IN THE NATIONAL COMPANY LAW TRIBUNAL

ALLAHABAD BENCH, PRAYAGRAJ

CP (IB) NO.33/ALD/2023
In the matter of
An application under Section 7 of the Insolvency and Bankruptcy
Code, 2016 read with Rule 4 of the Insolvency and Bankruptcy
(Application to Adjudicating Authority) Rules, 2016)

In the matter of:

RAJESH ALFRED
Having its Registered Office at 57, The Domes,
Jaipur Road, Ajmer, Rajasthan-305001.

………… Applicant/Financial Creditor

Versus

M/S KETSAAL RETAILS LLP

Having its Registered Address at:
B-71, Sector-80, Noida, Gautam Buddha Nagar,
Uttar Pradesh -2013016
……Respondent/Corporate Debtor

Order pronounced on 06.10.2023

Coram:

Mr. Praveen Gupta. : Member (Judicial)

Mr. Ashish Verma : Member (Technical)

Appearances:

Sh. Sushant Singhal, : For the Financial Creditor

Sh. Ajit Singh Joher,
Ms. Anshita Agarwal,
& Sh. Mani Bhadra Jain, Advs.

Sh. Divyanshu Sarswat with : For the Corporate Debtor

Sh. Ajay Mishra, Advs. (Ex-parte v.o.d. 22.08.2023)
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CP (IB) No.33/ALD/2023
 ORDER

1. The Present Application has been filed under Section 7 of the

Insolvency and Bankruptcy Code,2016 (hereinafter referred

as I&BCode,2016) by the Applicant namely, Rajesh Alfred

who is a Sole Proprietor of M/s Anand Enterprises seeking

initiation of the Corporate Insolvency Process (hereinafter

referred as CIRP) against the Corporate Debtor i.e M/s

Ketsaal Retail LLP read with Rule 4 of the Insolvency and

Bankruptcy (Application to Adjudicating Authority) Rules

2016 in Form 1 containing all the information as required in

Part I, II, III, IV and V of the Form.

2. The Applicant, i.e M/s Anand Enterprises is a sole

proprietorship firm having its registered office situated at 57,

The Domes, Jaipur Road, registered office of Ajmer,

Rajasthan-305001.

3. The Respondent i.e M/s Ketsaal Retail LLP is a LLP, having

its registered office situated at B-71, Sector-80, Noida,

Gautam Buddha Nagar, Uttar Pradesh -2013016.

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CP (IB) No.33/ALD/2023
4. It is stated in the application that both the parties entered

into a “Reseller Agreement” dated 07.12.2020 wherein as per

clause (4)(m) and (5), applicant invested a sum of Rs.

20,00,000 (Rupees Twenty Lakhs Only) with assured

return/profit margin of 7% per month on the invested

amount. Copy of Reseller Agreement has been annexed as

Annexure-3 with the Application.

5. It is also stated in the application that although the Financial

Creditor's Proprietorship concern was granted authorization

to act as the Reseller for the Corporate Debtor under the

Agreement dated 07.12.2020, all the operational activities

related to the actual sale of products on 'Amazon' were

carried out by the Corporate Debtor itself. The Corporate

Debtor had complete access to the 'Amazon' seller account of

the Financial Creditor, overseeing daily sales, managing

stock inventory, coordinating 'Amazon' orders, handling

documentation associated with orders and packaging,

dispatching orders, monitoring sales and returns,

implementing strategies to enhance sales, and maintaining

sales strategies as stated under clause (6) and (7) of the

Agreement. In addition to this, the Corporate Debtor also

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CP (IB) No.33/ALD/2023
 stored the goods/products intended for sale on Amazon in its

own warehouse and ensured the safety of these products. The

pith and substance of the agreement was to raise financial

investments from the applicant and utilised that towards

reselling the products on the Amazon.

6. It is further stated in the application that an addendum

agreement dated 17.05.2021 (hereinafter the ‘First

Addendum’) was executed between both the parties in nexus

to the ‘Reseller Agreement’ dated 07.12.2020 wherein

investment amount was increased from 20,00,000 to

50,00,000 with increased profit margin of 9% per month from

August 2021 as stated under clause (1) and (3) of the First

Addendum. Copy of First Agreement has been annexed as

Annexure-4 with the Application.

7. Subsequently, another Addendum Agreement dated

07.10.2021 was executed in nexus to the agreement dated

07.12.2020 between both the parties wherein investment

amount was increased from 50,00,000 to 1,00,00,000 with

increased profit margin to 12% per month from January

2022. It was clearly mentioned in the Second Addendum that

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CP (IB) No.33/ALD/2023
 as stated in Clause (1), (3) and (6) of the ‘Second Addendum’,

applicant would be paid 9% per month assured return/profit

margins on the invested amount of Rs.50,00,000 from

October 2021 to December 2021. Copy of ‘Second Addendum’

has been annexed as Annexure-5 with the application.

