# In the matter of Zenica Cars India Private Limited CA Nos. 546 & 1146-2019 in CP (IB) No. 263-Chd-Hry-2018

> NCLT judgment dated 2021-03-22. Citation: TCN-2021-NCLT-02623. Volkswagen Finance Private Limited filed a petition under Section 7 of the Insolvency and…

- **Court:** NCLT
- **Order date:** 22 Mar 2021
- **Citation:** TCN-2021-NCLT-02623
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/zenica-cars-india-private-limited-ca-nos-546-1146-2019-in-cp-ib-no-263-chd-hry-2-1bf2b3af

## Summary

### Background

Volkswagen Finance Private Limited filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, against Zenica Cars India Private Limited, seeking to initiate the Corporate Insolvency Resolution Process (CIRP). The petition was based on a facility agreement dated 21.12.2011, where Volkswagen Finance provided credit and financial facilities to Zenica Cars for the purchase of cars supplied by Audi India. The financial creditor claimed a default of ₹41,02,26,827/- as of 02.02.2018.

## Facts

Volkswagen Finance Private Limited, the financial creditor, filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate CIRP against Zenica Cars India Private Limited, the corporate debtor. The petition was based on a facility agreement dated 21.12.2011, where Volkswagen Finance provided credit and financial facilities to Zenica Cars for the purchase of cars supplied by Audi India. The financial creditor claimed a default of ₹41,02,26,827/- as of 02.02.2018. Zenica Cars argued that there was no direct disbursement of money to them, the debt was disputed, and the application was liable to be dismissed due to suppression of facts regarding an arbitration award. The NCLT found that Volkswagen Finance had disbursed money to Audi India on

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## Issues and analysis

### Issue 1: Whether the disbursement of money by the financial creditor to a third party (Audi India) on behalf …

**Ratio:** The disbursement of money need not mandatorily be to the corporate debtor directly. It is

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**Reasoning:** The NCLT relied on the principle that the disbursement of money need not be directly to

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**Interpretation:** Section 7 of the IBC requires a 'financial debt' which includes a disbursement

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**Application:** In this case, Volkswagen Finance disbursed money to Audi India for the supply

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## Parties

- **Judges:** Ajay Kumar…; RaghuNa…
- **Appellants:** Volkswagen…
- **Respondents:** Zenica Cars India…
- **Advocates:** Abhishek Manu…; Azeem S…; +10 more

## Timeline

- **2011-12-21 — Facility Ag…**: Volkswagen Finance and Zenica Cars…
- **2011-12-15 — First Revolving Credit…**: ₹84 crores revolving credit…

## 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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