,00,00,000/- (Rupees Ten Crore only) to the extent of 75% of the total investment in development of the salt works at the Respondent's Versamedi unit and additional loan facility to the extent of INR 1,50,00,000/- (Rupees One Crore Fifty Lacs only) for the purpose of removal of existing charge on the current assets belonging to the Respondent.

It is reiterated that the Applicant is a Non-Banking Financial Company. It is denied that the Applicant is an alter ego of DCM Shriram Limited and is engaged in the manufacturing of Chemicals, Sugars, and various other items. It is submitted that the Applicant and DCM Shriram are two different entities under law, carrying on different businesses and are distinct entities and are run by different Boards. It is therefore submitted that the Respondent is trying to mix-up the issues by stating that there is an Arbitration Agreement filed between the parties and pending at New Delhi, whereas the fact remains is that there is no arbitration agreement between the Applicant and Respondent and the Applicant has not invoked any arbitration proceedings.

It is reiterated that the Applicant is a Financial Creditor as stipulated under Sec.5(7) of IBC. The Applicant falls under Sec.5(8)(a) & (f) of IBC which is money borrowed against payment of interest. It is stated that Section 5(8)(f) includes any amount raised under any other transaction including any forward sale or purchase agreement having the commercial effect of the borrowing. Therefore, the Applicant certainly can be construed as a Financial Creditor as defined u/s. 5(7) of IBC who has disbursed a financial debt as defined u/s. 5(8) of IBC.

It is denied that there is no time value of money. The mere fact that the amount was disbursed with a stipulation of interest shows the fact that there was consideration of time value of money. The definition of "time value of money is very wide. Therefore, there is no consideration of the time value of money in the transaction entered into between the parties.

The Respondent company has failed to re-pay loan to the Applicant and therefore, the Applicant has recalled the entire loan vide letter dated 06.03.2023. It is stated that there is thus a debt which exist in the eyes of law for which the present petition is maintainable. The Respondent by imposing its own mis-interpretations to various clauses / agreements between the parties cannot escape its liability to repay loan amount to the Applicant and thus cannot defeat the legitimate claim of the Applicant to which it is legally entitled to. It is stated that the alleged counter claims raised by the Respondent against the Applicant and DCM Shriram Limited is nothing but an attempt made by the Respondent with ulterior motives to defeat the legitimate claims of the Applicant for getting back its loan disbursed to Respondent and interest thereon and thus not maintainable under law.

It is denied that there is any breach of Rupee Term Loan Agreement by the Applicant. The Respondent has accepted that amount was disbursed to the Respondent.

It is denied that the Applicant has played any fraud on the Respondent. It is denied that the transactions between the parties had technically commenced prior to March 2020. It is denied that the Applicant did adhere to the Rupee Term Loan Agreement and disbursed the amount belatedly.

I deny that the Applicant has not complied with Rule 4(3) of I&B Application to Adjudicating Authority) Rules, 2016. I say that the Applicant served the advance copy of petition upon ments Ltd.

It is denied that there is any collusion between the Applicant and DCM Shriram Limited or the Applicant and DCM Shriram Limited have any intention to usurp the unit of the Respondent by creating default like situation as wrongly and vaguely alleged by the Respondent. I say that the Applicant is a wholly owned subsidiary of DCM Shriram Limited but is a separate legal entity as per the Companies Act, 2013.

It is denied that the petition filed by the Applicant is barred by Sec.10A of IBC. It is denied that the petition filed by the Applicant is not within limitation. It is stated say that a bare perusal of the payment schedule annexed with the Rupee Term Loan Agreement would make it clear that the obligation on the part of Respondent was to make payment of the installments on certain dates. The Respondent agrees that for the months between 1.4.2020 and 31.3.2021, the Respondent cannot invoke the jurisdiction of this Tribunal. However, for the defaults that occurred after 1.4.2021, the Applicant is in his right to approach this Tribunal. When the date of default is 1.4.2021, the petition is filed within three years from the date of default and therefore, the petition is within the period of limitation.

There is disbursement of amounts by the Applicant to the Corporate Debtor;

The Corporate Debtor has defaulted in making payments of the amounts of debt due to the Applicant which is more than Rupees One Crore.

