DSK Legal successfully represented Uno Minda before the NCLAT

DSK Legal successfully represented Uno Minda before the NCLAT

DSK Legal successfully advised, assisted, and represented Uno Minda Limited (Uno Minda), before the National Company Law Appellate Tribunal (NCLAT), New Delhi in respect of an Appeal bearing no. “Company Appeal (AT)(Ins) - 947/ND/2022.

The said appeal was filed by Mr. Rajeev Kumar Jain, Ex Director and one of the shareholders of M/s. Unicast Autotech Private Limited (Corporate Debtor/CD) against the order dated 08.07.2022 (Impugned Order) passed by the Ld. NCLT, New Delhi”.

The Appeal was filed against the Impugned Order in C.P. (IB) No. 763/(ND)/2021 wherein petition filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) filed by Uno Minda (represented by DSK Legal) was admitted and resultantly, the process of Corporate Insolvency Resolution Process (CIRP) was initiated against CD. The Impugned Order was challenged in the Appeal filed in August, 2022, involving various complex questions of law inter-alia the nature of debt was “operational” instead of “financial”; no disbursement was made directly to the accounts of CD by the Financial Creditor i.e., Uno Minda; the liability is of the Promoters and not of the Corporate Debtor; raw material cannot be equated to financial debt as per the IBC etc. by placing reliance on various judicial precedents, contractual clauses of the agreements.

DSK Legal, on behalf of Uno Minda, argued that the only precursor for admitting a petition under Section 7 of IBC was that there was a “default” in the payment of debt, which was not a disputed fact by the Appellant. Therefore, the admission of the Section 7 petition under IBC was mandatory by NCLT unless incomplete.

It was further contended that (i) if the money had been advanced to improve the financial health of CD and boost its economic prospects that would have a commercial effect of borrowing (ii) since the debt disbursed was against consideration for the time value of money, it would be squarely covered under Section 5(8) of the IBC and would therefore be categorised as “financial debt”.

The Tribunal reiterated the submissions by DSK Legal in the order in its findings and was pleased to hold the following, simultaneously also settling the law on the said issues:

Para 35 – “…interest is not sine-qua non, therefore, interest may or may not be payable by the Corporate Debtor and it is understanding between the parties which is significant and relevant to ascertain the existence of time value of money which can be in several forms, other than pure payment of interest.”

Para 36 – “the definition does not use the expression that disbursal should be made to the Corporate Debtor only. Hence, it can be implied that any disbursal made on behalf of the Corporate Debtor or at the instructions of the Corporate Debtor may also tantamount to disbursal made to the Corporate Debtor.”

Para 38 – “Raw material is obviously to be treated as part of working capital and any financial assistance towards working capital cannot be treated as operational debt and has to be taken only as financial debt.”

Para 39 – “At this stage, the contentions of the Appellant that it was the agreement between only the Promoter Group and the Respondent No. 1 and not with the Corporate Debtor cannot be accepted.”

In light of the foregoing, DSK Legal succeeded in defending Uno Minda’s interest before the NCLAT which was pleased to dismiss the appeal for being devoid of any merits.

The DSK Legal Team comprised of Samir Malik (Partner), Mahip Singh Sikarwar (Principal Associate), Varun Kalra and Krishan Kumar (Associates).

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