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TMI Blog2017 (3) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... and of Applicant No.4. He is also resident of Greater Kailash-I, New Delhi. 2. It is appropriate to mention that all the Applicants claim themselves to be the "Financial Creditors' within the meaning of the term used in Section 7 of 'IBC. In order to put the controversy in its proper perspective few facts may first be noticed. In accordance with the averments made in the application, the first three Applicants are resident of United States of America and the Applicant No.4, mother of Applicant No.3 resides in Delhi. Respondent viz. M/s. AMR Infrastructure is a Registered Company having its Head Office in Delhi. It is in the real estate business of constructing, promoting and developing commercial and residential properties, office spaces etc. A true typed copy of its Memorandum of Association has been placed on record (Annexure-A). 3. Applicant Nos. 3 and 4 booked two Office spaces measuring 1000 sq.ft. in their respective names under the project known as "Kessel-I - Valley" and executed Memorandum of Understanding dated 12.07.2007. It is alleged that the Memorandum of Understanding was lost by the Respondent with a mala fide intention and some ulterior motive. In its pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant Nos. 2 and 3 in future returns or adjust the total amount at the time of possession. It is pleaded by the Respondent that from January 2009 till March 2010, the Respondent continued making payment to the applicant Nos. 2 and 3 for an amount of Rs. 88,315/-, whereas it was actually supposed to pay an amount Rs. 99,600/-. However, the mistake was rectified and the Respondent started paying to the applicants the agreed amount from April 2010. It was further agreed by the Respondent to pay the difference of amount of Rs. 19,875/- in the near future. 5. Applicant No.1 also booked a fully-furnished residential flat measuring 550 sq.ft. on the 4th Floor for a consideration amount of Rs. 7,24,000/-. A sum of Rs. 5,80,000/- was paid by the Applicant No.1 to the Respondent at the time of booking and the remaining amount of Rs. 1,44,000/-was to be paid at the time of delivery of possession which included Club charges, EFC charges, EEC charges and IFMS charges. A Memorandum of Understanding was executed between the parties on 20.08.2009 with detailed terms and conditions. According to the terms of the MOU, construction of the fully-furnished flat was to be completed on or before Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 9. We have heard learned counsel at some length. We confronted learned counsel for the Applicants with a query as to how the Applicants would be covered by the expression 'Financial Creditor' and the expression 'Financial Debt' within the meaning of the term used in Section 7 and Section 5(7) & (8) of the IBC. According to the learned counsel, the default in payment of the amount of "Assured Returns" payable by the Respondent would be sufficient to satisfy the requirement of Section 7 read with Section 5(7) and (8) of the IBC. 10. In order to find out as to whether the Applicant answers the description of "Financial Creditor" and "Financial Debt" in terms of the aforesaid provision of the Act, it would be profitable to read the provisions of Sections 5(7) & (8) and Section 7 of IBC which are set out below:- '5. Definitions: In this Part, unless the context otherwise requires,- 7. "financial creditor" means any person to whom a financial debt is owed and includes a person to whom such debts has been legally assigned or transferred to; 8. "financial debt" means a debt along with interest, if any, which is disbursed against the consideration for the time v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... professional; and (c) any other information as may be specified by the Board' 11. From a bare perusal of Section 7 of the IBC, it is patent that the insolvency process can be triggered by a "Financial Creditor" individually or jointly against a corporate debtor when default has occurred. The first question arises for consideration is as to who is a 'Financial Creditor'. In order to ascertain the meaning of that expression we have to examine its definition as provided by Section 5 which is applicable to Part II. We have already extracted the provisions of Sections 5(7) and 5(8) of the IBC which are relevant to the issue raised. Section 5(7) of IBC defines the expression "Financial Creditor" and Section 5(8) of IBC defines the expression "Financial debt" which has been used in Section 5(7) of IBC. 12. A perusal of definition of expression 'Financial Creditor' would show that it refers to a person to whom a Financial debt is owed and includes even a person to whom such debt has been legally assigned or transferred to. In order to understand the expression 'Financial Creditor', the requirements of expression 'financial debt' have to be satisfied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duct at the end of a specified period is not a financial contract. It is essentially a contract for sale of specified goods. It is true that some time financial transactions seemingly restructured as sale and repurchase. Any repurchase and reverse repo transaction are sometimes used as devices for raising money. In a transaction of this nature an entity may require liquidity against an asset and the financer in return sell it back by way of a forward contract. The difference between the two prices would imply the rate of return to the financer. (See Taxman's Law Relating to IBC, 2016 by Vinod Kothari & Sikha Bansal) When we examine the nature of transactions in the present case, we find that it is a pure and simple agreement of sale or purchase of a piece of property. The agreement to sell a flat or office space etc. Merely because some "assured amount" of return has been promised and it stands breached, such a transaction would not acquire the status of a 'financial debt' as the transaction does not have consideration for the time value of money, which is a substantive ingredient to be satisfied for fulfilling requirements of the expression 'Financial Debt'. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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