Shamji Optima Private Limited ... vs Tridhaatu Aranya Developers Llp

NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI COMPANY APPEAL (AT) (INSOLVENCY) No. 922 of 2021 (Arising out of Order dated 29.09.2021, passed by National Company Law Tribunal, Court No. V, Mumbai Bench, C.P. No. 329/(IB)-MB-V/2020)

IN THE MATTER OF:

Shamji Optima Private Limited (Formerly known as Four Seasons Developers Private Limited) 702 runwal & Omkar Esquare, Eastern Exp Hwy, Sion East, Mumbai - 400022 Email: info@sopl.biz ...Appellant

Versus

Tridhaatu Aranya Developers LLP 5th Floor, B - Wing, Shrikant Chambers, Near R.K. Studio, Sion - Trombay Road, Chembur, Mumbai - 400071 Email: info@tridhaatu.com ...Respondent

For Appellant: Mr. Arun Kathpalia, Sr. Advocate with Mr. Sanjay Udeshi, Mr. Varun Singh, Ms. Pranati Bhatnagar, Mr. Darshan Ashar, Mr. Dharmesh Chheda and Mr. Aditya Udeshi, Advocates.

For Respondent: Mr. Somasekhar Sundaresan and Mr. Vishesh Kalra, Advocates.

JUDGEMENT

[Per: Shreesha Merla, Member (T)]

1. Aggrieved by the Order dated 29/09/2021 in C.P. No.- 329/(IB)-MB-

V/2020 passed by the Learned Adjudicating Authority (National Company

Law Tribunal, Court V, Mumbai Bench), 'M/s. Shamji Optima Private

Limited' preferred this Appeal under Section 61 of the Insolvency and

Bankruptcy Code, 2016 (hereinafter referred to as 'The Code'). By the

Impugned Order, the Adjudicating Authority has dismissed the Application -2-

filed under Section 7 of the Code, by the Appellant herein, against 'M/s.

Tridhaatu Aranya Developers LLP' (hereinafter referred to as the 'Corporate

Debtor'), observing as follows:

"38. Upon perusal of the documents annexed to the Petition and hearing counsels from both the sides, the Bench is of the considered opinion that there is no privity of contract between Petitioner and Corporate Debtor and the LLP agreement dated 07.os.20L2 and the Supplementary Retirement Deed dated 15.08.2OL6 is not a contract signed by and between the Petitioner and Corporate Debtor herein. The Supplementary Retirement Agreement contemplates certain liability of Tridhaatu wherein Tridhaatu agreed to pay the outstanding sum of Rs, 45,08,08,384/- to the Petitioner and provided certain cheques to be paid by the corporate Debtor herein being the group company. The corporate Debtor also confirmed the liability of payment of Rs.

4,03,28,000/- to the Petitioner herein as on 31.03.2018, however, this does not demonstrate any liability towards payment of financial debt.

39. The Petitioner has failed to demonstrate the basic ingredients of financial debt along with interest, if any, which is disbursed against consideration for time value and money and is in existence between the Petitioner and Corporate Debtor. The Petitioner is relying up reference being made in Supplementary Retirement Deed and that cheques were presented as security without any basis of contractual terms between the Petitioner and Corporate Debtor.

40. Tt is an undisputed fact that there is no privity of contract between the parties and a mere reference to certain liability while handing out cheques, confirmation of liability, it cannot be construed that there is a binding agreement of any debt due in terms of Section 5 (8) of the Code and hence, there is no evidence of default for non-payment of money by the Corporate Debtor towards his obligation of payment of monies under any contract is thus not established, Further, the claim is barred by limitation.

41. Unless the liability is crystallised by a regular civil court, the Petition under Section 7 of IBC cannot be admitted. The mere reference of handing over of cheque of Corporate Debtor as security does not fasten any liability to the Corporate Debtor for Company Appeal (AT) (Insolvency) No. 992 of 2021 -3-

payment of monies and any debt due under the Supplementary Retirement Deed. The expression Tridhaatu affiliated nominee including sister concern cannot be bound unless it is expressly confirmed that the sister concern is liable to pay in case of default and in the absence of any absolute liability. The claim has to be adjudicated by a regular civil court and hence the petition is liable to be dismissed."