8. Furthermore, it is stated that Corporate Debtor/Respondent

has committed default in payment of assured returns/profit

margins on the invested amount on 01.12.2021 which is even

continuing till date. The Corporate Debtor vide an email dated

14.7.2022 informed the applicant about the cancellation of

GST by the government officials and requested to place the

‘Exit Request’ as per the agreement. In response to the email

dated 14.07.2022 of the Corporate Debtor, the applicant vide

an email dated 14.07.2022 requested for formal and final

‘Exit Request’ and reimbursement of the funds which are due.

Copy of Email dated 14.07.2022 has been annexed as

Annexure-7 with the Application.

9. Applicant contends in the application that Corporate Debtor

has admitted its liabilities vide notice dated 20.8.2022,

05.11.2022 and also vide letter dated 25.11.2022. Copy of

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CP (IB) No.33/ALD/2023
 Notice dated 20.8.2022 and 05.11.2022 and letter dated

25.11.2022 have been annexed as Annexure-8, Annexure-9

and Annexure-10 respectively with the application.

10. As per Part-IV of the application, the Corporate Debtor is

allegedly liable to pay a sum of Rs.2,77,00,000/- (Rupees Two

Crores Seventy Seven Lakhs Only) as on 01.03.2022

comprising of invested amount of Rs.1,00,00,000 and

Assured Returns/Profit Margins of Rs.1,77,00,000/-.

11. The Applicant has placed reliance on the judgement dated

21.07.2021 passed by the Hon’ble NCLAT, New Delhi in the

matter of “Nikhil Mehta and Sons vs. AMR Infrastructure

Ltd.- Company Appeal (AT) (Insolvency) No. 07/2017” for

supporting his averment that the amount due to the

Corporate Debtor is a Financial Debt as stipulated under

Section 5(8) of the I & B Code, 2016.

12. As per the records, the registry of this court as well as the

Applicant issued notices to the Corporate Debtor but it failed

to be present on various occasions. Moreover, the Corporate

Debtor has not filed any reply to the petition. Therefore, this

Tribunal vide order dated 22.08.2023 had set the respondent

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CP (IB) No.33/ALD/2023
 as ex-parte. However, the Ld. Counsel on behalf of the

Corporate Debtor were present and argued the matter on last

day of hearing.

13. Ld. Counsel appearing on behalf of the Corporate Debtor by

referring to Reseller Agreement and its two Addendum,

argued that the said agreement with the Applicant was made

not for taking any finance/ loan from it but to enter into

reseller agreement in which produce of the Corporate Debtor

was being provided to the Applicant and the same was being

sold by it on Amazon Site. Therefore, there is no relation of

Financial Creditor and Corporate Debtor between them and

the amount outstanding is not a financial debt, and hence

this application filed U/s 7 is not maintainable. The Ld.

Counsel of the applicant countered the agreement of the

Corporate Debtor taking the plea as discussed in the

application maintaining that the amount paid to the

Corporate Debtor is the amount invested with them on which

assured return was promised but the same was not paid and

hence, the total outstanding amount of Rs.2,77,00,000/- is

financial debt and the same should be considered in the

application filed under Section 7 of the I & B Code, 2016 for

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CP (IB) No.33/ALD/2023
 initiating CIRP against the Corporate Debtor as it has

defaulted in the payment of this debt.

Findings and order

14. We have heard the Ld. Counsels of both sides and perused

the materials on record.

15. The issue for consideration before us is whether the amount

invested by the applicant would be classified as ‘Financial

Debt’ as enumerated under section 5(8) of the I & B Code,

2016 and whether the applicant is Financial Creditor within

the meaning of Section 5(7) of the I & B Code, 2016.

16. To determine the question whether applicant would fall or not

within the meaning of 'Financial Creditor', it is desirable to

notice the relevant clause of one of the Reseller Agreement

dated 07.12.2020 which are as under:-

“……

2. Basis of the agreement

The relationship between the parties shall be that of
seller and buyer and not that of principle and agent
and the transaction is on principle to principle basis
not withstanding anything to the contrary that may
be contained in this agreement or any
correspondence or letters between the parties
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CP (IB) No.33/ALD/2023
 hereto. Accordingly the RESELLER shall at no point
hold himself out as an agent of Ketsaal and Ketsaal
shall not be responsible for any act omission or
commission on the part of the RESELLER.
………….
m. Profit Margins- Notwithstanding anything
contained herein, Ketsaal assures the profit margins
of 7% of the invested amount. For the first three (3)
months there will be no assured returns. However,
post the period of stipulated three 03 months,
assured return of 7 % shall be given u on the
invested amount. The targeted time period will not
include the days where exception scenarios
occurred from Amazon's or Flipkart's side such as
account suspension, BuyBox unavailability etc.
n. The reseller has agreed to re-invest the amount
for first three months which he gets from the Amazon
subject to amazon payment cycle, with Ketsaal
under this agreement. Thereafter, the reseller can
take out 7% profit amount and re-invest the
remaining value.
o. The targeted time period to sell the stock worth
Rs. 20,00,000 will be 30 - 45 days. However, the
targeted time period may vary depending upon
invested amount and shall commence once the total
investment payment is made. Provided that, the said
targeted time shall only commence once the total
amount has been credited towards Ketsaal.
5. Payment
I. The reseller agrees to pay the consideration
amount of Rs.20,00,000/-, at the time of signing this
agreement the reseller paid Rs. 20,00,000/- via
NEFT Rs. 9,00,000/- Ref. ID
DCBLR52020120700007401, Rs. 9,00,000/- Ref.