The Corporate Debtor has also given balance debt confirmation in writing to the Applicant;

The Corporate Debtor has executed a Deed of Mortgage dated 3.3.2020 in favour of the Applicant to secure the repayment of the amounts disbursed by the Applicant to Corporate Debtor;

The Directors of the Corporate Debtor viz. Shri Dinesh Parasrampuria, Smt. Aruna Parasrampuria and Shri Sureshchandra Parasrampuria have also executed Deed of Guarantees dated 3.3.2020 in favour of Applicant;

Charge on the immovable properties is registered by the Corporate Debtor in favour of the Applicant u/s. 77 of the Companies Act, 2013;

(2023) 8 SCC 387 M. Suresh Kumar Reddy Vs. Canara Bank &Ors. ii. (2018) 1 SCC 407 Innoventive Industries Limited Vs. ICICI Bank & Anr. iii. (2023) 3 SCC 753 Orator Marketing Private Limited Vs. SamtexDesinz Private Limited. iv. (2019) SCC Online NCLAT 1132 Gaurav Agrawal, Director M/s. Albus India Ltd. Vs. Tuf Metallurgical (P) Ltd. &Anr. v. (2019) SCC Online NCLAT 52 Shailesh Sangani Vs Joel Cardoso &Anr. vi. Company Appeal (AT) (Ins) 1264 of 2019 Mukesh Kumar Aggarwal Vs. Anurag Gupta. vii. (2023) 240 Comp Case 132 (NCLT) Edelweiss Asset Reconstruction Ltd. &Anr. Vs. NainaNitin Desai.

(2024) 242 Comp Case 429 NainaNitin Desai Vs. Edelweiss Asset Reconstruction Ltd. &Anr.

(2023) SCC Online NCLAT 467 NainaNitin Desai Edelweiss Asset Reconstruction Ltd. &Anr.

2022 SCC Online NCLAT 147 Rajesh Kedia v. Phoenix ARC (P) Ltd. xi. 2023 SCC Online NCLAT 299 Guruprasad V. Hishobkar v. Shree Aahraya Saouhard Credit Scoiety Ltd.

CP (IB) 156(PB)/2017 (NCLT, Delhi) (DoD: 30.6.2017) Reliance Commercial Finance Ltd. vs. Ved Cellulose Limited. xiii. Arb. P. 212 of 2024, IA 9821 of 2024 (Delhi High Court) (DoD: 22.5.2024) Pitambar Solvex Pvt. Ltd. & Anr. vs. Manju Sharma & Ors. xiv. 2021 (6) SCC 436 Indus Biotech Private Limited vs. Kotak India Venture (Offshore) Fund.

The Application has been filed under section 7 by the Financial Creditor against the Corporate Debtor ‘The Maharaja Salt Works Co. Pvt. Ltd.’ seeking the admission of Corporate Debtor into Corporate Insolvency Resolution Process.

The Financial Creditor and Corporate Debtor executed following documents on 03.03.2020:

Rupee Loan Agreement ii. Hypothecation Agreement iii. Mortgage Deed iv. Guarantee Deeds v. Non-Disposal Undertaking, Promissory Note vi. Loan Term Salt Supply Agreement vii. Tripartite Agreement.

It is seen that the Loan was disbursed to the Corporate Debtor Rs. 10.00 crores and additional amount of Rs.1.50 crore through Rupee Loan Agreement dated 03.03.2020 along with loan repayment schedule which was revised on various occasions up to five times. The 5th revised Repayment Schedule was sent to the Corporate Debtor on 24.02.2022 which was accepted by the Corporate Debtor and was sent back to the Financial Creditor but with some modification. The Financial Creditor stated vide additional affidavit dated 23.07.2024 that they did not accept the same and never signed the said revised repayment schedule.

As it is seen that the 1^st Default Notice was sent to the Financial Creditor by the Corporate Debtor on 17.02.2021 for delay in disbursal of development loan affecting development work which was then sent on multiple occasion last being 6^th Default Notice dated 12.12.2021.

The Financial Creditor also issued recall notice to the Corporate Debtor on 06.03.2023 calling upon to make payment of Rs.11,25,63,498/- within 7 days. Thereafter a Corrigendum Notice dated 14.03.2023 to recall notice dated 06.03.2023 was issued for rectification of typographical error in para10 of the Notice.

Then the Demand Notice dated 06.04.2023 was issued u/s 13(2) of the SARFAESI Act, 2002 upon Corporate Debtor by the Financial Creditor.

It is seen that the Financial Creditor has produced NeSL Form-C but failed to produce Form-D before this Tribunal. However, the Financial Creditor has placed E-mail from NeSL stating that the E-mail with regards to the authentication status of Corporate Debtor bounced back.

Therefore, the Record of Default cannot be ascertained without authentication by the NeSL, hence we are constrained to perusal at the documents present before us.

As it is seen from the bank statement the amount in question was disbursed to the Corporate Debtor.

