2018 (9) TMI 1298 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - financial debt - Held that - There is no document to show that the respondent company either accepted or undertook to repay the loan with interest. The applicant has failed to justify as to how without any provision of interest, the debt claimed in the application can be termed as a financial debt. 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. We make it clear that any observations made in this order shall not be construed as an expression of opinion on the merit of the controversy and the right of the Applicants before any other forum shall not be prejudiced on account of dismissal of the instant application.

Summary

Issues Involved:
1. Jurisdiction of the Tribunal.
2. Definition and qualification of "Financial Creditor".
3. Definition and qualification of "Financial Debt".
4. Evidence of loan agreement and interest.
5. Admissibility and maintainability of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Tribunal:
The Tribunal confirmed its jurisdiction over the matter as the registered office of the respondent corporate debtor, M/s Satkar Air Cargo Services Private Limited, is located in New Delhi. Hence, this Tribunal has territorial jurisdiction over the NCT of Delhi, as per sub-section (1) of Section 60 of the Insolvency and Bankruptcy Code, 2016.

2. Definition and Qualification of "Financial Creditor":
The applicant must satisfy the definition of "Financial Creditor" under Section 5(7) of the Code. The Tribunal emphasized that a "Financial Creditor" is any person to whom a financial debt is owed, including a person to whom such debt has been legally assigned or transferred. The applicant, Mr. Ravinder Pal Singh Lamba, claimed to be a financial creditor based on an unsecured loan given to the respondent. However, the Tribunal found that mere grant of a loan and its admission by the corporate debtor does not automatically qualify the applicant as a "Financial Creditor" under the Code.

3. Definition and Qualification of "Financial Debt":
"Financial Debt" is defined under Section 5(8) of the Code as a debt along with interest, if any, which is disbursed against the consideration for the time value of money. The applicant claimed a total amount in default of ?1,77,71,974, which included ?80,00,000 as the principal loan and ?97,71,974 as interest at 18% per annum. The Tribunal noted that in the absence of any evidence showing that the loan was disbursed against the consideration for the time value of money, the applicant's claim does not meet the definition of "Financial Debt".

4. Evidence of Loan Agreement and Interest:
The Tribunal observed that the applicant did not produce any loan agreement or documentation supporting the claim of interest at 18% per annum. The respondent denied any agreement to pay interest, and there was no evidence to suggest that the loan was disbursed with the consideration for the time value of money. The Tribunal cited the Hon'ble NCLAT judgments in Vishwanath Singh v. Visa Drugs and Pharmaceuticals (P.) Ltd. and Dr. B.V.S. Lakshmi v. Geometrix Laser Solutions Private Limited, emphasizing the necessity of proving the time value of money to qualify as a financial debt.

5. Admissibility and Maintainability of the Application:
The Tribunal concluded that the applicant failed to substantiate the claim with supporting documentary evidence that interest was payable on the loan. The balance sheets of the respondent company showed no accumulation of interest, indicating that the loan was not disbursed against the consideration for the time value of money. Consequently, the debt could not be termed as a "financial debt", and the applicant did not qualify as a "financial creditor". Therefore, the application under Section 7 of the Code was not maintainable.

Conclusion:
The Tribunal dismissed the petition as not maintainable, stating that the applicant did not meet the criteria of a "financial creditor" and the claimed debt did not qualify as a "financial debt". The Tribunal clarified that the observations made in the order should not be construed as an expression of opinion on the merits of the controversy, and the applicant's rights before any other forum remain unaffected.