2018 (5) TMI 1331 - Tri - Insolvency and Bankruptcy

Corporate insolvency process - financial debt existence - Held that - The claim of assured return till 2018 prima facia is not payable being in violation of the agreement. The Assured Return was only payable till completion and licensing of the premises. There is no denial of completion of the premises and licensing of the same. Even possession of the premises has been handed over to the licensee long since May 2016. Therefore, the present claim of assured return till 2018 much after the completion and possession of the licensee, prima facia is not tenable. Applicants simultaneously cannot take contractual advantage of both owner as well as investor. As per the agreed terms the liability of the developers shall cease after the premises has been licensed. The present claim made after possession of licensee will naturally face the resistance of contractual obligations. The claim/debt in question cannot be termed as a simplicitor claim of Assured Return so as to come within the scope of financial debt . As per the provisions of the agreement after the license and handing over possession, there cannot be any claim for payment towards assured return till 2018. Therefore neither the present claim can be termed to be a financial debt nor does the applicants come within the meaning of financial creditor . Once the applicants do not come within the meaning of financial creditor , they become ineligible to file the application under Section 7 of the Code. This petition fails and the same stands dismissed as not maintainable.

Summary

Issues Involved:
1. Whether the applicants qualify as "financial creditors" under the Insolvency and Bankruptcy Code, 2016.
2. Whether the claim made by the applicants constitutes a "financial debt."
3. Whether the application for initiation of Corporate Insolvency Resolution Process (CIRP) is maintainable.

Issue-wise Detailed Analysis:

1. Whether the applicants qualify as "financial creditors" under the Insolvency and Bankruptcy Code, 2016:
- The applicants, Mr. Manoj Kumar Bahri and Mrs. Meera Kapoor, claimed to be financial creditors and filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (the Code) for initiating CIRP against the respondent company, M/s. Entertainment City Limited.
- The Tribunal noted that only a "financial creditor" can file an application under Section 7 of the Code. To qualify as a financial creditor, the applicants must prove that they are owed a "financial debt" as defined under Section 5(7) and 5(8) of the Code.
- The Tribunal examined the definitions of "financial creditor" and "financial debt" and concluded that the applicants must demonstrate that the debt was disbursed against the consideration for the time value of money.

2. Whether the claim made by the applicants constitutes a "financial debt":
- The applicants had booked a commercial space in the Gardens Galleria Shopping Mall project and paid 90% of the total lease premium. They were promised an assured return until the date of possession.
- The applicants claimed an amount of ?72,38,516, which included the assured return and interest thereon at 24% per annum for the period from October 2015 to January 2018.
- The Tribunal noted that the assured return was payable until the completion and licensing of the premises. The respondent had informed the applicants that the unit was ready for possession and had licensed the premises to a third party.
- The Tribunal found that the applicants failed to justify their claim for assured return until January 2018, as the premises were completed and licensed by May 2016. Therefore, the claim did not constitute a "financial debt" under the Code.

3. Whether the application for initiation of Corporate Insolvency Resolution Process (CIRP) is maintainable:
- The Tribunal observed that the claim involved complex contractual issues requiring detailed investigation, which could not be addressed in an application under Section 7 of the Code.
- The Tribunal emphasized that the onus was on the applicants to prove that the assured return was payable until January 2018. The applicants failed to provide sufficient evidence to support their claim.
- The Tribunal distinguished the present case from the Nikhil Mehta & Sons v. AMR Infrastructure Ltd. case, where the claim for unpaid assured return was considered a financial debt. In the present case, the assured return was only payable until the completion and licensing of the premises.
- The Tribunal concluded that the applicants did not qualify as financial creditors and, therefore, the application under Section 7 of the Code was not maintainable.

Conclusion:
- The Tribunal dismissed the application as not maintainable, stating that the applicants did not come within the meaning of "financial creditor" and the claim did not constitute a "financial debt."
- The Tribunal clarified that the observations made in the order should not prejudice the applicants' rights before any other forum.