2020 (3) TMI 1345 - Tri - Insolvency and Bankruptcy

Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment - Financial Creditors - existence of debt and dispute or not - HELD THAT - The Financial Creditors everywhere mentioned the word 'deposit', therefore, the amount which he has deposited with the Corporate Debtor does not come within the purview of the definition of Financial Debt rather the Financial Creditors, admittedly, deposited the amount with the Corporate Debtor and in lieu of that he was getting interest from the Corporate Debtor, therefore, he can claim the refund under Chapter V of the Companies Act, read with Company (Acceptance of Deposits) Rule, 2014 - So far, the initiation of proceeding under Section 7 of the Code is concerned is not liable to be accepted. Mere plain reading of the provisions shows that default means nonpayment of debt, whereas, the amount which the applicants deposited does not come under the definition of the debt. Therefore, it cannot be accepted that there is a default in payment of debt - the applicants have some other remedy under the law to recover the amount which they have deposited with the Corporate Debtor but so far initiation of the Section 7 of the IBC is concerned, the present application is not maintainable. Application dismissed.

Summary

Issues Involved:
1. Whether the claims of the Financial Creditors fall under the definition of "Financial Debt" as per Section 5(8) of the Insolvency and Bankruptcy Code (IBC), 2016.
2. Applicability of the Companies (Acceptance of Deposits) Rules, 2014, and relevant sections of the Companies Act, 2013.
3. Whether the default in payment constitutes a "default" under Section 3(12) of the IBC.
4. Maintainability of the application under Section 7 of the IBC, 2016.

Issue-wise Detailed Analysis:

1. Definition of "Financial Debt" under Section 5(8) of the IBC:
The Tribunal examined the claims of the Financial Creditors, who had deposited money under the Corporate Debtor's investment schemes. The Corporate Debtor had promised returns on these investments, either in the form of plots of land or multi-fold returns on the maturity of the schemes. The Tribunal referred to the definitions in Section 5(7) and 5(8) of the IBC, which define "financial creditor" and "financial debt," respectively. The Tribunal concluded that the claims do not fall within the purview of Section 5(8) of the Code because the Financial Creditors had deposited money under a scheme and had not given a debt to the Corporate Debtor.

2. Applicability of Companies (Acceptance of Deposits) Rules, 2014:
The Tribunal referred to Sections 73, 74, and 76 of the Companies Act, 2013, and the Companies (Acceptance of Deposits) Rules, 2014. These provisions prohibit companies from accepting deposits from the public except in a prescribed manner and provide for the repayment of deposits accepted before the commencement of the Act. The Tribunal noted that the Financial Creditors had deposited money with the Corporate Debtor, which does not qualify as a "financial debt" but rather as a deposit under the Companies Act. Therefore, the Financial Creditors can seek repayment under Chapter V of the Companies Act, 2013, and the relevant rules.

3. Definition of "Default" under Section 3(12) of the IBC:
The Tribunal referred to the definition of "default" in Section 3(12) of the IBC, which means non-payment of debt when it becomes due and payable. Since the Tribunal had already determined that the amounts deposited by the Financial Creditors do not constitute a "debt," it concluded that there is no default in payment of debt under the IBC.

4. Maintainability of the Application under Section 7 of the IBC:
The Tribunal addressed the argument of the Financial Creditors that there was a default in payment, making the application under Section 7 of the IBC maintainable. However, since the Tribunal had already concluded that the deposited amounts do not qualify as "financial debt," it held that there is no default in payment of debt. The Tribunal referenced its decision in the case of Satish Chand Gupta vs. Servel India Private Limited, which had similar facts and legal issues. Consequently, the Tribunal dismissed the application under Section 7 of the IBC, stating that the Financial Creditors have other remedies under the law to recover their deposited amounts.

Conclusion:
The Tribunal dismissed the application under Section 7 of the IBC, 2016, filed by the Financial Creditors against the Corporate Debtor. The Tribunal held that the claims of the Financial Creditors do not fall under the definition of "financial debt" as per Section 5(8) of the IBC. The amounts deposited by the Financial Creditors are considered deposits under the Companies Act, 2013, and the Financial Creditors can seek repayment under Chapter V of the Companies Act, 2013, and the Companies (Acceptance of Deposits) Rules, 2014. The Tribunal also concluded that there is no default in payment of debt as defined under Section 3(12) of the IBC.