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2021 (9) TMI 362 - AT - Insolvency and BankruptcyJurisdiction - power of Adjudicating Authority to adjudicate the matter under the I B Code - Respondent/Applicant is neither a Financial Creditor nor an Operational Creditor - debt and default existing in terms of the I B Code or not - case of Appellant is that there is no provision for return of money together with interest under the Share Purchase Agreement between the parties and therefore, the Respondent is not a Financial Creditor viz-a-viz the Appellant - HELD THAT - The essence of any debt to be described as financial debt is the time value of money as Borrowing is a name for money transaction. The word debt is applicable to a sum of money which has been promised at a future day as against a sum nor due and payable. In fact, a sum of money which is certainly and in all events payable is a debt, in regard to the fact whether it is payable now or at a future date - Under the I B Code, 2016 the shift is from inability to pay to an existence of default. No doubt, the Adjudicating Authority is not required to decide the amount of default. Even if a debt is disputed, if the same is more than ₹ 1,00,000/- then the application filed under Section 7 of the Code is maintainable in Law. The actuality of debt was proven by virtue of the concerned terms which formed part of the order of the Adjudicating Authority dated 24.09.2020. When a Settlement was arrived at between the parties, it is the pre-module duty of the Corporate Debtor to effect payments proposed by virtue of the Settlement after committing default, the Appellant cannot take altogether different stand, especially when the tenor and spirit of Share Purchase Agreement was not adhered to - when the Appellant had promised to repay the advanced sum paid by the Respondent/Applicant to it, then there is not only a violation of the Share Purchase Agreement dated 21.11.2012 but also the non-payment of amounts comes squarely under definition of Section 5(8) of the I B Code pertaining to Financial Debt. In the instant case, it is quite clear that the order admitting the application under Section 7 of the Code, filed by the Respondent/Applicant has not been assailed by the Appellant. In fact, in the Impugned Order dated 30.03.2021 passed by the Adjudicating Authority in IBA/13/KOB/2020 whereby and whereunder the application filed by the Respondent/Applicant was admitted, the said Adjudicating Authority came to the conclusion that the Respondent/Applicant had proved the existence of a debt as well as existence of default and had discussed in detail about the same in the order dated 25.08.2020, which speaks for itself. This Tribunal comes to an inevitable and inescapable cocksure conclusion that the aforesaid promise comes squarely within the ambit of definition of Financial Debt and that the Respondent/Applicant is without any haziness is a Financial Creditor in the eye of Law - Suffice it for this Tribunal to pertinently point out that the Appellant/Corporate Debtor had not adhered to its commitment in respect of Share Purchase Agreement dated 21.11.2012 and had not paid the amount admittedly, especially in the teeth of the fact that the debt due arises out of the said Share Purchase Agreement. The Impugned Order passed by the Adjudicating Authority (National Company Law Tribunal, Kochi Bench, Kerala) in admitting the Application IBA/13/KOB/2020 does not suffer from any material irregularity or patent illegality in the eye of law - Appeal dismissed.
Issues Involved:
1. Jurisdiction of the Adjudicating Authority under the I & B Code. 2. Classification of the Respondent as a Financial Creditor or Operational Creditor. 3. Existence of Debt and Default under the I & B Code. 4. Validity of the Share Purchase Agreement and its implications. 5. Settlement and Withdrawal of the Application under the I & B Code. 6. Adherence to the Settlement Agreement by the Corporate Debtor. 7. Legal implications of the Addendum to the Share Purchase Agreement. 8. Admissibility of the Application under Section 7 of the I & B Code. Issue-wise Detailed Analysis: 1. Jurisdiction of the Adjudicating Authority under the I & B Code: The Appellant contended that the Adjudicating Authority lacked jurisdiction to adjudicate the matter under the I & B Code as the Respondent was neither a Financial Creditor nor an Operational Creditor. However, the Tribunal found that the Adjudicating Authority had the jurisdiction to entertain the application under Section 7 of the I & B Code, as the Respondent was classified as a Financial Creditor. 2. Classification of the Respondent as a Financial Creditor or Operational Creditor: The Appellant argued that the Respondent was not a Financial Creditor as there was no provision for the return of money with interest under the Share Purchase Agreement. The Tribunal, however, held that the Respondent was a Financial Creditor, as the debt arose from the Share Purchase Agreement and the Addendum, which included terms for repayment with interest. The Tribunal referred to judgments that classified advances under similar agreements as financial debts. 3. Existence of Debt and Default under the I & B Code: The Appellant contended that there was no debt in terms of the I & B Code, and hence no default. The Tribunal found that the existence of debt was evidenced by consent terms and the Corporate Debtor's own admissions. The Tribunal held that the Respondent had proved the existence of debt and default, making the application under Section 7 of the I & B Code maintainable. 4. Validity of the Share Purchase Agreement and its implications: The Appellant argued that the Share Purchase Agreement did not contemplate a refund of the advance paid, and therefore, there was no financial debt. The Tribunal, however, found that the agreement, along with the Addendum, created a financial obligation for the Corporate Debtor to repay the advance with interest, thereby constituting a financial debt. 5. Settlement and Withdrawal of the Application under the I & B Code: The Tribunal noted that the I & B Code allows for the withdrawal of applications under Sections 7, 9, and 10 at various stages. In this case, the application was settled after admission but before the public announcement. The Tribunal held that the Adjudicating Authority was not barred from admitting the matter even after settlement. 6. Adherence to the Settlement Agreement by the Corporate Debtor: The Tribunal observed that the Corporate Debtor had failed to adhere to the terms of the settlement agreement, which included payment of the agreed amount by a specified date. The Tribunal found that the Corporate Debtor's failure to comply with the settlement terms justified the restoration of the insolvency proceedings. 7. Legal implications of the Addendum to the Share Purchase Agreement: The Addendum to the Share Purchase Agreement required the Respondent to make payments to the Corporate Debtor's creditors. The Tribunal found that the Addendum created a financial obligation for the Corporate Debtor, reinforcing the classification of the debt as a financial debt. 8. Admissibility of the Application under Section 7 of the I & B Code: The Tribunal upheld the Adjudicating Authority's decision to admit the application under Section 7 of the I & B Code, as the Respondent had proved the existence of debt and default. The Tribunal found that the application was not barred by limitation and that the debt arose from a valid agreement. Conclusion: The Tribunal dismissed the appeal, upholding the Adjudicating Authority's order admitting the application under Section 7 of the I & B Code. The Tribunal found no material irregularity or patent illegality in the Adjudicating Authority's decision, and the appeal was dismissed with no costs.
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