Provision providing for penalty is not uncommon in Agreement of supply and the said clause has no bearing on the claim that it is Financial Debt | Security of refund of advance amount cannot change the nature of transaction into Financial Debt – Sainik Industries Pvt. Ltd. Vs. Ritesh Raghunath Mahajan, RP, Indian Sugar Manufacturing Company Ltd. – NCLAT New Delhi

Hon’ble NCLAT held that:
(i) The penalty is envisaged in event the second party refuses or fails to deliver the entire/ part quantity. Provision providing for penalty is not uncommon in Agreement of supply and the said clause has no bearing on the claim of the Appellant that it is financial debt.
(ii) Security of refund of advance amount cannot change the nature of transaction for supply of sugar into financial debt. Security for advance in supply of goods is also an accepted mode and manner for protecting the advance but the said clause has no bearing on nature of transaction.

Provision providing for penalty is not uncommon in Agreement of supply and the said clause has no bearing on the claim that it is Financial Debt | Security of refund of advance amount cannot change the nature of transaction into Financial Debt – Sainik Industries Pvt. Ltd. Vs. Ritesh Raghunath Mahajan, RP, Indian Sugar Manufacturing Company Ltd. – NCLAT New Delhi Read Post »