Damyanti Tea Industries vs M/S Bochapathar Tea Estate Pvt. Ltd

NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI Company Appeal (AT) (Insolvency) No. 890 of 2021 In the matter of: Damayanti Tea Industries (A unit of M/s Chandrabali Commercial India Pvt. Ltd.) Registered Office 3rd Floor, Junction Floor, R.K.B Path, Dibrugarh - 786001, Assam ...Appellant

Versus

M/s Bochapathar Tea Estate Pvt. Ltd. Registered Office - Purnanandh Road, Dibrugarh, Assam ...Respondent

Present: For Appellant: Mr. Kushank Sindhu, Ms. Gazal, Advocates For Respondent: Mr. Subhro Sanyal, Mrs. Monika, Advocates

ORDER

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.

2. 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 2

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.

3. 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"

4. 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.

5. 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

Company Appeal (AT) (Insolvency) No. 890 of 2021 3

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?

7. 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."

8. 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.

9. 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

Company Appeal (AT) (Insolvency) No. 890 of 2021 4

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.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Dr. Alok Srivastava] Member (Technical) Sheetal/RR

Company Appeal (AT) (Insolvency) No. 890 of 2021