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TMI Blog2019 (10) TMI 1340X X X X Extracts X X X X X X X X Extracts X X X X ..... read with Section 5(7), 5(8) and 7 and other relevant provisions contained in the IB Code, with the following prayers amongst others: 1. Declare that IRP is stopped from removing the Applicant and other similarly placed creditors from the class of financial creditors and or to change their class to that of operational creditors by his volition, after his own act of having already classified them as the financial creditors of the Corporate Debtor NLL. 2. Declare that IRP is not empowered to suo mo to and without concurrence of the Committee of Creditors (hereinafter referred as "CoC" and without information to and consent from the applicant and/or other similarly placed creditors, remove applicant's or other similarly placed creditors' names from the CoC. 3. Declare that IRP is not empowered to proceed to hold meeting of the CoC without allowing attendance and voting to the applicant and other similarly placed creditors and that if any such meeting already happened and voting conducted, declare such meeting and voting as invalid, illegal and void. 4. Declare that IRP is not empowered to ask the applicant and other similarly placed creditors to re-file their claim as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CoC record that the verification was provisional and after deliberations, it was found that there is a need for proper due diligence and second legal opinion. Therefore, in view of the above aspects and after examining the provisions contained in Section 5(7), 5(8), 5(20), 5 and other relevant provisions of the IB Code, the Respondent IRP informed the Applicant vide email dated 10.06.2019 that the Applicant cannot be treated as Financial Creditor. The Applicant can be considered only as an Operational Creditor and advised the Applicant to submit his revised claim in appropriate Form i.e. Form-B. A copy of the email dated 10.06.2019 is placed by the Applicant at Annexure-C to his IA. 5.2 The Respondent IRP has submitted in his affidavit in reply that Applicant is the President of an Association which consists of members who have paid membership fees for using the services and properties of NLL for a defined period and there is no consideration for time value of money and what is paid is the membership fees. A person who claims to be a member under some such Scheme cannot be treated to be a Financial Creditor. The Applicant or any person similarly placed does not fulfil any of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or its de-materialised equivalent; (c) any amount raised pursuant to any note purchase facility or 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 a 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 nonrecourse 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbership Fees is nonrefundable, if there is no cancellation from member within 10 days from the date of enrolment. On perusal of the records, it is found that amount so paid, is admittedly non-refundable, that itself, shows that it neither fetches any interest as provided under Section 5(8) nor it is due to the Applicant. As such, the claim does not fall within the category of "Financial Debt". 9.1 This Adjudicating Authority while going through the Significant Accounting Policies of NLL has also observed that Time Membership Fees is recognized as revenue income. This is reflected in the Balance Sheet of NLL for the Financial Year ended on 31st March, 2009 where, in the Sources of Funds - Loan Funds, NLL has not shown Membership Fees collected from Time Share Members, as a Loan. From the perusal of Schedules annexed to Notes Forming Part of Accounts for the Financial Year ended on 31st March, 2009, Time Share Members do not find place in the list of Creditors. 9.2 Last but not the least, on perusal of the First Report to the CoC by the Respondent IRP, annexed by the Applicant with his IA, it is found that IRP has clearly used the words "Provisionally Admitted". Refer Item No. 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the IBC is distinctly different than the one prevalent in England as provided in its Insolvency Act, 1986 and the ' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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