2. Submissions of the Learned Counsel appearing on behalf of the

Appellant:

• The Learned Senior Counsel for the Appellant contended that the

Appellant, (formerly known as 'Four Seasons Developers Private

Limited') is a 'Financial Creditor' of the 'Corporate Debtor', having

disbursed unsecured loans, which the 'Corporate Debtor' had

defaulted in repayment; that 'Tridhaatu Group' and 'Prince Care

Group' are engaged in the business of Real Estate; 'Tridhaatu Group'

promoted by Mr. Krishnan Muthukumar, Mr. Dhananjay Anand

Sandu and Mr. Pritam Chivukula include entities i.e., Tridhaatu Asset

Holding LLP, Tridhaatu Mumbai Structures Private Limited and

Sandu Homes LLP; 'Prince Care Group' promoted by Mr. Dharmesh

Kishore Chheda and Mr. Bhavesh Kishore Chheda includes entities

forming a part of Shamji Optima Private Limited' (the Appellant herein)

and Prince Care Developers LLP. It is argued by the Learned Senior

Counsel that the definition of 'Tridhaatu Group' includes the

respective sister concerns and all group Companies.

• The Appellant retired from the Respondent LLP vide Retirement

Agreement dated 12/08/2016 and received amounts receivable as

share of profits.

Company Appeal (AT) (Insolvency) No. 992 of 2021 -4-

• Learned Counsel contended that the principal outstanding loan

amount is confirmed in the Balance Sheets for the Financial Year

2018-19 of the 'Corporate Debtor'; that cheques were issued by the

'Corporate Debtor' in favour of the Appellant towards repayment of the

unsecured loans, which cheques were dishonoured on account of

insufficient funds.

• The Learned Adjudicating Authority has failed to take into

consideration the Supplementary Retirement Deed dated 12/08/2016,

whereby the factum of the unsecured loans repayable to the

'Corporate Debtor' was recorded.

• It is submitted that the Appellant disbursed the loan to the tune of

Rs.6,43,28,000/- on 12/08/2016, the repayment of which is stated in

the Supplementary Retirement Deed dated 13/08/2016 entered into

between the 'Tridhaatu Group' and the 'Prince Care Group'. The

Agreement also provided for payment of interest by the 'Tridhaatu

Group' to the 'Prince Care Group'.

• As per the Agreement, the debt disbursed was to be repaid by on or

before 31/12/2016. It is argued that the 'Tridhaatu Group' admitted

its liability to pay the amounts to 'Prince Care Group' vide letter dated

05/08/2019, but failed to pay the same. Under these circumstances,

the Appellant filed an Application under Section 7 of the Code.

• The Learned Counsel strenuously contended that the Balance Sheet of

the Corporate Debtor Company as on 31/03/2018, the cheques

issued by the 'Corporate Debtor' in favour of the Appellant and the

Retirement Deed clearly shows that there is a privity of contract

between the Appellant and the Corporate Debtor Company. It is also Company Appeal (AT) (Insolvency) No. 992 of 2021 -5-

argued that the definition of 'Financial Debt' in Section 5(8) of the

Code does not expressly exclude an interest free loan and that the

Adjudicating Authority has failed to take into consideration the ratio

of the Hon'ble Apex Court in 'M/s. Orator Marketing Private Limited'

Vs. 'M/s. Samtex Desinz Private Limited', 2021 SCC OnLine SC 513.

• It is the 'Agreement' which is the 'Financial Contract' between the

parties and the existence of the Financial Contract is not a sine qua

non for the purpose of filing of Application under Section 7 of the

Code.