During the course of the hearing the Sr. Counsel for the Corporate Debtor was relying on the matter pending before the Hon'ble Arbitral Tribunal stating that NCLT proceedings should not be continued. But as per section 231 of the IBC, 2016, no other court shall have jurisdiction in respect of the matter in which the AA is empowered by this code to pass any order. The relevant section is reproduced below:

It can be seen from the judgment of the Hon’ble Supreme court in the matter of M. Suresh Kumar Reddy Vs Canara Bank & Ors. (Civil Appeal No. 7121 OF 2022) stating that in the matter of Section 7, the only thing which is to be seen while ordering in Section 7 matters is whether there is debt and default.

we also rely on Swiss Ribbons Pvt. Ltd. & Anr. Vs Union of India & Ors.( W.P.(civil) No. 99 of 2018 decided by the Hon’ble Supreme Court more particularly para no. 35,36 and 37 of the said Judgment which are reproduced as below:-

It is seen from documents placed that there was a financial debt as amount of Rs.11,30,03,498/- crores were disbursed to the Corporate Debtor and the default is stated to be occurred on 01.04.2021. But the contention of Corporate Debtor was that the revised 5^th repayment schedule will change the default date as further extension is provided. However, it is seen that the 5^th revised Repayment Schedule was sent back by Corporate Debtor to the Financial Creditor with same modification. Moreover, Financial Creditor filed an affidavit stating that they never accepted the said repayment schedule. Therefore, the repayment of debt will be followed as per original repayment schedule.

Further, post the 5^th repayment schedule dated 17.02.2022 applicant sent the recall notice on 06.03.2023 followed by a corrigendum dated 14.03.2023 and recalled the entire loan amount of Rs. 11,30,03,498/-. Financial Creditor is claiming an amount of Rs. 13,47,29,121/- in this petition. The issue of recall notice puts the controversy regarding the 5^th revised repayment schedule to rest as entire debt became due and payable.

As per section 3(12) of the code it is stated that default occurs when non-payment of debt wholly or partly or in installment of the amount not paid by the Corporate Debtor then there is default and from the facts and circumstances of the case it is clear that there was non-payment of the debt by the Corporate Debtor/ Corporate Debtor. the Section 3(12) is reproduced as under:-

The Respondent/Corporate Debtor- M/s. The Maharaja Salt Works Co. Pvt. Ltd. is admitted in the Corporate Insolvency Resolution Process under section 7 of the IBC, 2016.

As a consequence, thereof, the moratorium under Section 14 of the IBC, 2016 is declared for prohibiting all of the following in terms of Section 14(1) of the IBC, 2016.

The order of moratorium shall have effect from the date of this order till the completion of the Corporate Insolvency Resolution Process or until this Adjudicating Authority approves the Resolution Plan under sub-section (1) of Section 31 or passes an order for liquidation of Corporate Debtor under Section 33 of the IBC, 2016, as the case may be.

It is further directed that the supply of essential goods/services to the Corporate Debtor, if continuing, shall not be terminated or suspended or interrupted during the moratorium period as per provisions of subsections (2) and (2A) of Section 14 of IBC, 2016.

As proposed by the Financial Creditor, we appoint Mr. Sunil Kumar Kabra, having Registration No. IBBI/IPA-001/IP-P01011/2017-18/11662, (email-) under section 13 (1)(c) of the Code to act as Interim Resolution Professional (“IRP”) of Corporate Debtor, subject to the condition that no disciplinary proceedings are pending against him. He shall conduct the Corporate Insolvency Process as per the Insolvency and Bankruptcy Code, 2016 r.w. Regulations made thereunder.

The IRP shall perform all his functions as contemplated, inter-alia, by sections 17, 18, 20 & 21 of the IBC, 2016. It is further made clear that all personnel connected with the Corporate Debtor, its Promoter or any other person associated with the management of the Corporate Debtor are under legal obligation under section 19 of the IBC, 2016 for extending assistance and co-operation to the IRP. Where any personnel of the Corporate Debtor, its Promoter or any other person required to assist or co-operate with IRP, do not assist or co-operate the IRP is at liberty to make appropriate application to this Adjudicating Authority with a prayer for passing an appropriate order.

This Adjudicating Authority directs the IRP to make a public announcement of the initiation of CIRP and call for the submission of claims under section 15 as required by section 13(1)(b) of the IBC, 2016.

The IRP or the RP, as the case may be shall submit to this Adjudicating Authority periodical report with regard to the progress of the CIRP in respect of the Corporate Debtor.

The IRP shall be under duty to protect and preserve the value of the property of the Corporate Debtor and manage the operations of the Corporate Debtor as a going concern as a part of obligation imposed by Section 20 of the IBC, 2016.

The Financial Creditor is directed to pay an advance of Rs.2,00,000/- (Rupees Two Lakh Only) to the IRP within a period of 7 days from the date of this order to meet the cost of CIRP arising out of issuing public notice and inviting claims etc. till the CoC decides about his fees/expenses.

The Registry is directed to communicate a copy of this order to the Financial Creditor, Corporate Debtor and to the IRP and the concerned Registrar of Companies, after completion of necessary formalities, within seven working days and upload the same on the website immediately after the pronouncement of the order. The Registrar of Companies shall update its website by updating the Master Data of the Corporate Debtor in MCA portal specific mention regarding admission of this Application and shall forward the compliance report to the Registrar, NCLT.