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2018 (6) TMI 851 - Tri - Insolvency and BankruptcyCorporate Insolvency Resolution Process - whether the Applicant answers the description of Financial Creditor and Financial Debt ? - Held that - The inflows and outflows are distanced by time and there is a compensation for time value of money. It is significant to notice that in order to satisfy the requirement of this provision, the financial transaction should be in the nature of debt and no equity has been implied by the opening words of Section 5(8) of the I&B Code. It is true that there are complex financial instruments which may not provide a happy situation to decipher the true nature and meaning of a transaction. Essentially in the case in hand Assured Returns is associated with the delivery of possession of the aforementioned properties. The classical transaction which would cover the definition of financial debts is illustrated in sub-clause (a) of sub-section (8) of Section 5 i.e. the money borrowed against the payment of interest. Ld. Counsel of Applicants has been able to show material on record or otherwise that it is a financial transaction in which a debt has been disbursed against the consideration for the time value of money and he being the Financial Creditor is entitled To trigger the insolvency process against the respondent in accordance with Section 7 of the I&B Code. The petition filed by the applicant / financial creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016 is hereby admitted for initiating the Corporate Resolution Process and declare a moratorium and public announcement as stated in Section 13 of the I&B Code, 2016. The moratorium is declared for the purposes referred to in Section 14 of the Insolvency and Bankruptcy Code, 2016.
Issues Involved:
1. Determination of the status of the applicant as a 'Financial Creditor'. 2. Qualification of the debt as a 'Financial Debt'. 3. Occurrence of default and initiation of Corporate Insolvency Resolution Process (CIRP). Issue-wise Detailed Analysis: 1. Determination of the Status of the Applicant as a 'Financial Creditor': The petitioner filed the application under Section 7 of the Insolvency & Bankruptcy Code, 2016, seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The applicant contended that an agreement was concluded for the purchase of a plot under the 'Appreciation Clause', which allowed for a refund of the entire consideration amount along with appreciation in the form of interest upon payment within the stipulated time. The applicant argued that this arrangement qualifies them as a 'Financial Creditor' under Section 5(7) of the I&B Code. The Tribunal referred to the case of Nikhil Mehta & Sons (HUF) & Ors. Vs. M/s AMR Infrastructures Ltd., where the NCLAT held that the debt in question was disbursed against the consideration for the 'time value of money', thus qualifying it as a 'Financial Debt'. The Tribunal found this precedent applicable, concluding that the applicant qualifies as a 'Financial Creditor'. 2. Qualification of the Debt as a 'Financial Debt': The applicant claimed a total default amount of ?12,09,638, which included the principal sum, appreciation, and interest. The Tribunal examined the definitions under Sections 5(7) and 5(8) of the I&B Code, which define 'Financial Creditor' and 'Financial Debt', respectively. The Tribunal emphasized that a financial debt must involve disbursement against the consideration for the time value of money. The Tribunal cited the definition of 'time value of money' from Black's Law Dictionary, emphasizing that the transaction should involve compensation for the time value of money. The Tribunal concluded that the debt in question, involving assured returns associated with the delivery of possession of the property, qualifies as a 'Financial Debt'. 3. Occurrence of Default and Initiation of CIRP: The Tribunal noted that the Corporate Debtor failed to refund the amount even after the stipulated period, despite several notices and emails from the applicant. The Tribunal found that the application was complete and there was an occurrence of default. The Tribunal referred to the case of Innoventive Industries Ltd. Vs. ICICI Bank, where it was held that if the adjudicating authority is satisfied with the occurrence of default and the completeness of the application, the application under Section 7 of the I&B Code is liable to be admitted. The Tribunal found no sustainable objections from the Corporate Debtor and admitted the application. Order: The Tribunal admitted the petition filed by the applicant under Section 7 of the I&B Code for initiating the CIRP. A moratorium was declared as per Section 14 of the I&B Code, prohibiting certain actions against the Corporate Debtor. The Tribunal appointed Mr. Manmohan Jhawar as the Interim Resolution Professional (IRP) and directed him to make a public announcement and convene a meeting of the Committee of Creditors. The Tribunal ordered the Registry to communicate the order to the Financial Creditor, Corporate Debtor, and IRP, and listed the matter for filing the progress report on 2nd July, 2018.
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