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TMI Blog2020 (10) TMI 825X X X X Extracts X X X X X X X X Extracts X X X X ..... into Memorandum of Understanding/Collaboration agreement about the land followed by two other supplementary MOU's dated 20th November 1989 and 22nd November 1989. During the year 1992, some dispute arose between the parties. The Applicant, alongwith its associates filed a Civil Suit for specific performance along with other reliefs against the Corporate Debtor, before the Hon'ble High Court of Delhi bearing CS (OS) No.1744 of 1992. Based on an amicable settled entered into between the parties, the Civil Suit was decreed on 10th April 1996. 3. As per the settlement filed before the Hon'ble High Court, the Corporate Debtor had agreed to develop a Group-Housing Complex on a plot of land admeasuring 22.95 acres. Out of this area, the Applicant, alongwith another, was entitled to only 34,000 sq. ft. residential covered/built-up area alongwith proportionate super area. Given the terms of settlement if the sanction of plans is not obtained within a maximum period of 3 years from the date of signing of the settlement, in that event, the Corporate Debtor and M/s Dalmia Promoters and Developers Pvt Ltd, agreed to give the further built-up area of 1700 sq. ft., after the lapse o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in case of delay in getting the sanction of plans, the penalty in the shape of additional built-up area in favour of Financial Creditor and its associates was to be allotted. In other words, nothing is paid in terms of money to the Financial Creditor and its associates in the light of the 'consent decree and settlement terms'. The Corporate Debtor has not raised any money from the Financial Creditor in terms of the explanation provided to sub-clause (8) of Section 5 of I&B Code, 2016. 9. Learned Counsel for the Financial Creditor submits that MoU's dated 26th June 1989, 20th November 1989 and 22nd November 1989 entered into between the Financial Creditor and the Corporate Debtor for allotment of the built area to the Financial Creditor. In addition to this, the Financial Creditor had paid an amount of Rs. 2 Crores to the Corporate Debtor in September 1989. As per MoU dated 20th November 1989, MoU dated 22nd June 1989 was cancelled. As per terms of MoU Dt. 20th November 1989 the amount of Rs. 2 Crores was to be refunded to Financial Creditor latest by 28th February 1990. The Corporate Debtor did not reinstate the MoU dated 22nd June 1989 hence it became void. But the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into the parties was made part of the judgment and decree of Court. As per terms of the settlement, the Corporate Debtor had agreed to provide 34000 sq. ft. of the built-up residential area and proportionate super area to the Plaintiff in the Group Housing Complex to be developed on a plot of land measuring 22.95 acres situated at Block 48, Keventer Lane, Sardar Patel Marg, New Delhi. 15. By order of the Hon'ble High Court dated 04th January 1995 in FAO (OS) No. 6/93 titled Dalmia Promoters and Developers Pvt Ltd & Others (arising from the aforesaid Civil Suit) an amount of Rs. 2 Crores being the interest-free security deposit with the Respondent Corporate Debtor was refunded to the Appellant. Thus, no money of the Appellant is left with the Respondent. Hon'ble High Court of Delhi by order dated 06th August 2019 in Ex. FA No.32/2019 passed an order for staying the execution proceeding. 16. The Corporate Debtor further contends that debt, as alleged by the Appellant, is not a 'financial debt' as defined under Clause (8)(f) of Section 5 of the Code, as no sums were raised from/paid by the Appellant. The Corporate Debtor further contended that original amount of debt on 10th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Code provides that any amount raised from an allottee under a real estate project shall be deemed to be an amount having the commercial effect of borrowing. Explanation (ii) to Section 5(8)(f) provides that expressions' allottee' and 'real estate' project shall have the meanings respectively assigned to them in Real Estate (Regulation & Development) Act, 2016. 21. In this case, the Appellant is not an allottee under a 'real estate project'. In fact, the alleged allotment of 34000 sq. ft. of land with an additional 5100 sq. ft. land is on account of 'Consent Decree' passed by the Hon'ble High Court of Delhi dated 10th April 1996. Pursuant to the consent decree and as per Settlement Agreement allotment to the Financial Creditor was in lieu of claim of Financial Creditor against Corporate Debtor for utilization of Rs. 2 Crore beyond the due date. Therefore, the allotment was made as monetary compensation for interest-free utilization of Rs. 2 Crore for five years beyond the due date, i.e. 28th February 1990. 