Prajendra Jaroli vs Jai International Private Limited

Borivali East, Mumbai - 400 066 ...Appellant

Versus

JAI INTERNATIONAL PVT. LTD.

Having its Registered Office at:

75, Mittal Chambers, Nariman Point,

Mumbai - 400 021 ...Respondent

Present: For Appellant: Mr. Abhijeet Sinha, Ms. Ekta Bhasin, Ms. Aastha Trivedi, Mr. Aditya, Advocates For Respondent: Mr. Vaibhav Gaggar, Ms. Sumedha Dang, Mr. Ketan Sarraf, Advocates

JUDGMENT

Per: Justice Rakesh Kumar Jain.

This appeal is directed against the order dated 28.11.2019 passed by the

Adjudicating Authority (National Company Law Tribunal, Mumbai Bench-IV) by

which an application filed under Section 9 of the Insolvency and Bankruptcy

Code, 2016 (in short 'Code') by the Appellant (Operational Creditor), an

individual, against the Respondent (Corporate Debtor) for the initiation of the

Corporate Insolvency Resolution Process (in short 'CIRP') on account of non-

payment of a sum of Rs. 7,50,77,317/- as principal, claimed in terms of a

Company Appeal (AT) (Insolvency) No. 09 of 2020 2

Memorandum of Understanding (in short 'MOU') dated 24.08.2013, has been

dismissed.

2. In brief, the case set up by the Appellant is that the Respondent is in the

business of supply, trading and exports of agriculture extraction products and

the Appellant has been engaged as a consultant for handling all day-to-day

activities of the Corporate Debtor. The MoU dated 24.08.2013 was entered into

between the Appellant and Shantilal Ratanchand Lunkad, authorized signatory

of the Corporate Debtor as per which the Respondent agreed to pay Rs. 4.50

Crores with interest at the bank deposit rate to the Appellant w.e.f. 01.08.2013.

The total debt due and payable to the Appellant by the Respondent is

calculated at Rs. 7,50,77,317/- about which the Appellant served a demand

notice dated 06.04.2019 under Section 8 of the Code.

3. As per case of the Respondent, reply to the notice dated 06.04.2019 was

filed on 16.03.2019 denying its liability to the amount claimed and also that

the MOU is invalid, non-est and void ab-initio as the Corporate Debtor had not

authorized anyone to enter into said MOU on its behalf. It is also alleged that

the MOU is dated 24.08.2013 whereas the application filed under Section 9 of

the Code on 13.04.2019 was much beyond the period of three years and is

thus barred by limitation. On the aforesaid pleadings of the parties, the

Adjudicating Authority found that there were two issues involved, namely,

whether the claim of the Appellant is barred by limitation and the MOU has

been executed by the Corporate Debtor. The Adjudicating Authority decided

Company Appeal (AT) (Insolvency) No. 09 of 2020 3

both the issues against the Appellant and the application was dismissed.

Hence, this appeal.

4. Counsel appearing on behalf of the Appellant has vehemently argued

that the MOU was entered into by the Corporate Debtor through the Appellant

and it does not make any difference if the MOU bears the seal of the Company

or not. Counsel for the Appellant has vehemently argued that MOU has been

executed on the stamp paper purchased by the Corporate Debtor and is signed

by the authorized person. It is submitted that the Adjudicating Authority has

committed an error in rejecting the MOU on the ground that it does not bear

the seal of the Company which is not necessary for the purpose of executing

the same. It is further submitted that the Appellant could not have, in any way,

found out as to whether the company has authorized the signatory of the MOU

because it is a part of the indoor management. It is further submitted that in

so far as, the issue of limitation is concerned, though the MOU was executed

on 24.08.2013 but the Respondent has made the payment in the year 2018,

therefore, the application filed under Section 9 of the Code on 13.04.2019 was

within limitation.

5. On the other hand, Counsel appearing on behalf of the Respondent has

argued that there has been no reference of the MOU, purported to have been

executed on 24.08.2013, between the parties till 2018. It is further argued that

Shantilal Ratanchand Lunkad who has signed the MOU is neither the director

or nor key managerial personnel and has never been authorized through

resolution of the board to enter the MOU with the Appellant and the amount of

Company Appeal (AT) (Insolvency) No. 09 of 2020 4

Rs. 50,000/- which is alleged to have been made to the Appellant on

09.07.2018 is not the part of the payment but the expenses. He has also

referred to various invoices available on record to contend that none of the

invoices pertains to the part payment of the alleged amount due/claimed by

the Appellant.

6. We have heard Counsel for the parties and perused the record with their

able assistance.

7. The controversy in this appeal revolves around the execution of the MOU,

therefore, it would be relevant to refer to the same, which is reproduced as

under:-

"Memorandum of Understanding This MOU made and entered in Mumbai on 24th day of August, 2013 by and between M/s Jai International Pvt. Ltd. A company incorporated under the provisions of the Companies Act, 1956 having its office at 75, Mittal Chambers, Nariman Point, Mumbai- 400 021 hereinafter referred to as "The Company" (which expression shall unless it be repugnant to the context or meaning thereof be deemed to mean and include its Administrator and Assigned) and Mr. Prajendra Jaroli Administrator and Assignee) and Mr. Prajendra Jaroli S/o. Mr. Shanti Lal Jaroli an adult and Indian Inhabitant residing at C-506, Gokul Garden, Thakur Complex, Kandivli (E), Mumbai - 400 101 hereinafter referred to as the "The Consultant" (which expression shall unless it be repugnant to the context or meaning thereof be deemed to mean and include his heirs, executors, administrator, assignee). Whereas the Company is engaged in the business of Exports of Agri & Extraction Products, Leasing, Medical etc. And where as the consultant is providing his consultancy right from incorporation of the company.