• The Learned Counsel contended that the claims are well within the

period of Limitation as the Limitation would extend from time to time

on account of the acknowledgement in the Balance Sheets and placed

reliance on the Judgement of the Hon'ble Supreme Court in 'Asset

Reconstruction Company (India) Limited' Vs. Bishal Jaiswal and Anr.',

2021 SCC OnLine SC 321.

3. Submissions of the Learned Counsel appearing on behalf of the

Respondent:

• Learned Counsel for the Respondent strenuously contended that there

is no privity of contract between the 'Corporate Debtor' and the

Appellant herein and that there is no debt due under the provisions of

IBC. The LLP Retirement Deed is dated 12/08/2016 and the

Supplementary Retirement Deed is dated 13/08/2016 and as per

Clause 15 of the LLP Deed, the partners of the LLP, on retirement,

were entitled to receive amounts standing to the credit of their capital

account. This is the only obligation of the 'Corporate Debtor' towards

Company Appeal (AT) (Insolvency) No. 992 of 2021 -6-

its partners, which was duly fulfilled and acknowledged by the

Appellant.

• The LLP is governed by the Limited Liability Partnership Act, 2008,

and as per Section 3 of the Act; the LLP is a body corporate

independent of its partners and cannot be bound by the partners of

the LLP. The dispute arises out of the LLP Retirement Deed dated

12/08/2016 and the Supplementary Deed dated 13/08/2016, to

which the 'Corporate Debtor' Tridhaatu Aranya LLP is not a party.

Hence there is no privity of contract qua the Appellant under the said

deeds.

• The acknowledgement in the Balance Sheets is only for the sake of

accounting purpose and the same cannot be read dehors the facts.

Out of the alleged amount of Rs.4,05,08,08,384/- a sum of

Rs.40,96,11,329/- has already been paid to the Appellant and there

are disputes pertaining to reconciliation which are pending between

the parties and highlighted in the correspondence dated 05/08/2019.

• The payment was to be made to the Appellant by the 'Tridhaatu

Group' and not by the 'Corporate Debtor' herein. The amount

stipulated under the Supplementary Deed was under various heads

and a mere issuance of the cheque cannot be a basis to state whether

the liability is that of the 'Financial Creditor' or of the 'Operational

Creditor'.

• It is contended that the amounts were acknowledged only for the

purpose of accounting and the amounts have been mentioned in the

Balance Sheet only on account of the cheques having been issued.

The act of issuance of the cheques cannot alleviate the 'Corporate Company Appeal (AT) (Insolvency) No. 992 of 2021 -7-

Debtor' to the status of a guarantor and the cheques were given in

good faith and they by themself do not constitute any 'Financial Debt'.

• The Learned Counsel placed reliance on the ratio of the Judgement of

the Hon'ble Supreme Court in 'Reliance Natural Resources Limited' Vs.

'Reliance Industries Limited', (2010) 7 SCC 1, in paras 58 to 60, 125,

297, 303, 305, 311 and 329(ii) to buttress his argument that the MoU

is a private pact between the members of the family and not binding

on the Company.

Assessment:

4. For better understanding of the relationship between the parties, we

need to see the parties to the LLP Retirement Agreement dated 12/08/2016,

which is detailed as hereunder:

"LLP RETIREMENT AGREEMENT

This Limited Liability Retirement Agreement (this Agreement) is made and entered into on the 12th August, 2016, at Mumbai by and between:

i. Mr. Krishnan Muthukumar.

ii. Mr. Dhananjay Anand Sandu.

iii. Mr. Pritam Chivukula.

iv. Tridhaatu Asset-Holdings LLP.

v. Tridhaatu Mumbai Structures Private Limited. vi. Sandu Homes LLP.

vii. Four Seasons Developers Private Ltd.

viii. PriceCare Developers LLP."

