Sunil Tulsidas Gadekar & Anr. vs Vindhyawashini Marine Services Private Limited

[PER: BENCH]

This is an Application bearing C.P. (IB) No.282/MB/2025 filed on 03.03.2025 by Sunil Tulsidas Gadekar & Anr., the Applicants (Financial Creditors) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “the Code”) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (hereinafter referred to as “the AAA Rules”) for initiating Corporate Insolvency Resolution Process (hereinafter referred to as “CIRP”) in respect of Vindhyawasani Marine Services Private Limited, the Corporate Debtor (CD).

The Applicants are individuals engaged in the business of freight and logistics. The CD is a Private Limited Company registered under the Companies Act, 1956 and engaged in the business of shipping, marine and logistics.

The Applicants have relied on the following documents:

The total amount claimed to be in default by the Applicants against the CD in Part-IV of the Application is Rs.2,11,91,300.50/- (Two Crore Eleven Lakh Ninety-One Thousand Three Hundred Rupees and Fifty Paisa) due as on 09.02.2024.

The date of default as per Part-IV is 09.11.2023. This date of default taken by the Applicants inter alia is the date when CD having failed to make payment of award amount after receipt of Award passed by Sole Arbitrator.

Sometime in the year 2014-15, the CD was suffering a severe financial crunch and was burdened with heavy debts, on account of which it was unable to carry out the repair, maintenance of its vessel, i.e., "C.B.Chenab" (hereinafter referred to as "Chenab"). Further, Chenab was arrested by the High Court Bombay under Admiralty Suit No.214/2014 vide order dated 13.03.2014 filed by Bombay Engineering Work.

The CD had approached the Applicants with an intent to streamline its business activities, including resuming the chartering of Chenab after due maintenance and repair. The Applicants duly agreed to provide funding to the CD in line with the terms and conditions agreed between the parties which were duly recorded in a Funding Agreement entered on 02.09.2015 and finally executed on 16.08.2016.

It is submitted that under the terms of the said Funding Agreement, the Applicants provided funds to the tune of Rs.30 lakh each to the CD on various dates, the schedule of payment funding is annexed to the said Funding Agreement. In fact, due receipts for the said funds of Rs.30 lakh each having been given by the Applicants to the CD, were duly issued by the CD company, which also form a part of the said Funding Agreement.

Under the Funding Agreement, the parties agreed that in consideration of the said funding by the Applicants, the CD shall transfer 30% of its ownership in the Chenab in favour of the Applicants and it was agreed that the funds will strictly be utilised by the CD for the purpose of clearing all its debts and liabilities which include the repair and chartering of Chenab.

Further, under Clause 9 of the said Funding Agreement, it was agreed between the parties that once Chenab is ready for chartering, the net revenue generated from the business of chartering shall be divided between the parties in the following ratio: Corporate Debtors: 55% Claimant No.1: 22.5% Claimant No.2: 22.5%.

Under Clause 11 of the Funding Agreement, the Applicants were to receive the revenue which shall be generated from the chartering of Chenab till they got their principal funded amount and 45% profit p.a. on their invested funded amount. Further, under Clause 12 of the Funding Agreement, once the ship became competent for chartering as per time scheduled, for further fair seasons, the amount of per day generated revenue was to be distributed as per Clause 9.

The Applicant submitted that under the Funding Agreement, more particularly under Clause 11, the disbursement of Rs. 60 lakhs made by the Applicants was disbursed to the CD against the condition that the principal amount would be returned along with a guaranteed yield of 45% p.a., thus satisfying the time value of money requirement under Section 5(8) of the Code.

Under Clause 19 of the Funding Agreement, it is agreed between the parties that no amendment or modification or addition or alteration of this agreement shall be valid unless the same is made in writing & in consensus by the parties.

Despite the categoric understanding in the Funding Agreement between the parties as regards the revenue sharing, Applicant No. 1 has till date, admittedly only received a sum of Rs.6,25,000/- and Applicant No. 2 has admittedly received only a sum of Rs.8,55,000/- from the CD.

The Applicants thereafter upon enquiry learnt that the CD was in fact diverting the funds, which funds had been provided by the Applicants to the CD only for clearing its debt and liability of Chenab, and was using the same for purposes such as paying EMD for a chartering Agreement with ONGC (for a per day charter of Rs. 1.60 lakh) and for purchase of a new vessel C.B.KPS.

