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TMI Blog2018 (2) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... ny such evidence, the Appellant cannot claim that loan amount, if any given to the Respondent comes within the meaning of ‘financial debt’, as defined under sub-section (8)(f) of Section 5 of the ‘I&B Code’. We hold that the Adjudicating Authority rightly held that the Appellant is not a ‘Financial Creditor’. Appeal dismissed. - (Company Appeal (AT) (Insolvency) No. 38 of 2017) - - - Dated:- 22-12-2017 - Mr. S.J. Mukhopadhaya, Mr. A.I.S. Cheema And Mr. Balvinder Singh For The Appellant : Shri Arun Kumar, Ms. Niveditha Jhinnaiah and Ms. Bhabna Das, Advocates For The Respondents : Shri Alok Dhir, Ms. Varsha Banerjee and Shri Kunal Godhwani, Advocates JUDGMENT SUDHANSU JYOTI MUKHOPADHAYA, J. The Appellant, claimed to be Financial Creditor filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as I B Code ) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 to initiate Corporate Insolvency Resolution Process against Geometrix Insolvency Solutions Private Limited (Respondent). The Adjudicating Authority (National Company Law Tribunal), Hyderabad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016. The Respondents, in its reply dated 26th September, 2016 claimed that the money has been repaid thus: ..the balance lying to your client s account as on 31st March, 2015 is history and it has been repaid and/or adjusted as desired by your client, and as on 3rd September 2016, your client ceased to be a creditor of my client. 7. Learned counsel for the Appellant submitted that the Tribunal wrongly held that the Appellant is not a Financial Creditor . According to learned counsel for the Appellant, she is Financial Creditor within the meaning of sub-section (7) of Section 5 of the I B Code . 8. Learned counsel for the Appellant submitted that the debt owed by the Respondent to the Appellant is a Financial Debt as per sub-section (8)(a) of Section 5 of the I B Code as the loans carried interest. It was also submitted that the transaction is a Financial Debt under sub-section (8)(f) of Section 5 of the I B Code , as it has the commercial effect of a borrowing. 9. According to counsel for the Appellant, the Respondent has admitted in the books of account that the Appellant is an unsecured creditor , and the money advanced by her were loans to the Company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clude any one or more mode of disbursed as mentioned in clause (a) to (i) of sub-section (8) of Section 5 of the I B Code . Therefore, it is to be seen whether the amount paid by the Appellant fulfils the conditions of disbursement against consideration of time value and money. It is only pursuant to such satisfaction that the Appellant can plead that the amount allegedly disbursed by the Appellant has a commercial effect of borrowing under sub-section (8)(f) of Section 5 of the I B Code . 14. The term Creditor has been defined in sub-section (10) of Section 3 of the I B Code , wherein a Financial Creditor as well as an unsecured creditor have been independently mentioned. However, I B Code proceedings can be triggered only by either a Financial Creditor or an Operational Creditor . According to Respondent, the Appellant does not fall within the meaning of Financial Creditor in absence of financial debt being disbursed by the Appellant, therefore, the Appellant has no locus to initiate I B Code proceedings against the Respondent Company. It was also submitted that the Appellant at best can claim to be an unsecured creditor of the Respondent Company, howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alyana Hyma as the first Directors of the Respondent - Corporate Debtor . The correct Articles as placed by the Respondent- Corporate Debtor mentions the name of the first Directors as P. Kedarnath and Dr. B.V.S. Lakshmi i.e. the Appellant herein. Further, according to the Respondent, the Balance Sheets as placed on record, were prepared at the time when the Appellant was exercising control over the Respondent Company. 18. It was further contended that the Appellant is guilty of siphoning funds which has been explained in detail by the Respondent Company in its additional affidavit. A criminal complaint and FIR being lodged against the Appellant in August, 2016 and therefore, according to the Respondents, the Appellant with a malafidely intent to arm-twist the Respondent- Corporate Debtor tried to initiate the process for alleged recovery of amount due to the Appellant. 19. We have heard learned counsel for the parties and perused the records. 20. The Appellant has enclosed the copy of Form-32 and the annual ledger statement from the Respondent for the period from 2013-14 to 2015-16 evidencing the transfer of funds from the Appellant to the Respondent- Corporate Debtor . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... INDIAN BANK OCC A/C 36,67,937 10,67,370 INDIAN BANK T/L 6106957536 67,04,081 3,77,845 INDIAN BANK T/L 899902028 2,10,74,989 1,97,63,812 3,14,47,007 2,12,09,027 SCHEDULE - D UNSECURED LOAN -KALYANI - 20,000 -KEDARNATH PULIPAKA - 20,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24317562 Journal 75,000.00 30-5-2014 By Kedarnath Indian Bank A/c 6124317562 Journal 50,000.00 7-6-2014 By Kedarnath Indian Bank A/c 6124317562 Journal 1,50,000.00 9-6-2014 By Kedarnath Indian Bank A/c 6124317562 Journal 1,00,000.00 10-6-2014 By Travelling Convyence Journal 11,334.00 By Travelling Convyence Journal 50,298.00 12-6-2014 By Kedarnath Indian Bank A/c 6124317562 Journal 70,000.00 19-6-2014 By Younus Petty Cash Cash Receipt 2,000.00 By Travelling Convyence Journal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9-3-2015 By Indian Bank CA 6241424998 Bank Receipt 1,09250.00 25,000.00 75,28,462.00 To Closing Balance 75,03,462.00 75,28,462.00 7528,462.00 22. Learned counsel appearing on behalf of the Respondent while brought to the notice of the Appellate Tribunal that the aforesaid document suggests that majority of the amount has been shown against journal or by bank receipt and whatever the amount shown therein has been shown to be unsecured loan . In the ledger book, the loans and advances from related parties shown to be unsecured loan and one of the them shows from Director s relatives (daughter of the Appellant is the Director), as ₹ 95,48,279/- for year ending 31st March, 2016 and ₹ 81,64,250/- for the year ending 31st March, 2015. 23. Similar is the position with regard to the other documents wherein the amount has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 28. In Nikhil Mehta Sons case (supra) this Appellate Tribunal while noticed sub-section (8) of Section 5 of the I B Code observed: - 17. The first question arises for consideration is as to who is a Financial Creditor . Learned Adjudicating Authority, for determination of the aforesaid issue examined the definition provided in Section 5(7) and 5(8) and in the impugned judgement rightly observed: - 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 which is defined in Section 5(8) of the IBC. The opening words of the definition clause would indicate that a financial debt is a debt along with interest which is disbursed against the consideration for the time value of money and it may include any of the events enumerated in sub-clauses (a) to (i). Therefore the first essential requirement of financial debt has to be met viz. that the debt is disbursed against the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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). 29. For coming within the definition of Financial Debt as defined under sub-section (8) of Section 5, the Claimant is required to show that (i) there is a debt alongwith interest, if any, which has been disbursed and (ii) such disbursement has been made against the consideration for the time value of money . Thereby, if the Claimant claims to be Financial Creditor he will have to show that debt is due which he has disbursed against the consideration for the time value of money and that the borrower has raised the amount directly or through other modes like credit facility or its de-materialised equivalent, note purchase facility or the issue of bonds, notes, debentures, loan stock or any other similar instrument. The amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital lease under the Indian Accounting Standards or such other accounting standards can also be referred to by the Creditor to claim that there is a financial debt due to him which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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