And whereas the company and the consultant desires to reduce the terms and conditions of the understanding in writing. Now this Memorandum of Understanding witnesseth as under:

1. The company has agreed for a sum of Rs. 4,50,00,000/-

payable to the consultant in full and final settlement of his

Company Appeal (AT) (Insolvency) No. 09 of 2020 5

account net of the amounts standing debit to the consultant and his family members as on 31.07.2013 in the books of the company.

2. Shri Shantilal R. Lunkad has agreed to administer for payment of sum referred in clause 1.

3. The said sum will carry interest @ bank deposit rate w.e.f. 1.08.2013 till actually paid.

4. The consultant has agreed that whenever the company pays any amount in satisfaction of the sum stated in clause 1 above, the same will be ploughed back in M/s Jai Global Commodities Pvt. Ltd. Either by way of share capital or otherwise towards his 30% share in working capital required by M/s Jai Global Commodities Pvt. Ltd. Subject to remaining 70% being contributed by the other promoters/directors of M/s Jai Global Commodities Pvt. Ltd.

5. The consultant agrees to provide his service to enable the company in carrying on its export business of Agri & Extraction products.

6. The consultant will be entitled to 20% of the income earned from the business stated in clause 5 arrived at before depreciation & Taxation accrued after 31st July, 2013.

7. The company agrees that it will not object in carrying on the business of Agri & Extraction products by M/s Jai Global Commodities Pvt. Ltd. Which do not attract incremental turnover benefits for export incentives.

In Witnesses Whereof parties hereto have hereunto, set and subscribe their respective hands the day and year first hereinabove written.

Signed, Sealed & Delivered By the withinnamed the "Company"

by the hands of Mr. Shantilal Ratanchand Lunkad the Authorized Signatory In the present of CA Paras Mandot 30, Kamdar Shopping Centre, Opp. Station Vile Park (E) Mumbai-57 Signed, Sealed & Delivered By the withinnamed Consultant Shri Prajendra S Jaroli In the presence of CA Paras Mandot 30, Kamdar Shopping Centre, Opp. Station Vile Park (E) Mumbai-57"

8. From the bare reading of aforesaid MOU, it is apparent that the alleged

past dues of the Appellant were ultimately settled to the tune of Rs. 4.50

Company Appeal (AT) (Insolvency) No. 09 of 2020 6

Crores as on 31.07.2013 and it was agreed that the said sum shall carry an

interest at the Bank deposit rate w.e.f. 01.08.2013 till it is actually paid. It was

also agreed that the Appellant shall keep on providing the services to the

Respondent and shall be entitled to 20% of the income earned from the

business after 31.07.2013. Thus, the MOU is divided into two parts the first

part deals with the settlement of accounts of the Appellant till 31.07.2013 to

the tune of Rs. 4.50 Crores with interest at the Bank rate calculated w.e.f.

01.08.2013 till actually paid and the second part is regarding continuation of

the services provided by the Appellant as consultant to the company to its

export business and agriculture extraction products for which he would be

entitled to 20% of the income earned from the business after 31.07.2013.

9. Even for the sake of arguments, if it is presumed that MOU has been

duly executed between the parties yet the application under Section 9 of the

Code filed by the Appellant on 13.04.2019 in respect of Rs. 4.50 Crores is

beyond the period of limitation because right to apply accrued from 31.07.2013

and the period three years would be over by 31.08.2016. The argument of the

Appellant that the subsequent payment made in the year 2018 by the

Respondent would attract Section 19 of the Limitation Act, 1963 is totally

fallacious. The payment of Rs. 50,000/- referred to in the argument by Counsel

for the Appellant is to Rajendra Jaroli, whereas the appeal is filed by Prajendra

Jaroli. The Respondent has drawn our attention to Pg. 216 to 218 which are

the payments made towards the professional charges of the Appellant after

31.07.2013 and were not part of the payment of Rs. 4.50 Crores which was

Company Appeal (AT) (Insolvency) No. 09 of 2020 7

alleged to have been settled by the Corporate Debtor through Shantilal

Ratanchand Lunkad. Thus, in our considered opinion, the petition filed under

Section 9 of the Code to claim of Rs. 4.50 Crores on the basis of the MoU dated

24.08.2013 is clearly barred by limitation as the residuary Article 137 of the

Limitation Act, 1963 would apply which provides a limitation of three years

from the date when the right to apply accrues.

10. In so far as, the genuineness of the MOU is concerned, nothing has been

brought on record as evidence by the Appellant that the executant, namely,

Shantilal Ratanchand Lunkad was duly authorized by the Respondent.

Moreover, he is neither a director nor a key managerial personnel to bind the

company by executing the MOU on its behalf without having any authority

much less the resolution of the board passed in his favour.

11. Thus, looking from any angle, we do not find any error in the impugned

order, which requires any interference by this Tribunal. Hence, the present

appeal is dismissed. No costs.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Kanthi Narahari] Member (Technical) New Delhi

03rd November, 2022

Sheetal

Company Appeal (AT) (Insolvency) No. 09 of 2020