Despite the agreed terms of the Funding Agreement, more particularly Clause 14 (c) which casted an obligation on the CD to maintain complete transparency with the Applicants in respect of the business revenue of the company as well as revenue generated from the chartering of Chenab, the CD kept the Applicants in the dark and despite their requests, neither did the CD furnished any details as to the revenue earned by chartering of Chenab nor did it make any payments to the Applicants towards their share in the revenue.

The Applicants were accordingly constrained to file a Petition under Section 9 of the Arbitration and Conciliation Act, 1996 (being Application No. 133/2017) before the District Court, Thane which court after hearing the parties was pleased to pass an order dated 05.12.2017, in favour of the Applicants inter alia directing the CD to furnish a bank guarantee to the tune of Rs.30.20 lakhs. Pursuant to the said order, the Applicants had filed Application for Contempt of Court before the Hon'ble District Court as the CD had failed to comply with the said order. It was only in terms of the order dated 17.01.2019 passed in Civil Miscellaneous Application No. 149 of 2010 in the Contempt Proceedings that the CD furnished a bank guarantee.

Being aggrieved by the breach of the said Funding Agreement by the CD, the Applicants vide their Advocates letter dated 27.04.2017 addressed to the Advocate for the CD, invoked Arbitration clause under the said Agreement. The CD has not replied to the above notice nor disputed the claims made by the Applicants. The Applicants accordingly moved the Hon’ble Bombay High Court under Section 11 of the Arbitration and Conciliation Act,1996 for appointment of an Arbitrator. The Bombay Hight Court appointed the Ld. Arbitrator.

The CD in the Arbitral proceedings disputed the execution of the Funding Agreement dated 02.09.2015 and is relying upon an Agreement dated 23.09.2015 purportedly entered into between the parties, existence and execution of which is disputed by the Applicants. Subsequently, after hearing both the parties the Sole Arbitrator allowed the claim of Applicants herein and rejected the counterclaim of the CD. The Applicants state that the copy of award has been sent to CD by the Applicants and Advocate Mr. Vinod Dubey has also collected copy of award on behalf of the CD from the Ld. Arbitrator.

The Learned Arbitrator was pleased to pass the following Arbitral award,

Despite the said award, the CD herein failed to make the payment and accordingly, the Applicants vide their demand notice dated 16.02.2024 once again called upon the CD to repay debt due as on 09.02.2024. Neither did the CD disputed the demand raised therein, nor did it make the payment. It is pertinent to note that the CD has also not challenged the Arbitral Award before any Court of law and thus the said award has attained finality.

This Tribunal vide interim order dated 02.04.2025 directed the Applicant to bring on record the NeSL record of default in Form C and D. The order records as follows:

The Applicant complied with the above order by filing an Additional Affidavit dated 02.05.2025 and stated that the Applicants received confirmation/acknowledgment for Form D only on 01.05.2024 through mail, which prevented the timely filing of both Form C and Form D as directed.

This Tribunal observed that the Applicant had filed the written consent form of proposed IRP in Form AA which is not as per the Code and therefore, vide interim order dated 19.08.2025, gave an opportunity to the Applicant to cure the defect in terms of proviso to Section 7(5) to place on record the correct written consent form and thereby de-reserved the matter.

Thereafter, the Applicant filed an Additional Affidavit dated 03.09.2025 which is recorded vide interim order dated 04.09.2025 and placed on record the correct written consent form of the proposed IRP.

The CD has filed Affidavit-in-Reply on 15.05.2025. The same was affirmed by Mr. Akhand Pratap Singh, Director and authorised representative of the CD vide Board Resolution dated 14.02.2019.

In its reply, the CD has denied all the contentions of the Applicant made in the Application. The Applicants have failed to establish if they are Financial Creditors or that any Financial Debt exists and for this reason the Application be dismissed.

The Applicants have no cause of action to institute the present Application under Section 7 of the Code against the CD, as the allegations made therein are demonstrably false, frivolous, and bereft of substance. It is evident that the Application has been filed with the ulterior motive of coercing the CD and extracting monies by misusing the beneficial provisions of the Code, thereby tarnishing the CD’s reputation within the business community.

