Sanjay Bansal & Ors vs Utkal Steel And Power Private Limited

IN THE MATTER OF: Sanjay Bansal & Ors. ...Appellants Versus Utkal Steel and Power Pvt. Ltd. ...Respondent

Present: For Appellants : Ms. Misha Rohatgi Mohta and Ms. Riya Dhingra, Advocates.

For Respondent : None.

ORDER

(Hybrid Mode)

13.01.2025 : This Appeal has been filed challenging the Order dated

30.08.2022 passed by the Adjudicating Authority (National Company Law

Tribunal, Cuttack Bench, Cuttack) by which C.P. (IB) No. 22/CB/2022 filed

by the Appellant to initiate Insolvency Resolution Process against the

Corporate Debtor has been rejected.

2. Brief facts necessary to be noticed for deciding the Appeal are:

i. The Appellants are Shareholders of Company namely SSAB Energy and

Minerals Limited engaged in iron ore. A Share Transfer Agreement

between the Shareholders of SSAB represented by the Appellant and

Respondent was entered on 26.02.2021 for consideration of

Rs.9,59,34,418/- .

ii. The Share Transfer Agreement also contemplated sale of existing iron

ore stock was about 8,000 MT.

iii. The Agreement contemplated that iron ore shall either be sold by the

Appellant on the price agreed or the Respondent shall purchase the

existing stock or can be sold at the agreed rate between the Parties and

the sale consideration shall be remitted to the Appellant.

iv. It is submitted that after the Share Transfer Agreement, the entire stock

was sold in May & June, 2021 and the Appellant thereafter sent several

emails to the Respondent for remitting the amount received from sale

of the iron ore and ultimately only an amount of Rs.1 Crore was

remitted to the Appellants 25 Lakhs each which is reflected in their

email dated 30.06.2021.

v. It is submitted that in spite of several reminders when no amount was

paid legal notice was also issued on 22.08.2021 and thereafter

Application under Section 7 was filed claiming an amount of Rs. 1.65

Crores. In which Application Notices were issued, Corporate Debtor

appeared and filed the Reply and Adjudicating Authority by Impugned

Order has rejected the Application observing that there is no time value

of money and further it is not clear as to what is the date of default and

no time was fixed for selling the stock. Aggrieved by this Order, this

Appeal has been filed.

vi. The Appeal was heard by this Tribunal and Notices were issued on

17.01.2023.

Comp. App. (AT) (Ins.) No. 12 of 2023 & I.A. No. 4980 of 2022 2 of 7 vii. In response to the Notice, the Reply has also been filed and the matter

was also heard on 09.07.2024, where submission of the Respondent

was recorded that amount of Rs.25 Lakhs each paid to the Appellant

was towards the Share Purchase amount.

viii. We had permitted the Parties to file the Additional Affidavit. The

Additional Affidavit have been filed by the Appellant on 31.07.2024,

where the Appellant has pleaded that the amount of Rs.25 Lakhs each

totalling to Rs.1 Crore transferred to Appellant was towards proceed of

the sale of iron ore and that was not paid towards the share sale

consideration. In Paragraph 3 of the Affidavit following has been

pleaded:

"3. I further state and affirm that the said amount of Rs.1,00,00,000/- was paid by the Respondent to the Appellants as part of the proceeds from the sale of 8795 MT of iron ore, out of the total market value amounting to Rs.2.65 Crores due to the Appellants, as communicated to respondents vide email dated 08.04.2021. The said amount was not paid towards the share sale consideration to the outgoing shareholder, i.e., the Appellants herein."

3. Learned Counsel for the Appellant challenging the Order submits that

the transaction clearly involved the Financial Debt within meaning of Section

5(8)(e) of the Insolvency and Bankruptcy Code, 2016 (for short 'The IBC' or

'The Code') to which the Adjudicating Authority has not adverted and the

observation of the Adjudicating Authority that there is no time value of money

in the transaction is not correct. It is further submitted that the

Comp. App. (AT) (Ins.) No. 12 of 2023 & I.A. No. 4980 of 2022 3 of 7 correspondence between the Parties clearly indicates that the amount of Rs.1

Crore was towards the value of sale of iron ores.

4. When the case was taken up today for hearing, no one appears for the

Respondent. The Share Transfer Agreement is part of record which is filed as

Annexure A-2 and the Share Transfer Agreement contemplated following:

"...Further buyer and seller have agreed that the stock of iron ore of various grades and sizes as per annexure is lying in the factory premises as per the details which is excluding the total consideration. The stock will be valued and purchase has the option to buy it at a mutual agreed price or else facilitate sale of the same and remit the proceeds to outgoing equity shareholders through four representatives namely Sanjay Bansal, Ajay Bhat, Binod Sharma and Santosh Singhi in equal proportion. The sellers may arrange to sell the material and the buyer will be obligated to remit the proceeds to outgoing shareholders as agreed above. It is further agreed that the sale of iron ore will require appropriate permissions from mining dept...."

