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TMI Blog2019 (2) TMI 1499X X X X Extracts X X X X X X X X Extracts X X X X ..... the view that in the absence of performance of its own obligation the amount would not be due and payable to the Financial Creditor. As a sequel to the above discussion we find that the petitioners do not satisfy the requirements of Section 7(5) of the Code insofar as no default appears to have occurred which is to arise only after fulfilling the obligations on the part of the Financial Creditor. The default would occur only when the amount is due and payable as stated in the above paras. The petition fails and the same is dismissed. The dismissal of the petition shall not be construed as an expression of opinion on the merit of the controversy in any other proceedings. - C.P. NO. IB-209(PB)/2018 - - - Dated:- 2-1-2019 - CHIEF JUSTICE (RTD.) M.M. KUMAR, PRESIDENT AND DR. DEEPTI MUKESH, MEMBER (J) For The Petitioner : Mr Rajeev Sharma and T. Rajat, Advocates JUDGMENT M.M. KUMAR, PRESIDENT. Mr. Krishan Kumar Kohli and three others claiming to be 'financial creditors' have filed this petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for brevity 'the Code') read with rule 4 of the Insolvency and Bankruptcy (Applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... structure Limited (for brevity SRS) whereby SRS was to take over KKK completely including the land belonging to KKK admeasuring 13 kanal (7865 square yards) bearing Mustkil No. 44, 14/5th Milestone, Mathura Road, Faridabad-121003. The relevant stipulations incorporated under the said agreement reads as under:- (a) KKK has 202900 shares in aggregate which are owned by 12 persons, names of whom are given in table below. Rate/Amount, which SRS shall pay to the concerned existing shareholder for purchasing/acquiring 100% shares of KKK are also mentioned in the table below: S. No. Name of Shareholder Number of Shares held in KKK Rate at which each share shall be acquired by SRS (Rs.) Amount to be paid by SRS (Rs.) 1. Shri K.K. Kohli 121074 200 2,42,14,800/- 2. Smt. Radha Kohli 44800 200 89,60,000/- 3. Ms. Sonia Kohli 15700 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of all liabilities of KKK or complete development marketing of proposed I.T. Unit/Park on said land, SRS shall pay such amounts to the concerned existing shareholder, which have been withheld by SRS under this clause and remained unadjusted (i.e., excess over the liabilities of KKK). It is made clear that SRS would pay interest @ 22% per annum to the existing shareholder(s) on the amount withheld by SRS in terms of this clause from the date of withholding the amount till the payment thereof by SRS in terms of this clause. (i) . A copy of the agreement dated 16.11.2007 has been placed on record (Annexure-D). 6. The aforesaid agreement Annexure-D was acted upon between the parties and in light thereof KKK was takenover by SRS. Afterwards SRS was converted into SRS-I-Tech. Thereafter on 14.05.2008 another MOU entered into between SRS-I-Tech (earlier known as KKK) and SRS Aviation wherein Mr. Kohli represented himself an erstwhile shareholders of the KKK. The relevant stipulations incorporated under the said MOU are quoted as under:- 1. . 2. The First Party (SRS Real Infrastructure Limited) has paid a sum of ₹ 4,02,67,500/- (Rupees Four ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jointly and severally liable to refund the aforesaid deposits in proportion to the liabilities cleared/paid by the Third Party Appropriate adjustments shall also be given to the Third Party for any refunds/subsidies etc received from Government departments for the period prior to 31.03.2008. 7. S/Shri Nanak Chand Tayal, Anil Jindal and Shri Rajesh Singla (Directors of the First, Second and Fourth Parties) hereby undertake to personally guarantee the refund of the aforesaid deposit to the Third Party (Mr. Krishan Kumar Kohli and the erstwhile shareholders of KKK) in terms of this agreement and have signed this agreement in their capacity as guarantors. In case the First (SRSRIL), Second (SRS I-Tech) and Fourth (SRS Aviations) Parties are do not refund the aforesaid deposit in terms of this Memorandum of Understanding, Third Party (Mr. Krishan Kumar Kohli and the erstwhile shareholders of KKK) may at its option recover the said deposit from them and/or their aforesaid Guarantors. 7. Afterwards the name of SRS Aviation was changed to KM Realtech Private Limited and further to KM Realtech Limited. Later on, a supplementary MOU dated 31.07.2010 (Annexure-F) was entered into be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2015. 