In substance and commercial reality, the sums credited to the CD were advanced pursuant to a joint venture and profit-sharing arrangement entered into between the parties, the objective of which was to clear the outstanding debts and liabilities of the vessel, undertake necessary repairs, and resume its commercial operations through chartering. It was expressly agreed that the net revenue generated from such chartering activities after accounting for and deducting all incidental and operational expenses would be shared in the agreed ratio of 45% to the Applicants and 55% to the CD. The Applicants have supressed the true character and commercial intent of the transaction in question.

The CD submits that there exists no Funding Agreement dated 02.09.2015, executed by the CD on 16.08.2016. The said document is neither registered nor duly notarized in the manner required under law. The mere attestation by the Notary Officer, without the endorsement ‘"Before Me,” clearly establishes that the alleged Funding Agreement was not executed in the presence of the Notary Officer, thereby casting serious doubt on its validity and probative value. The CD does not dispute the fact that certain sums were transferred by the Applicants. However, the amount of Rs. 60,00,000/- was transferred pursuant to a joint venture and profit-sharing arrangement, arising from the Memorandum of Understanding dated 23.09.2015, duly executed between the Applicant and the CD. Unlike the purported Funding Agreement, the said Memorandum of Understanding bears the attestation ‘Before Me” by the Notary Officer, clearly evidencing that the original document was produced and executed in the presence of the Notary Officer, with all requisite parties being physically present at the time of execution.

The said arrangement cannot construe as a financial debt repayable by the CD under any circumstances. In fact, assuming for the sake of argument and purely under a hypothetical scenario that reliance is placed on the alleged Funding Agreement which forms the basis of the arbitral award it is evident that the arbitration proceedings were initiated for breach of contract, and not for recovery of any financial debt.

The Funding Agreement itself is devoid of any clause stipulating that, in the event the joint venture and profit-sharing arrangement fails to yield results, the CD would be liable to refund or repay the entire amount advanced. Most notably, Clause 13 of the alleged Funding Agreement expressly clarifies that the CD shall not be liable to repay any amount in the event revenue is not generated. The agreement further contemplates that the Applicant would be responsible for devising a business strategy to generate revenue an obligation the Applicants failed to discharge resulting in losses which the CD was compelled to bear.

The Applicants are misusing the Code by invoking this jurisdiction for execution of an arbitral award which is not the objective of the Code. The Applicants have not adduced any credible or cogent evidence to demonstrate that the transaction in question constituted a financial debt as defined under section 5(8) of the Code, nor that there existed a borrower-lender relationship between the parties an essential precondition for admission of an application under section 7. In the absence of these foundational elements, the basic ingredients required to invoke Section 7 of the Code and trigger the CIRP against the CD are clearly not satisfied.

It is further submitted that when a Memorandum of Understanding or agreement contains reciprocal rights and obligations between the parties specifically in the context of a profit-sharing or joint venture arrangement where each party is to partake in residual gains only upon successful performance of their respective obligations, the investment made pursuant thereto cannot, by any measure, be construed as a “financial debt” within the meaning of the Code.

The CD relies on the following judgments to show that there is no Financial Debt based on the Applicants being investors as the money was invested under joint venture and profit-sharing arrangement.

The Applicant has relied on the following judgments:

We have heard both the Ld. Counsels and have perused the records as placed before us. Our findings in the matter are as under: -

The Applicants at the request of the CD agreed to provide funds to the CD in line with terms and conditions agreed between the parties under the Funding Agreement entered on 02.09.2015 and executed on 16.08.2016.

The Applicants had disbursed Rs. 30 lakh each to the CD on various dates. The due receipts for the said funds of Rs. 30 lakhs each having been given to the CD by the Applicant were duly issued by the CD which form a part of the Funding Agreement. It is seen from Schedule II of the Funding Agreement dated 02.09.2015 that the applicants have disbursed the above-mentioned funds to the CD as the CD has acknowledged the same. Therefore, we are of the view that the funds were disbursed and there arose a financial relation between the parties.

It is admitted fact that the parties had agreed to share revenue in the ratio of 22.5% by each Applicant and 55% by the CD from the business of chartering and that the CD shall transfer 30% of its ownership in the Chenab in favour of the Applicants. The Applicants have admittedly received a sum of Rs. 6.25 lakhs and Rs. 8.55 lakhs from the CD.