5. Thus, the sale of iron ore which was contemplated in the above part of

the Share Transfer Agreement was clearly apart from the sale consideration

for the Share Transfer and was receivable and is clearly covered by Section

5(8)(e) and shall fall within the definition of Financial Debt. The

correspondent between the Parties which has been brought on the record

indicate that Appellant has been asking the Respondent to make the payment

of Rs. 2.65 Crores, out of which amount of only Rs. 1 Crore was transferred

which is reflected in the email dated 30.06.2021. In spite of the legal Notice

issued on 22.08.2021, balance amount was not paid, hence the Application

was filed under Section 7.

Comp. App. (AT) (Ins.) No. 12 of 2023 & I.A. No. 4980 of 2022 4 of 7

6. We have noticed that conflicting stands were being taken by the

Respondent before the Adjudicating Authority as well as before this Tribunal.

At the time of hearing on 09.07.2024, as noted above the amount of Rs. 1

Crore was sought to be explained towards consideration of Share Purchase

Agreement which is apparently incorrect. The email dated 30.06.2021 which

was sent by the Respondent, the series of correspondence has been brought

on record where the Appellants have been requesting the Respondent to make

the payment towards the sale of iron ore in the email dated 07.05.2021, the

Appellant has informed the Respondent that the amount has been showed as

a marked value of the iron ore is Rs. 2.65 Crores. In the email dated

08.04.2021 filed as Annexure A-3 it is mentioned that iron ore has been sold

for amount of Rs. 2.65 Crores.

7. The main question for consideration for the Adjudicating Authority was

as to whether there was a default on the part of the Respondent or whether

the amount transaction was involved as a Financial Debt. The Adjudicating

Authority in Paragraph 14 observed that there is no consideration for time

value of money. In Paragraph 13 of the Order following has been observed:

"13. Heard the learned counsel of both sides. Material on record perused. The dispute herein arises out of a Share Transfer Agreement executed on 26.02.2021. Apparently, there is no dispute at present in regard to transfer of shares. The claim of the Financial Creditors are in context of sale proceeds of iron ore stocks of SSAB, which in terms of the aforesaid Share Transfer Agreement was to be received by CD and then to be remitted to the Financial Creditors. FC claims that towards sale of aforesaid iron ore CD has received Rs.2.65 Crore and made remittances to the tune of

Comp. App. (AT) (Ins.) No. 12 of 2023 & I.A. No. 4980 of 2022 5 of 7 Rs.1.00 crore however, defaulted to remit the balance amount of Rs.1.65 crore."

8. Adjudicating Authority has made observation that in Paragraph 15 the

date of default is an important factor and there is no sufficient reasoning given

for arriving at the date of default. Appellants having been writing to the

Respondent that about the value of the iron ore and the fact that has been

sold and the fact that amount of Rs.1 Crore was remitted by Respondent

clearly proves that the said amount was paid towards the price for sale of iron

ores. No justification has come as to why the Respondent has not paid back

the amount of Rs.1.65 Crores as claimed by the Appellant. In the Reply which

was filed by the Respondent before the Adjudicating Authority it was sought

to contended that the claim of damages cannot be decided in proceeding

under Section 7 and there is no time value of money involved in the case.

Acknowledgment of liability was also denied.

9. In view of the foregoing, we are of the view that Appellant has proved

that the transaction involved as Financial Debt within meaning of Section

5(8)(e) of the IBC and Adjudicating Authority erred in rejecting the Application

filed by the Appellant under Section 7.

10. In result, the Appeal is allowed. The Order impugned is set aside and

Appeal is disposed of with following directions:

i. Subject to depositing of balance amount of Rs.1.65 Crores before the

Adjudicating Authority within a period of two months from the date of

this Order and filing a sufficient prove before the Adjudicating Authority

Comp. App. (AT) (Ins.) No. 12 of 2023 & I.A. No. 4980 of 2022 6 of 7 about the deposit of the amount, the Adjudicating Authority shall close

the proceedings.

ii. Failing debt to be discharged as directed above, the Adjudicating

Authority shall proceed to pass an Order of admission under Section 7

Application along with the consequential directions.

Appeal is disposed of accordingly.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical) himanshu/kam

Comp. App. (AT) (Ins.) No. 12 of 2023 & I.A. No. 4980 of 2022 7 of 7