Shivam Agrioils Pvt. Ltd. Vs Shree Krishna Vanaspati Industries Pvt. Ltd. (NCLAT Delhi)
The NCLAT Delhi dismissed an appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 against the NCLT New Delhi order dated 20.06.2022, which had dismissed the Appellant’s Section 7 application seeking initiation of Corporate Insolvency Resolution Proceedings against Shree Krishna Vanaspati Industries Pvt. Ltd. The dispute arose from payments made by Shivam Agrioils Pvt. Ltd. to State Bank of India on behalf of the Corporate Debtor in connection with the proposed acquisition of its mortgaged industrial property.
The Corporate Debtor had mortgaged the subject property with SBI and defaulted on its loan. Under an MoU dated 25.11.2014, followed by another MoU dated 02.03.2016, the Appellant agreed to make payments towards the Corporate Debtor’s SBI liability in return for transfer of the property. The Appellant paid Rs.10.46 crore to SBI. An Agreement to Sell dated 19.03.2016 subsequently contemplated transfer of the property for Rs.15 crore. The transaction was not completed, and the property was subsequently released to the Corporate Debtor under an Amnesty Scheme after SBI’s charge was cleared.
The Appellant contended that the Rs.10.46 crore payment constituted a financial debt under Section 5(8) of the IBC and that the Corporate Debtor had failed to repay the amount or complete the transfer of the property. The Corporate Debtor disputed this, contending that the transaction was a sale arrangement rather than a financial debt, that the Appellant had failed to pay the balance consideration, and that no debt had become due and payable. It also argued that the Section 7 proceeding was being used as a recovery mechanism.