12. Thereafter SRSRIL, SRSACPL, the aforesaid guarantors and Akriti Global Traders Ltd. transferred an amount of ₹ 100 lacs to Mr. K.K. Kohli, Ms. Aanchal Kohli, Ms. Ankita Kohli and M/s. Pawan Kumar Kohli Sons (HUF) and ₹ 85 lacs to Ms. Radha Kohli, Ms. Saveena Kohli and Mr. Krishan Kumar Kohli (HUF) and directed them to deposit the same with the Trustworthy Gems and Jewellers Pvt. Ltd. (Respondent) and Logical Jewellers Pvt. Ltd. respectively. Both the aforesaid entities controlled and floated by the aforesaid guarantors and are the Group Companies of SRSRIL SRSACPL. The details of the said deposits are as under: - Trustworthy Gems and Jewellers Pvt. Ltd. Mr. K.K. Kohli ₹ 30 lacs Ms. Aanchal Kohli ₹ 20 lacs Ms. Ankita Kohli ₹ 20 lacs M/s. Pawan Kumar Kohli Sons (HUF) ₹ 30 lacs Logical Jewellers Pvt. Ltd. Ms. Radha Kohli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing pressure upon us to clear the liabilities. In fact, interests and penalties are accruing on said liabilities and the same are increasing day by day. In these circumstances, please note that Trustworthy Gems Jewellers Private Limited and Logical Jewellers Private Limited are not liable to pay you amount till you clear of liabilities of K.K. Kohli Brothers Private Limited (now known as SRS Automotive Components Pvt. Ltd.) for period upto 31.03.2008 and submit proof thereof to us. We shall settle accounts with you upon your clearing said liabilities. 16. A chart relating to computation of amount of default and dates of default has been placed on record in a tabular form which is as under:- Details of Calculation of interest for Trustworthy Gems Jewellers (P) Ltd from 01.01.2016 to 31.01.2018 Loan Amount : 100 Lac Interest : 22% per annum Description Amount Int. for Jan upto 31.01.2016 183333 Int. for Feb upto 28.02.2016 186694 Int. for Mar upto 31. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal respondent was proceeded ex partee. 18. On 12.09.2018, during the course of hearing the question arose in our mind as to whether the petitioner would fall within the definition of 'financial creditor' as given in Section 5(8) of the Code or it could be regarded as 'corporate debtor' as defined by Section 3(8) of the Code. Thus, on the request of the learned counsel for the petitioner we ordered for listing the matter on 16.10.2018. On 16.10.2018 we heard the arguments and reserved the order. 19. During the course of hearing we raised a specific query as to whether the petitioner would be covered by the definition of expression 'financial creditor' as per the provisions of Section 5(7) (8) of the Code. 20. In order to reach a correct conclusion, it would be pertinent to note the definition of expression 'financial creditor' as provided by Section 5 (7) of the Code which means any person to whom a financial debt is owed and includes a person to whom such financial debt has been legally assigned or transferred. The expression 'financial debt' has been defined in Section 5(8) of the Code to mean a debt alongwith interest, if a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either case, as the inflows and outflows are distanced by time, there is a compensation for time value of money. The amount of compensation is usually worked out on the risk factor inherent in the series of payments. There can be complex financial instruments where deciphering the true intent of the transaction, debt or equity, may not be easy. The definition is illustrative as it uses the expression 'includes' and has then set out various illustrations of financial transactions. Accordingly, the definition must be read in its contemporaneous meaning to cover all such financial transactions as providers of finance commonly enter into. It appears that the petitioner fulfils the first ingredient of Section 5(8) of the Code. 21. However, it has to answer the other requirements. In the present case it is evident from the perusal of reply to the notice sent by the Corporate Debtor to the Financial Creditor that as per agreements and addendums executed between them, a sum of ₹ 1,85,00,000/- (Rupees One Crore Eighty Five Lakh Only) belonging to the petitioners has been deposited with Trustworthy Gems Jewellers Private Limited and Logical Jewellers Private Limited towar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjudicating authority. Under sub-section (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be. A perusal of the aforesaid observation would show that the Adjudicating Authority-NCLT has to be satisfied that a default has occurred and the Corporate Debtor is entitled to point out that the default has not occurred and that the debt is not due or a debt may not be due if it is not payable in law or in fact. It is in this regard that stipulation in the agreement dated 14.05.2008 in clauses 4 5 read with supplementary MOU dated 31.07.2010 have been referred by the Corporate Debtor in its reply to the notice and it has been pointed out that the Financial Creditor has failed to discharge its own obligations and the amount would not be due and payable till they discharge their own obligation. It is pertinent to mention that the Corporate Debtor has conceded the agreements and addendums but has gone to say that it has been paying interest and the Financial Creditor was to clear its liabilities within a maximum period of five years and are ..... 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