5. It is seen from the LLP Retirement Agreement dated 'Four Seasons

Developers Private Limited' and 'Prince Care Developers LLP' have chosen to

retire and only serial nos. 1, 2, 3, 4, 5 and 6 are collectively referred to as

'continuing partners' who formed a Limited Liability Partnership named

'Tridhaatu Prince Care Developers LLP'. Clause 15 of the LLP denotes that

Company Appeal (AT) (Insolvency) No. 992 of 2021 -8-

the retiring Party was entitled to their share which was ascertained at Rs. 8

Crs./-. Clause (d) of the said Deed reads as follows:

"D. Vide notice dated 20th April, 2016, the Retiring Partners had expressed their desire to retire from the said LLP w.e.f. 31 st July, 2016 at the close of the day and the Continuing Partners have given their consent unanimously to the Retiring Partners to retire from the said LLP. The said LLP has paid total amount of Rs.8,00,00,000/- (Rupees Eight Crore Only) in full and final settlement to the Retiring Partners in their Profit Sharing Ratio, the details of payment of which are as under:

Date of Mode of Name of Amount Payment Payment by Retiring Paid to Cheque of Partner Retiring BOI Sion Partner Branch 12th August, 031378 Four Seasons 99,00,000/- 2016 Developers Pvt. Ltd. 12th August, 031379 PriceCare 7,01,00,000/- 2016 Developers LLP Total 8,00,00,000/-

(Emphasis Supplied)

6. It is the case of the Respondent/'Corporate Debtor' that qua the LLP,

the entire amount has been finally settled and the aforenoted clause proves

that an amount of Rs. 8 Crs./- was paid towards full and final settlement.

7. The Supplementary Retirement Deed was executed between the

'Tridhaatu Group' and 'Prince Care Group' on 13/08/2016, the relevant

provisions of which reads as follows:

Company Appeal (AT) (Insolvency) No. 992 of 2021 -9-

Company Appeal (AT) (Insolvency) No. 992 of 2021 -10-

(Emphasis Supplied)

Company Appeal (AT) (Insolvency) No. 992 of 2021 -11-

8. The material on record evidences that the Supplementary Deed was

executed between the 'Tridhaatu Group' and the 'Prince Care Group' and

signed accordingly by their representatives.

9. The definition of 'Financial Debt' under Section 5(8) is reproduced as

hereunder:

"(8) "financial debt" means a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes--

(a) money borrowed against the payment of interest;

(b) any amount raised by acceptance under any acceptance credit facility or its de-materialised equivalent;

(c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;

(d) the amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital lease under the Indian Accounting Standards or such other accounting standards as may be prescribed;

(e) receivables sold or discounted other than any receivables sold on non-recourse basis;

(f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing;

[Explanation.--For the purposes of this sub-

clause,--

(i) any amount raised from an allottee under a real estate project shall be deemed to be an amount having the commercial effect of a borrowing; and

(ii) the expressions, "allottee" and "real estate project" shall have the meanings respectively assigned to them in clauses (d) and (zn) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016);]

Company Appeal (AT) (Insolvency) No. 992 of 2021 -12-

(g) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price and for calculating the value of any derivative transaction, only the market value of such transaction shall be taken into account;

(h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution;

(i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause;"

10. It is the main case of the Appellant that there is a privity of contract

between the Appellant and the Corporate Debtor Company having regard to

the principal outstanding amount being reflected in the Balance Sheet for

the year ending March 2019; the Supplementary Retirement Deed executed

by the continuing partners of the 'Corporate Debtor' recording the factum of

unsecured loans and finally the cheques issued by the 'Corporate Debtor' in

favour of the Appellant towards payment of the due amount. At the outset,

we address ourselves to the issue raised by the Appellant that the

Supplementary Retirement Deed evidences a privity of contract between the

Appellant and the 'Corporate Debtor'.

