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TMI Blog2019 (10) TMI 1046X X X X Extracts X X X X X X X X Extracts X X X X ..... as 'IBC') against the Corporate Debtor - M/s Home Movie Makers Private Limited (Respondent herein) for initiation of Corporate Insolvency Resolution Process. 3. The Adjudicating Authority, after hearing the parties, dismissed the Application holding that the claim made by the Appellant (Financial Creditor) is not a 'financial debt'. Paragraphs-9 & 10 of the impugned order is extracted hereunder: .... "9. In view of the reasons aforementioned, we believe that it is not a financial debt and the petitioner tried to masquerade it as financial debt when reply came to section 8 Notice from the corporate debtor. Therefore, this Bench having felt that this petitioner should not have concealed the facts and tried to metamorphose this petition as petition u/s 7 of the Code, this Company Petition is hereby dismissed by imposing costs of Rs. 1,00,000 payable to the Corporate Debtor within 15 days hereof. 10. Accordingly this Company Petition is hereby dismissed" ...... 4. The Appellant in support of their grounds argued that the transaction between the parties clearly establishes it is a financial debt. 5. Per contra, the Respondent (Corporate Debtor) denied the stand of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y an amount of Rs. 30 lakhs by way of advance towards their (Respondent's) entitlement from sale of FCT in relation to telecasting of serial viz., PASALMAR/GANGA which will be telecasted during the period from 01.01.2017 to 31.01.2017 (Page 81 of Paper Book). 11. The Appellant issued notice in Form-3 under Section 8(1) of the IBC dated 15.11.2018 to the Respondent claiming an amount of Rs. 57,55,799/- shown as Operational Debt and relied on the marking agreement dated 09.12.2016 and in continuation thereof, relied on letters dated 31.01.2017, 29.05.2017 and 07.11.2017. The Appellant clearly stated that the claim is an Operational Debt. However, the Appellant having issued notice under Section 8(1) of the IBC filed a petition in Form-1 i.e., under Section 7 of the IBC whereby a Financial Creditor is entitled to file application under the said Section, claiming an amount of Rs. 57,55,799/- plus interest and shown as disbursed on 28.09.2013, 30.11.2016, 09.12.2016 and 31.01.2017. 12. The Respondent contended and not denied the agreement dated 09.12.2016 with respect to the marking of FCT in connection with telecasting of Tamil Commercial Serial titled Ganga on SUN TV channel. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed "in consideration of the rights granted to the Marketing Agency under Clauses 3 & 4 hereinabove, the Marketing Agency (Appellant) agrees to pay the Producer (Respondent) as mentioned in Annexure-1 in detail. As per the Agreement the Appellant referred as 'Marketing Agency' and the Respondent referred as 'Producer'. In Annexure-1 of this Agreement it has been clearly mentioned that in consideration of the rights granted to the Appellant (Marketing Agency) under Clauses 3 & 4, the Appellant shall pay to the Respondent (Producer) in the manner as stated therein. However, from the clauses of the Annexure, an amount of Rs. 1,80,000/- per episode as telecast fee of the Programme, shall be paid in advance on a weekly basis. However, there is no clause with respect to payment of interest in case of default. Further clause-6 of the agreement dated 09.12.2016 entered between the Appellant and the Respondent, same amount i.e., Rs. 1,80,000/- as consideration and payment has been mentioned towards telecast fee. From the aforesaid agreement it is clear that the Appellant had not disbursed the money against the consideration for the time value of money and the Respondent has not received the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue of bonds, notes, debentures, loan stock or any similar instrument; (d) The amount of any liability in respect of any lease or hire purchase contract which is deemed as finance or capital lease under the Indian Accounting Standards or such other accounting standards as may be prescribed; (e) Receivables sold or discounted other than any receivables sold on non-recourse basis; (f) Any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing; (g) Any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price and for calculating the value of any derivative transaction, only the market value of such transaction shall be taken into account; (h) Any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution; (i) The amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause;" ... 17. From the records and from Form-1, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words, the legislature has included such financial transactions in the definition of 'Financial debt' which are usually for a sum of money received today to be paid for over a period of time in a single or series of payments in future. It may also be a sum of money invested today to be repaid over a period of time in a single or series of instalments to be paid in future. In Black's Law Dictionary (9th edition) the expression 'Time Value' has been defined to mean "the price associated with the length of time that an investor must wait until an investment matures or the related income is earned". In both the cases, the inflows and outflows are distanced by time and there is a compensation for time value of money. It is significant to notice that in order to satisfy the requirement of this provision, the financial transaction should be in the nature of debt and no equity has been implied by the opening words of Section 5(8) of the IBC. It is true that there are complex financial instruments which may not provide a happy situation to decipher the true nature and meaning of a transaction. It is pertinent to point out that the concept 'Financial Debt' as envisaged under Section 5(8) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he time value of money'. To show that there is a debt due which was disbursed against the 'consideration for the time value of money', it is not necessary to show that an amount has been disbursed to the 'Corporate Debtor'. A person can show that the disbursement has been made against the 'consideration for the time value of money' through any instrument. For example, for any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price and for calculating the value of any derivative transaction for which only the market value of such transaction shall be taken into account, it is not necessary to show that amount has been disbursed. The disbursement against the 'consideration for the time value of money' is the main factor." 20. By relying on the aforesaid Judgment of this Appellate Tribunal, we are of the view that the Appellant, who claims to be a Financial Creditor, however, claims made by it, is not a Financial Debt. It is reiterated that in the marketing agreements and subsequent correspondence exchanged between the Appellant and the Respondent, no way it is mentioned that the amount paid by the Appellant to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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