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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 ..... as a Financial Creditor is not maintainable, and no amount has been paid by the Appellant to the Respondent. There is no financial debt in favour of the Appellant. It is pertinent to mention that Appellant's pleading is that the amounts have been paid by the Appellant to the Respondent and the consent decree itself is the debt for which Section 7 Application has been filed. Default or not - HELD THAT:- The Financial Creditor filed a suit before Delhi High Court in 1992 and on the direction of the Hon'ble High Court 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, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;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 of 3 years from the date of settlement and the liability of addition of 700 sq. ft. built-up area per annum, would be for a maximum of 3 years, after the expiry of first three years from the date of settlement, and will cease thereafter. 4. As per the settlement arrived at between the Financial Creditor alongwith its associates and the Corporate Debtor, the building plans were to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oney 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 ₹ 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 ₹ 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 amount of ₹ 2 Crore was not refunded by the Corporate Debtor till 28th February 1990 as per the terms of MoU. Therefore, the Financial Creditor filed a suit before Delhi High Court in 1992 and on the direction of the Hon'ble High Court the Corporate Debtor returned principal amount to the Financial Creditor in January 1995. The Financial Creditor and Corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 ₹ 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 April 1996 was 34000 sq. ft. built-up residential area and an additional amount of 5100 sq. ft. was added to the debt on 10th April 2002 on account of penalty for delay in sanction of plans, as per Clause (J) of the Consent Decree. It is argued that the financial debt can only be money raised and paid and not for any oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 2 Crore beyond the due date. Therefore, the allotment was made as monetary compensation for interest-free utilization of ₹ 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 plot, apartment or building as the case may be has been allotted, sold or otherwise transferred by the promoter and includes the person who subsequently acquires by the said allotment to sale transfer or otherwise. But does not include a person to whom such plot, apa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 project shall be deemed to be an amount having the 'commercial effect of borrowing' and thus, would be covered under the definition of 'Financial Creditor' as defined under Section 5(7) of the Code. It is thus, clear that the Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 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, even then there is admittedly no 'default' of the Respondent as even the execution of the said decree has been held to be premature by the Hon'ble High Court, as such it cannot be said that there is a debt. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 explanation provided to sub-clause (8) of Section 5 of I B Code, 2016. Thus, it is clear that the alleged debt is not a financial debt in terms of Sec 5(8)of the Code. 32. The Ld Counsel for the R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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