22. The Appellant contends that Section 2(b) of RERA, 2016 provides that 'allottee' in relation to 'real estate project', means the person to whom a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mething equivalent" in these matters is obviously the flat/apartment. Also of importance is the expression "commercial effect". "Commercial" would generally involve transactions having profit as their main aim. Piecing the threads together, therefore, so long as an amount is "raised" under a real estate agreement, which is done with profit as the main aim, such amount would be subsumed within Section 5(8)(f) as the sale agreement between developer and home buyer would have the "commercial effect" of a borrowing, in that, money is paid in advance for temporary use so that a flat/apartment is given back to the lender. Both parties have "commercial" interests in the same-the real estate developer seeking to make a profit on the sale of the apartment, and the flat/apartment purchaser profiting by the sale of the apartment. Thus construed, there can be no difficulty in stating that the amounts raised from allottees under real estate projects would, in fact, be subsumed within Section 5(8)(f) even without adverting to the Explanation introduced by the Amendment Act." (emphasis in bold supplied) 24. Under Section 5(8)(f) of I&B Code, any amount raised from 'allottee' under a real estate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te project. We were shown the Dictionary of Banking Terms (2nd Edn.) by Thomas P. Fitch in which "time value for money" was defined thus: "present value: today's value of a payment or a stream of payment amount due and payable at some specified future date, discounted by a compound interest rate of DISCOUNT RATE. Also called the time value of money. Today's value of a stream of cash flows is worth less than the sum of the cash flows to be received or saved over time. Present value accounting is widely used in DISCOUNTED CASH FLOW analysis." (emphasis supplied) That this is against consideration for the time value of money is also clear as the money that is "disbursed" is no longer with the allottee, but, as has just been stated, is with the real estate developer who is legally obliged to give money's equivalent back to the allottee, having used it in the construction of the project, and being at a discounted value so far as the allottee is concerned (in the sense of the allottee having to pay less by way of instalments than he would if he were to pay for the ultimate price of the flat/apartment)." 27. In this case, assuming that the consent decree is a debt, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt the Corporate Debtor returned principal amount, i.e. Rs two crores to the Financial Creditor in January 1995 and to compensate interest-free security of Rs two crores for five years,given the terms of the settlement, the Applicant and Corporate Debtor entered into an agreement dated 10th April 1996, whereby the Applicant/Appellant was allotted 34000 sq. ft. area of built-up area. It was also agreed upon that in case the project is delayed; the Applicant would get an additional 5100 sq. ft area of built-up area. The 'debt' as alleged by the Financial Creditor is not a 'financial debt' as defined under sub Clause (8) of Section 5 I&B Code, 2016, because no sum has been raised from an allottee under the Real Estate Project. The Financial Creditor and its associates have not paid any money towards the allotment of built-up area. Given the terms of settlement Financial Creditor and its associates entitled to 34000 sq. ft. In other words, nothing is paid in terms of money to the Financial Creditor and its associates in the light of the 'consent decree and settlement terms'. The Corporate Debtor has not raised any money from the Financial Creditor in terms of the expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be triggered by the corporate debtor itself or a financial creditor or operational creditor. A distinction is made by the Code between debts owed to financial creditors and operational creditors. A financial creditor has been defined under Section 5(7) as a person to whom a financial debt is owed and a financial debt is defined in Section 5(8) to mean a debt which is disbursed against consideration for the time value of money. As opposed to this, an operational creditor means a person to whom an operational debt is owed and an operational debt under Section 5(21) means a claim in respect of provision of goods or services."
Thus it cannot be said that there is any default by the Respondent under the Code, as the time for performance has not arrived yet and therefore in terms of various decisions of Hon'ble Supreme Court it is clear that even if the consent decree is a 'debt', even then there is no Default by the Respondent in terms of the Code.
34. Therefore, we are of the considered opinion that there is no reason for interference with the impugned order passed by the Adjudicating Authority. Hence Appeal is dismissed. No order as to costs. X X X X Extracts X X X X X X X X Extracts X X X X
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