The CD had then started to divert funds for purchase of new vessel which was a against the Clause 14(c) of the Funding Agreement which was in relation to maintain complete transparency with the Applicants in respect of the business revenue generated from chartering of Chenab. Thereafter, the CD did not make any payments to the Applicants towards their share in the revenue, pursuant to which the Applicants filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 where the Hon’ble Bombay High Court appointed a sole Arbitrator.

The Ld. Arbitrator passed an award and said award dated 09.11.2023 has assumed finality. The Arbitration Award records as follows:

From the perusal of the Arbitration Award dated 09.11.2023 it is seen that the CD had to pay the Applicants a sum of Rs. 23,75,000/- and Rs. 21,45,000/- debt along with interest of 45% p.a. from the date of execution of the Funding Agreement i.e. 16.08.2016 until payment/realization. Therefore, we are of the considered view that there was an outstanding debt payable by the CD to the Applicants.

The CD has contested that the Funding Agreement dated 02.09.2015 and executed by the CD on 16.08.2016 does not exists as it is not registered and duly notarised. In our view, according to the Applicant his cause of action is arising out of non-payment of dues as per arbitral award. It is also seen that the CD has participated in the Arbitral proceedings. The arbitral award has dealt with this issue and has held that the Funding Agreement dated 02.09.2015 exists and the CD was not able to prove the invalidity of the Funding Agreement.

The CD has submitted that Clause 13 of the Funding Agreement dated 02.09.2015 has stated that the CD shall not be liable to repay any amount in the event revenue is not generated. Clause 13 is reproduced as follows:

On perusal of the above agreement it is seen that Clause 13 of the Funding Agreement does not satisfy the CD’s contentions. From the above extract we see that the Applicants were to decide further strategy if the revenue is not generated and the CD will not have any objection for the same.

Further, the CD contented that the Memorandum of Understanding dated 23.09.2015 was duly attested and the arrangements between the parties arose from this understanding. It is seen that the Memorandum of Understanding dated 23.09.2015 was disproved under the Award dated 09.11.2023 and further the payments were to be made as per the MOU stands negative as the MOU itself was not proved to be a substantial document. Therefore, the CD’s contention that payment terms were as per the MOU is not accepted.

The CD states that the Arbitration proceeding was for breach of contract and not for recovery of any financial debt and the Applicant has invoked this jurisdiction for execution of the Arbitral Award. To deal with this issue this Tribunal places reliance on the judgments referred by the Applicants of Hon’ble Supreme Court in Kotak Mahindra Bank Limited vs. A. Balakrishnan and Anr., (2022) 9 Supreme Court Cases 186 and Dena Bank (Now Bank of Baroda) vs. C. Sivakumar Reddy, (2021) 10 SCC 330. The Hon’ble Supreme Court in the case of Kotak Mahindra Bank (supra) has held as follows:

Therefore, in view of the above observations we can safely conclude that the Applicants have a fresh cause of action to file this Application under Section 7 of the Code as there is an Arbitral award in favour of the Applicants which has attained finality and the CD has not satisfied the same by way of payment of the amounts as per award.

The CD has raised the issue that the transaction in question is not a financial debt as defined under Section 5(8) of the Code nor there existed a borrower-lender relationship between the parties. It is our finding that the Applicants had disbursed a sum of Rs. 60 lakhs to the CD under the Funding Agreement dated 02.09.2015 and the same is acknowledged by the CD with the due receipts attached in Schedule II of the Funding Agreement. There might not be explicit terms drawn in the Funding Agreement with regard to interest which would give a commercial effect of borrowing or time value of money under Section 5(8) of the Code. We place reliance on the Hon’ble NCLAT, New Delhi in Adhunik Corporation Limited vs. Shivam India Limited in Company Appeal (AT) (Insolvency) No. 1427 of 2023 wherein the court held that,

From reading the above findings, it can be said that the Applicants have invested funds under the Funding Agreement and as per the terms of the agreement, the Applicants were promised to get the principal amount along with profit @45% p.a. which the CD failed to pay the Applicants and therefore, the funds take the course of debt under Section 5(8) of the Code. The following is the finding as recorded in the Award:

Therefore, from the above finding of the Ld. Arbitration Tribunal we hold that the CD has defaulted in payment of the principal amount and a simple interest of 45% p.a. as held by the Ld. Arbitrator.

