# In the matter  of Sudha Siva Traders Pvt. Ltd. IBA-1444-2019

> NCLT judgment dated 2021-11-01. Citation: TCN-2021-NCLT-00630. The case involves an application filed under Section 7 of the Insolvency and Bankruptcy Code,…

- **Court:** NCLT
- **Order date:** 1 Nov 2021
- **Citation:** TCN-2021-NCLT-00630
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/sudha-siva-traders-pvt-ltd-iba-1444-2019-03ae0ea9

## Summary

### Background

The case involves an application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016, by Ram Chandra Traders Private Limited (Financial Creditor) against Sudha Siva Traders Pvt. Ltd. (Corporate Debtor) seeking initiation of Corporate Insolvency Resolution Process (CIRP). The Financial Creditor claimed that the Corporate Debtor defaulted on payments for the supply of materials, leading to a debt of Rs.35,48,240/-. A Memorandum of Agreement was entered into on 31.03.2019, converting the debt into an unsecured loan to be repaid in installments.

## Facts

Ram Chandra Traders Private Limited (Financial Creditor) supplied steel and allied products to Sudha Siva Traders Pvt. Ltd. (Corporate Debtor). The Corporate Debtor defaulted on payments, leading to a debt of Rs.35,48,240/-. On 31.03.2019, a Memorandum of Agreement was executed between the parties, converting the outstanding debt into an unsecured loan to be repaid in 12 monthly installments commencing from 01.11.2019 to 31.10.2020, with 18% interest p.a. on default. The Financial Creditor filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The Corporate Debtor admitted its liability but claimed inability to repay. The Financial Creditor sought

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## Issues and analysis

### Issue 1: Whether the Memorandum of Understanding entered into between the parties on 31.03.2019 would …

**Ratio:** A 'financial debt' means a debt along with interest, if any, which is disbursed against

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**Reasoning:** The Adjudicating Authority reasoned that the original transaction was for the supply of

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**Interpretation:** Section 5(8) of the IBC, 2016 defines 'financial debt' and specifies the

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**Application:** In this case, the Adjudicating Authority applied the definition of 'financial

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## Parties

- **Judges:** Sucharit…; Anil Ku…
- **Appellants:** Ram Chandra…
- **Respondents:** Sudha Siva…
- **Advocates:** A.G. Sathyanarayan…; Rohan Rajas…

## Timeline

- **1995-03-20 — Incorporation of…**: Sudha Siva Traders Pvt.…
- **2019-03-31 — Memorandum of…**: Ram Chandra Traders Private Limited and Sudha Siva Traders Pvt. Ltd. entered into a…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 7 — Initiation of corporate insolvency resolution…](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-7)

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