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TMI Blog2020 (7) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... can be deducted. The sale transaction between the corporate debtor and M/s. Versatile Commotrade Private Limited was entered by the corporate debtor to make huge profit and money paid by the M/s. Versatile Commotrade Private Limited to the Corporate Debtor was in the nature of advance paid for particular purpose for purchase of the property and Corporate Debtor was to give back equivalent money paid by executing sale deed and the corporate debtor being in the business of real estate, was obviously doing the same for huge profit purpose. Thus, advance money paid had commercial effect of borrowing. As such, above amount paid by M/s. Versatile was a debt disbursed against the consideration of time value of money under Sale Agreement having the commercial effect of borrowing - RP had rightly treated M/s. Versatile Commotrade Private Limited as a Financial Creditor . Application disposed off. - CA NO. 202/2019, IB-1489/ND/2018 - - - Dated:- 28-2-2020 - Smt. INA Malhotra, Judicial Member And Hemant Kumar Sarangi, Technical Member For the Applicant : Ishwar Mohapatra For the Respondent : Nikhlesh Krishnan and Abhishek Parma ORDER HEMANT KUMAR SARANGI, TECH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tile Commotrade Private Limited, under the category of Financial Creditor, which is against the provision of I B Code, 2016. 8. The basis of claim of the M/s. Versatile Commotrade Private Limited, as a Financial Creditor is that the Corporate Debtor executed Two agreements to sell with M/s. Versatile Commotrade Private Limited for the purpose of sale of land situated at Delhi. In pursuance of the said agreement the Corporate Debtor received ₹ 2,83,00,000/- as advance. As per this agreement, M/s. Versatile Commotrade Private Limited, was to pay balance sale consideration within stipulated time specified in the agreement, also, as per this agreement, if purchaser failed to pay the balance consideration within stipulated time, mentioned in the agreement, then advance amount received by the Corporate Debtor, will be forfeited and agreement to sell shall be cancelled. 9. The Applicant, in respect of the claim of M/s. Versatile Commotrade Private Limited, submits that, it will not fall under the category of Financial Creditor and that RP has made apparent error in treating the advance amount as Financial Debt, which is against the provision of I B code, 2016. It further s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or purchase agreement, having the commercial effect of borrowing. Recently, the Hon'ble Supreme Court in the judgement of Pioneer Land Infrastructure Ltd v. U.O.I., had analyzed in detail the scope and effect of Section 5 (8) as well as Section 5 (8) (f) of IBC and relevant portion of the said judgement which directly covers the issue in hand is quoted as under:- 70. Thus, in order to be a debt there ought to be a liability or obligation in respect of a claim which is due from any person. claim then means either a right to payment or a right to payment arising out of breach of contract, and this claim can be made whether or not such right to payment is reduced to judgement. Then comes default , which in turn refers to non-payment of debt when whole or any part of the debt has become due and payable and is not paid by the Corporate Debtor 72. The definition of financial debt in Section 5(8) then goes on to state that a debt must be disbursed against consideration for time value of money. Disbursement , is defined in Black's Law Disctionary (10th edn.) to mean: 1. The act of paying out money, commonly from a fund or in settlement of a debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of time value of money under Sale Agreement having the commercial effect of borrowing as defined in the above judgement of the Hon'ble Supreme Court and therefore, the RP had rightly treated M/s. Versatile Commotrade Private Limited as a Financial Creditor . 15. The Applicant has filed its rejoinder, in which the Applicant states that, in their reply M/s. Versatile relied on the decision of Hon'ble Supreme Court in the matter of M/s. Pioneer Urban Land Infrastructure Limited Anr. v. U.O.I Ors. It is submitted that in this judgement Hon'ble Supreme Court analysed in details the scope and effect of explanation to Section 5(8)(f) of the IBC more particularly constitutional validity of treating the home buyers as financial creditors which was inserted in the explanation to the Section 5(8)(f) of the IBC, 2016 by way of amendment in 2018, however, in the present case this transaction is not related to home buyers of a real estate project and as such the observations, comment, remarks made by Hon'ble Supreme Court in the above matter cannot be made applicable here, as fact and circumstances are entirely different. It is pertinent to mention that Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng, as such it will not fall within the category of financial debt. Moreover, Hon'ble Supreme Court in this clause 65 made reference to real estate allottee in order to conclude this observation which is not the case here as the transaction is in relation to purchase of land which does not fall within the ambit of real estate transaction. 18. Applicant further states that as per the clauses (d) and (zn) of section 2 of the Real Estate (Regulation and Development) Act, 2016 are reproduced below; (d) allottee in relation to a real estate project, means the person to whom a plot, apartment or building, as the case may be, has been allotted, sold (whether as freehold or leasehold) or otherwise transferred by the promoter and includes the person who subsequently acquires the said allotment through sale, transfer or otherwise but does not include a person to whom such plot, apartment or building, as the case may be, is given on rent; (zn) real estate project means the development of a building or a building consisting of apartments, or converting an existing building or a part thereof into apartments, or the development of land into plots or apartment, as the case may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is catch all in nature. This is clear from the words any amount and any other transaction which means that amounts that are raised under transactions not covered by any of the other clauses, would amount to a financial debt if they had the commercial effect of a borrowing. 79. as correctly argued by the learned Additional Solicitor General, the expression any other transaction would include an arrangement in writing for the transfer of funds to the corporate debtor and would thus clearly include the kind of financing arrangement by allottees to real estate developers when they pay installments at various stages of construction, so that they themselves then fund the project either partially or completely. 21. Thus, as it is observed in the above reproduced paras of the ruling in Pioneer Urban v. U.O.I of the Hon'ble Supreme Court, it is evident that Section 5(8)(f) is residuary provisions which is Catch all in nature and it covers any transaction under which any amount is paid for a particular purpose and it is not required that to cover such amount within the definition of financial debt, the money given should be as loan transaction. It is also evident ..... X X X X Extracts X X X X X X X X Extracts X X X X
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