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CP (IB) No.33/ALD/2023
 ID DCBLH20342007347, Rs. 2,00,000/- Ref ID.
DCBLH20342475023 in favor of company.
II. The sale of the goods by Ketsaal shall be on
advance payment by RTGS/Demand
Draft/cheque/NEFT/IMPS against supplies made
as may be required by Ketsaal from time to time. The
discretion of Ketsaal on choice of mode of payment
shall be final and binding upon the RESELLER.
III. The reseller has to agree to re-invest the amount
for first six months which he gets from the Amazon
subject to amazon payment cycle, with Ketsaal
under this agreement. Thereafter, the reseller· can
take out 7% profit amount. The capital investment
can also be increased or decreased by the reseller.
…..
V. Invoices will be generated and floated to reseller
against products allotted initially and reshuffling of
products during business flow in case needed.
VI. Such payment against dispatch shall always be
of essence to the transaction, which Ketsaal may
accept to execute in whole or in part on receipt of the
written or oral order of supply from the RESELLER.
…..”
17. In the light of above relevant clauses of Reseller Agreement,

the definition of Debt & Financial Debt, it is pertinent here to

mention here the meaning of 'debt' and ‘financial debt’ as

defined in Section 3(11) and 5(8) respectively of the I & B

Code' which reads as follows:-

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CP (IB) No.33/ALD/2023
 "3(11) "debt" means a liability or obligation in
respect of a claim which is due from any person and
includes a financial debt and operational debt;"
5(8) Financial Debt-
“financial debt” means a debt alongwith 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 nonrecourse basis;
(f) any amount raised under any other transaction,
including any forward sale or purchase agreement,
having the commercial effect of a borrowing;
(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;
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CP (IB) No.33/ALD/2023
18. As per the Reseller Agreement, we find that the amount

invested by the applicant is a consideration which shall be

received in advance by Corporate Debtor (Ketsaal) from time

to time for the supply of goods within the periods of 15 days

from the date of receipt of advance. This does not come within

the meaning of debt as defined above. Even the return on the

amount paid by the applicant is in form of the profit margin

and not for paying any interest on the amount deposited.

19. It is essential to mention here that the opening word of the

definition clause of Financial Debt U/s 5(8) is that a 'financial

debt' is a debt along with interest which is disbursed against

the consideration for the time value of money and may

include any of the events enumerated in sub-clause (a) to (i).

Therefore, it is to be seen whether the amount paid by the

applicant to the Corporate Debtor, fulfil the other condition

of "disbursement against consideration of time value and

money", to come within the definition of "Financial Creditor"

having satisfied that the Corporate Debtor raised the amount

through a transaction of forward sale and purchase under a

Reseller Agreement having commercial effect of a borrowing

[Section 5(8)(f)].
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CP (IB) No.33/ALD/2023
20. The agreement shows that the applicant and respondent were

in the capacity of manufacturer and reseller for reselling the

products on Amazon. The Applicant is entitled to receive the

profit margin 7% and 9% as per the Agreement and

Addendum Agreements entered into between both the parties

out of the profit amount to be received and hence, for earning

of such profit margin, no time value of money on the amount

paid is provided, rather profit margin would be determined

and shared on the sale price of the product as against the

purchase price. The judgement of the Hon’ble NCLAT relied

upon by the Financial Creditor does not come to the rescue

of the applicant for maintainability of the present application

as the issues involved in the said matter is pertaining to the

“loan disbursed by the appellants was against the

consideration of time value of money” which is not the

issue in the instant application.

21. The nature of transactions of the present case do not come

within the meaning of 'Financial Creditor', as in the case in

hand "Assured Returns" is associated with the profit margin

amount and this has nothing to do with the requirement of

Section 5(8), the time value of money therefore, is grossly

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CP (IB) No.33/ALD/2023
 missing in the transaction in hand. The agreement to resell

the products on the e-commerce platform with some assured

profit margins as promised in the Agreement would not confer

the status of a ‘financial debt' to the amount due to the

Applicant as the transaction does not have a consideration

for the time value of money, which is a substantive ingredient

to be satisfied for fulfilling requirements of the expression

'Financial Debt'.

22. For the reasons aforesaid, we are of the considered opinion

that this application filed under section 7 of the I & B Code,

2016 is not maintainable. We find that the debt does not fall

within the meaning of “financial debt” u/s. 5(8) of the IBC.

23. Therefore, the petition CP (IB) No.33/ALD/2023 filed by the

Applicant is hereby dismissed.

24. Ordered Accordingly.

(Ashish Verma) (Praveen Gupta)

Member (Technical) Member (Judicial)

Dated : 6th October, 2023

Ankita Sharma
(LRA)

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