9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (8) TMI 740 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - whether the amount claimed by the Appellant can be construed as a Financial debt as defined under Section 5 (8) of the IBC and if the Appellant falls within the ambit of the definition of Financial Creditor as defined under Section 5 (7) of the Code? - HELD THAT - The demand notice dated 17.04.2018 issued by the Appellant is under Section 8 of the IBC, wherein the Appellant had addressed itself as an Operational Creditor and called upon the Respondent to pay the unpaid Operational debt . In the demand notice, it is stated that the Operational Creditor and Corporate Debtor have executed the JDA on 25.01.2006, inter-alia for conversion of Corporate Debtor allowed in project from ownership of FSI to write off ownership and collaboration to the extent of 25% in the project and in the project land. In the entire body of the notice the Appellant has addressed the principal amount as Operational debt . In such a kind of a Joint Venture Project, both the parties, if they are a Corporate should be jointly treated to be one for the purpose of initiation of CIRP and hence this Application under Section 7 is not maintainable. The Applicant had issued notice to the Respondent under Section 8, terming it as an Operational debt . Be that as it may, this Application seeking initiation of CIRP by one partner of JDA against the other, only jeopardizes the interests of the allottees. Apart from the fact that the Joint Development Agreement entered into, is a contract of reciprocal rights and obligations, both parties are admittedly Joint Development Partners , who entered into a consortium of sorts for developing an Integrated Township and for any breach of terms of contract, Section 7 Application is not maintainable as the amount cannot be construed as Financial Debt as defined under Section 5(8) of the Code. The Appellant cannot be termed to be a Financial Creditor as envisaged under Section 5(7) of the IBC, 2016 - Appeal dismissed.
Issues Involved:
1. Whether the amount claimed by the Appellant can be construed as a ‘Financial debt’ under Section 5(8) of the Insolvency and Bankruptcy Code (IBC), 2016. 2. Whether the Appellant qualifies as a ‘Financial Creditor’ under Section 5(7) of the IBC, 2016. 3. The nature of the relationship and transactions between the Appellant and the Respondent, specifically whether it constitutes a Joint Venture. 4. The implications of the contractual obligations and reciprocal promises under the Master Development Agreement (MDA) and its Addendum. Detailed Analysis: 1. Financial Debt under Section 5(8) of IBC: The primary issue is whether the amount claimed by the Appellant qualifies as a 'Financial debt' under Section 5(8) of the IBC. The Tribunal noted that for a debt to be considered a financial debt, it must be disbursed against the consideration for time value of money. The Appellant argued that the transaction involved interest payment at the rate of 18% p.a., categorizing it as a financial transaction. However, the Tribunal observed that the demand notice issued by the Appellant under Section 8 of the IBC termed the amount as an 'Operational debt,' which contradicts the claim of it being a financial debt. 2. Financial Creditor under Section 5(7) of IBC: The Tribunal examined whether the Appellant qualifies as a ‘Financial Creditor’ as defined under Section 5(7) of the IBC. The Appellant contended that the amounts due and payable fall within the definition of 'Financial Debt' and hence, they should be considered a 'Financial Creditor.' However, the Tribunal concluded that the nature of the relationship between the parties, as evidenced by the MDA and its Addendum, indicated a joint development project rather than a financial borrowing. Consequently, the Appellant does not meet the criteria of a ‘Financial Creditor.’ 3. Nature of Relationship and Transactions: The Tribunal analyzed the nature of the relationship and transactions between the Appellant and the Respondent. The agreements, including the Buyer’s Agreement, FSI Purchase Agreement, Joint Development Agreement (JDA), and MDA, pointed towards a joint development project. Clauses such as 2.1, 2.3, 3.2.4, 3.2.5, and others from the MDA and its Addendum emphasized a collaborative effort with shared costs and profits, indicating a Joint Venture rather than a creditor-debtor relationship. The Tribunal referred to the legal definition of a Joint Venture and concluded that the agreements reflected a commercial transaction in the nature of a Joint Venture. 4. Contractual Obligations and Reciprocal Promises: The Tribunal noted that the agreements between the parties involved several reciprocal promises and obligations. For instance, the MDA required the Respondent to make certain payments, which were contingent upon the Appellant fulfilling its obligations, such as transferring project components. The Tribunal emphasized that the agreements were contracts of reciprocal rights and obligations, and any breach should be addressed within the framework of these contracts rather than through the initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the IBC. Conclusion: The Tribunal concluded that the amount claimed by the Appellant does not qualify as a 'Financial debt' under Section 5(8) of the IBC, and the Appellant does not qualify as a 'Financial Creditor' under Section 5(7) of the IBC. The relationship between the parties was determined to be a Joint Venture with shared obligations and profits, rather than a creditor-debtor relationship. Consequently, the Tribunal dismissed the appeal, stating that the initiation of CIRP under Section 7 of the IBC was not maintainable in this case.
|
