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TMI Blog2019 (9) TMI 1190X X X X Extracts X X X X X X X X Extracts X X X X ..... siness dealings. The Application is allowed thereby Respondents no. 3-11 are declared as not falling under category of Financial Creditors but may be unsecured creditors who may avail other remedies to recover their debt. Further it is ordered that the COC meetings held on 13.06.18, 29.08.18, 12.09.18 and 29.09.18 are non-est and resolutions passed if any therein such meetings stands nullified. - Company Petition No. IB- 492/ND/2018 And CA No. 184/2018 - - - Dated:- 9-7-2019 - DR. DEEPTI MUKESH, Member (Judicial) And SHRI PRADEEP R. SETHI, Member (Technical) For The Applicant : Mr. Abhishek Puri, Adv And Mr. V. Siddharth, Adv For The RP : Mr. Rajesh Kumar Parakh For The Respondents : Mr. Moni Cinmoy, Adv. ORDER DR. DEEPTI MUKESH, MEMBER (JUDICIAL) 1. The present application is filed by one of members of COC, Shinham Bank who is holding 14.96% voting rights and has challenged the status of all other COC members as financial creditors, being the individuals, who claim to be financial creditors on the basis of their lending of money to the Corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btor has not accepted any money from respondents no.3 to 11 in compliance of Section 73, hence such contracts are void as per Section 23 and Section 24 of the Indian Contract Act and thus unenforceable in law thereby the Respondents no.3-11 even though have advanced money and as per account of Corporate Debtor, interest is also paid for certain period but the said transactions are void in eyes of law and based on that the Respondents no.3-11 cannot claim the status of Financial Creditor as defined under Insolvency and Bankruptcy Code. They may prove their claim and right to recover, but they are not Financial Creditors and cannot become members of Committee of Creditors. 6. The applicant has further stated that Corporate Debtor and Respondents are related parties and hence the loan is advanced at such huge/ exorbitant rate of interest which is termed Extortionate Transaction as defined under Section 50 of Insolvency and bankruptcy Code and the same cannot be considered for the purpose of considering them as Financial Creditors. 7. The Respondents have filed reply vehemently opposing the application and prayed for confirming st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no other option but to borrow from the answering respondent and the answering respondents, knowing the director of the Corporate Debtor chose to advance the loan as per the mutually agreed terms. The answering respondent having advanced short-term loan to the Corporate Debtor for the purpose of running the company, could not be penalized for fault or any compliance default if committed by the Corporate Debtor. 12. It is denied that the amounts even if inappropriately advanced by the Respondent nos. 3-11 do not fall within the accepted legal manner of monies that can be accepted by any private company under the Companies Act, 2013. 13. It is further denied that the communications between the answering respondent and the Corporate Debtor do not clearly establish the conditions of the said loan. The claim of the answering respondent categorically enumerates, in their letters/ correspondences while advancing money, the conditions on which the short -term loan had been advanced by the answering respondent to the Corporate Debtor, further the same could easily be verified by a perusal of the financial statements of the Corporate Debtor and the forensic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 Madhulika Chahal (Resp. No.5) 13,33,200/- 10,00,000/- 4.47% 5 Dushyant Rana (Resp. No. 6) 13,33,200/- 10,00,000/- 4.47% 6 Pervinder Yadav (Resp. No. 7) 9,32,000/- 5,00,000/- 2.23% 7 Shri Bhagwan (Resp. No. 8) 35,46,000/- 16,50,000/- 7.38% 8 Ankit Yadav (Resp. No. 9) 15,60,000/- 10,00,000/- 4.47% 9 Rajendra Singh (Resp. No. 10) 22,20,000/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... els for applicant and Respondents 3 to 11, the matter was fixed for hearing of Respondent 2 i.e. RP, specifically at their request on 23.04.2019. On the said date RP further sought adjournment which was declined, hence liberty was sought and granted to file written submissions by RP, and further to all parties, if desired. 