The Applicant has also referred to the case of Hon’ble NCLAT, New Delhi in Arunkumar Jayantilal Muchhala vs. Awaita Properties Pvt. Ltd. and Anr. in Company Appeal (AT) (Insolvency) No. 121 of 2023, where it has been held that,

The Hon’ble NCLAT in the above matters held that the disbursement was for time value of money and falls under the definition of financial debt under Section 5(8) of the Code which is applicable to the present case.

The CD’s reliance on the judgment of Hon’ble NCLAT, New Delhi in Jagbasera Infratech Private Ltd vs Rawal Variety Construction Ltd. in Company Appeal (AT) (Insolvency) No.150 of 2019, wherein it is held that the amount invested in the Joint Venture Project by the Appellant in its capacity as a “promoter’ and ‘investor’ does not fall within the ambit of definition of financial debt under Section 5(8) of the Code. In the present case, there is no Joint Venture Agreement between the parties and hence there arises no relation of promoter/investor. Therefore, we hold that reliance is misplaced by the CD. In the case of Realpro Realty solutions Pvt. Ltd vs Sanskar Projects and Housing Ltd. in Company Appeal (AT)(Insolvency) No. 374 of 2023, Hon’ble NCLAT, New Delhi held that transaction is in the nature of investment for profit and not disbursement for time value of money and hence does not fall within the canvas of financial debt as defined under Section 5(8) of the Code. We notice that the facts of the case are distinguishable in a manner that in the present case the Applicants have invested funds in the CD and revenue generated therein would be returned to the Applicants along with the principal amount by the CD and therefore the disbursement made by the Applicants is of the nature of debt, which is for time value of money. Thus, this judgment cannot come to the aid of the CD.

The judgment of Hon’ble NCLAT, New Delhi in Sushil Ansal vs Ashok Tripathi & Ors. in Company Appeal (AT) (Insolvency) No.452 of 2020, the court held that Respondents in that matter had moved the Tribunal for execution/recovery of the amount due under the Recovery Certificate and not for insolvency resolution of the Corporate Debtor. But in the present case and placing reliance on the Hon’ble Supreme Court in Dena Bank (supra) case, the court has taken the view that any decree or award which is not fulfilled gives a fresh cause of action to the Applicants to file an Application under the Code. Therefore, from the above findings and judgments, we are of the considered view that the Applicants are Financial Creditors and a financial debt was due and payable by the CD.

Further, the NeSL record of default in Form C and Form D have been produced by the Applicants. The NeSL record in Form D is in form of email attached to the Additional Affidavit filed by the Applicants, which shows the status of authentication as “Deemed to be Authenticated”.

In view of the above findings, it is clear that the Applicant has placed on record necessary evidences and materials to demonstrate the existence of the financial debt exceeding the minimum threshold of Rs.1 Crore prescribed under Section 4 of the Code due and payable by the CD as well as the default in repayment thereof by the CD. The Application is complete as all the relevant documents have been attached by the Applicant along with the Application.

The Applicant has proposed the name of Mr. Umesh Balaram Sonkar, a registered Insolvency Professional as the Interim Resolution Professional (IRP) to carry out the functions as mentioned under the Code. The Applicant has filed an Additional Affidavit and has given his consent and declaration in Form 2, inter alia, stating that no disciplinary proceeding is pending against him and also provided his AFA in Form B valid till 31.12.2026.

We find that all pre-requisites of Section 7(5)(a) of the Code are fulfilled and, accordingly, we are satisfied that the instant Application is fit for admission under Section 7 of the Code.

We make it clear that at this stage we have not crystalized the amount as claimed in this Application, the same is left to be collated by the IRP.

In view of the aforesaid findings, Application bearing C.P.(IB) No. 282/MB/2025 filed under Section 7 of the Code by Sunil Tulsidas Gadekar and Shakir Ali Sajjad Ali Shaikh, the Financial Creditor, for initiating CIRP in respect of Vindhyawashini Marine Services Pvt. Ltd, the Corporate Debtor is hereby admitted.

We further declare moratorium under Section 14 of the Code with consequential directions as mentioned below: -