2018 (4) TMI 1477 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process - whether the applicant does not come within the definition of Financial Creditor and the claimed amount is not a financial debt and the present application filed under Section 7 of the Code is not maintainable - Held that - In the present claim there is no whisper of inclusion of any unpaid assured return amount. In the absence of any provision of assured return it can be said that the investment was not made against the consideration for time value of money and therefore neither the present claim can be termed to be a financial debt nor does the applicant come within the meaning of financial creditor . Once the applicant does not come within the meaning of financial creditor he becomes ineligible to file the application under Section 7 of the Code. For the reasons stated above this petition fails and the same stands dismissed as not maintainable.

Summary

Issues Involved:
1. Jurisdiction of the Tribunal.
2. Definition and status of the applicant as a "Financial Creditor."
3. Existence of a "Financial Debt."
4. Applicability of the arbitration clause.
5. Allegations of forum shopping.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Tribunal:
The Tribunal confirmed its territorial jurisdiction over the matter as the registered office of the respondent company is in Delhi. This aligns with sub-section (1) of Section 60 of the Insolvency and Bankruptcy Code, 2016 (the Code).

2. Definition and Status of the Applicant as a "Financial Creditor":
The applicant, Mr. Rajendra Kumar Saxena, claimed to be a financial creditor under Section 7 of the Code. However, the Tribunal emphasized that only a "Financial Creditor" can initiate the Corporate Insolvency Resolution Process (CIRP). The Tribunal examined whether the applicant fits the definition of a "Financial Creditor" under Section 5(7) of the Code, which requires the debt to be disbursed against consideration for the time value of money.

3. Existence of a "Financial Debt":
The Tribunal scrutinized whether the amount paid by the applicant constituted a "financial debt" under Section 5(8) of the Code. The Tribunal noted that the contract between the parties was purely for the sale and purchase of immovable property. There was no agreement for assured or guaranteed returns on the investment. Consequently, the Tribunal concluded that the disbursement was not against the consideration for the time value of money, and thus, the applicant did not qualify as a financial creditor.

4. Applicability of the Arbitration Clause:
The respondent argued that the presence of an arbitration clause in the agreement necessitated referring the matter to arbitration. The Tribunal referred to precedents, including the NCLAT's ruling in International Road Dynamics South Asia (P.) Ltd. v. Reliance Infrastructure Ltd., which held that the existence of an arbitration clause does not preclude the application under the Code. The Tribunal reiterated that the Insolvency and Bankruptcy Code, 2016, overrides other acts, including the Arbitration and Conciliation Act, 1996.

5. Allegations of Forum Shopping:
The respondent alleged forum shopping, arguing that the agreement mandated disputes to be referred to the consumer redressal forum of CREDAI (NCR). The Tribunal dismissed this contention, stating that the overriding provisions of the Code take precedence, and the allegation of forum shopping was not based on sound legal principles.

Conclusion:
The Tribunal dismissed the application as not maintainable, concluding that the applicant did not meet the criteria of a "Financial Creditor" and the claimed amount did not constitute a "financial debt." The Tribunal clarified that the observations made in the order should not prejudice the applicant's rights before any other forum.

Final Order:
The petition was dismissed, and the Tribunal ordered that a copy of the order be served to the parties.