22. The main issue which is to be decided is: a. Whether the respondents No. 3 to 11, the members of CoC as on date are Financial Creditors as defined under Section 5 (7) while considering the money advanced by them, and/or, will fall under the category of Financial Debt under Section 5(8)(a). For convenience Section 5(8)(a) is reproduced hereunder: - ( 8) financial debt means a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money and includes--- ( a) money borrowed against the payment of interest; The money advanced by the respondent Nos. 3 to 11 since is not in pursuance of any loan agreement/ document but merely a letter by lender for advance to the Corporate Debtor, it is important to conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a banking institution notified by the Central Government under section 51 of the Banking Regulation Act, 1949 (10 of 1949), or a corresponding new bank as defined in clause (d) of section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) or in clause (b) of section (2) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980) , or from a cooperative bank as defined in clause (b-ii) of section 2 of the Reserve Bank of India Act, 1934 (2 of 1934) ; ( iv) any amount received as a loan or financial assistance from Public Financial Institutions notified by the Central Government in this behalf in consultation with the Reserve Bank of India or any regional financial institutions or Insurance Companies or Scheduled Banks as defined in the Reserve Bank of India Act, 1934 (2 of 1934); ( v) any amount received against issue of commercial paper or any other instruments issued in accordance with the guidelines or notification issued by the Reserve Bank of India; ( vi) any amount received by a company from any other company; ..... 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( xi) any non-interest bearing amount received or held in trust; ( xii) any amount received in the course of, or for the purposes of, the business of the company,- ( a) as an advance for the supply of goods or provision of services accounted for in any manner whatsoever provided that such advance is appropriated against supply of goods or provision of services within a period of three hundred and sixty-five days from the date of acceptance of such advance: Provided that in case of any advance which is subject matter of any legal proceedings before any court of law, the said time limit of three hundred and sixty-five days shall not apply: ( b) as advance, accounted for in any manner whatsoever, received in connection with consideration for property under an agreement or arrangement , provided that such advance is adjusted against the property in accordance with the terms of agreement or arrangement; ( c) as security deposit for the performance of the contract for supply of goods or provision of services; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of this Act, no company shall invite, accept or renew deposits under this Act from the public except a manner provided under this chapter. 23. On perusal of Section 73(1) of the Companies Act, 2013 read with Rule 2(c) of Companies (Acceptance of Deposit) Rules and after analysing the transactions between the Corporate Debtor and Respondents No. 3 to 11, it can be said that the said advance of money was accepted by Corporate Debtor as loan. Section 73(2) will not apply since none of the respondents no. 3-11 are members of Corporate debtor advancing such money. 24. Considering that the said money advanced by the respondents to the Corporate Debtor is not deposit but loan, the question arises as to what kind of debt can it be categorised into. Certainly, this is not an Operational debt as there is no transaction for goods or services, the money is plainly advanced for the business purpose of the Corporate Debtor having clause of Interest though much higher as compared to market or other prevailing rates in normal parlance or business dealings. 25. It needs to be discussed whether the money advanced by the Respondents no. 3-11 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied that any debt extended by any person providing financial services which is in compliance with any law for the time being in force in relation to such debt shall in no event be considered as an extortionate credit transaction . The Section clearly means that if the Corporate Debtor is involved in any extortionate credit transaction which involves the receipt of any money, the RP has to consider the same and avoid such transaction. Such an exercise is neither discussed nor considered by RP. 27. As a sequel to above discussions, Application is allowed thereby Respondents no. 3-11 are declared as not falling under category of Financial Creditors but may be unsecured creditors who may avail other remedies to recover their debt. Further it is ordered that the COC meetings held on 13.06.18, 29.08.18, 12.09.18 and 29.09.18 are non-est and resolutions passed if any therein such meetings stands nullified. 28. The RP is directed to reconstitute the COC and hold the meeting to proceed with CIRP and to take all further steps promptly. 29. Let the copy of the order be made available to all the parties concerned and be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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