11. It is evident from the material on record that both the Retirement

Deed dated 12/08/2016 and the Supplementary Retirement Deed dated

13/08/2016 were entered into between the 'Tridhaatu Group' and 'Prince

Care Group', to which the 'Corporate Debtor' 'Tridhaatu Aranya Developers

LLP' is not a party. The 'Corporate Debtor' is a Limited Liability Partnership

incorporated under the provisions of the Limited Liability Partnership Act,

2008, and is a body incorporate independent of its partners. It is to be seen

whether any debt/liability has been taken up by a partner in the name of

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the LLP. In the Application under Section 7 of the Code filed by the

Appellant herein the 'Corporate Debtor' is described as an LLP, and as a

part of the 'Tridhaatu Group'. The repayment amounts and the terms

reflected in Clause 1(A)(c) of the Supplementary Retirement Deed dated

13.08.2016 are between 'Tridhaatu' and 'Prince Care' 'Groups' and

essentially between the partners thereof, pursuant to which, the post dated

cheques were issued. Likewise, Clause 4, which speaks of 'Default in

Repayment' also establishes that the terms are between the Partners of

'Tridhaatu' and 'Prince Care' 'Groups' only. Even the correspondence dated

10.06.2019 is addressed by the representatives of the 'Prince Care Group' to

the representatives of the 'Tridhaatu Group'. It is specifically stated in the

legal Notice dated 05.08.2019 issued on behalf of the 'Prince Care' 'Group'

that the cheques issued by 'Tridhaatu Builders LLP' and 'Tridhaatu Aranya

Developers LLP' were dishonoured, against which issue, the Appellant has

issued Notices under the provisions of Section 138 of the Negotiable

Instruments Act, 1881 and that their claim is against the 'Tridhaatu Group'.

The 'Corporate Debtor' is a distinct legal entity and the aforenoted 'Deeds' do

not construe any privity of contract between the 'Corporate Debtor' and the

Appellant and further establishes that mere issuance of these 2 cheques

does not construe 'liability' having consideration for 'time value of money'.

Further, the LLP Retirement Deed refers to a lumpsum amount of

Rs.45,08,08,384/- to be paid by the 'Tridhaatu Group'. It is the case of the

Respondent that out of this sum, a sum of Rs.6,13,34,457/- is towards

miscellaneous expenses and the remaining amount is not bifurcated and is

towards 'One Time Settlement'.

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12. It is an admitted fact that there were disputes between the Appellant

and continuing partners of the Respondent LLP. It is also evident from the

Supplementary Deed which records that the parties may exchange

ownership of facts to settle their obligations. It is pertinent to mention that

the Appellant has for the first time, in this Appeal has pleaded that the

partners can bind the LLP and relies on cheque copies and the Balance

Sheet reference. The onus to establish that the amount which is 'due and

payable' falls within the ambit of the definition of 'Financial Debt', as defined

under Section 5(8) of the Code, is on the Appellant herein. We find force in

the contention of the Counsel for the Respondent that the acknowledgement

in the Financial Statements for the Financial Year ending 2018-19 cannot

be read in isolation and has to be seen, keeping in view, the terms of both

the Deeds entered into between the parties and the nature of relationship

between them. Further, the Retirement Deed establishes that no amount is

'due and payable' qua the Respondent herein. There is no ascertained sum

crystallised as 'due and payable'. To reiterate, there is no documentary

evidence filed to prove that the two cheques amount to acknowledgement of

any 'Financial Debt', especially in the light of the fact that the Retirement

Deed and the Supplementary Retirement Deeds have been entered into

between the 'Tridhaatu Group' and 'Prince Care Group', for which the

Respondent/'Corporate Debtor' is not a party. Therefore, we are of the

earnest view that the 'amounts' do not possess the essential ingredients of

'Financial Debt' as defined under Section 5(8) of the Code. This Tribunal has

also observed in a catena of Judgements that IBC is not a 'recovery'

proceeding or a Code for settlement of collateral disputes.

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13. Hence, we see no reasons to interfere with the well-considered Order

of the Adjudicating Authority. This Appeal fails and is accordingly

dismissed. No Order as to costs.

[Justice Ashok Bhushan] Chairperson

[Ms. Shreesha Merla] Member (Technical) New Delhi 04th May, 2022 himanshu

Company Appeal (AT) (Insolvency) No. 992 of 2021