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TMI Blog2021 (1) TMI 1059X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of this Act, no company shall invite, accept or renew deposits under this Act from the public except in a manner provided under this Chapter: Provided that nothing in this sub-section shall apply to a banking company and nonbanking financial company as defined in the Reserve Bank of India Act, 1934(2 of 1934) and to such other company as the Central Government may, after consultation with the Reserve Bank of India, specify in this behalf. (2) A company may, subject to the passing of a resolution in general meeting and subject to such rules as may be prescribed in consultation with the Reserve Bank of India, accept deposits from its members on such terms and conditions, including the provision of security, if any, or for the repayment of such deposits with interest, as may be agreed upon between the company and its members, subject to the fulfilment of the following conditions, namely: - (a) Issuance of a circular to its members including therein a statement showing the financial position of the company, the credit rating obtained, the total number of depositors and the amount due towards deposits in respect of any previous deposits accepted by the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee months from such commencement or from the date on which such payments, are due, with the Registrar a statement of all the deposits accepted by the company and sums remaining unpaid on such amount with the interest payable thereon along with the arrangements made for such repayment, notwithstanding anything contained in any other law for the time being in force or under the terms and conditions subject to which the deposit was accepted or any scheme framed under any law; and (b) repay within one year from such commencement or from the date on which such payments are due, whichever is earlier. (2) The Tribunal may on an application made by the company, after considering the financial condition of the company, the amount of deposit or part thereof and the interest payable thereon and such other matters, allow further time as considered reasonable to the company to repay the deposit. (3) If a company fails to repay the deposit or part thereof or any interest thereon within the time specified in sub-section (1) or such further time as may be allowed by the Tribunal under sub-section (2), the company shall, in addition to the payment of the amount of deposit or part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of debt has become due and payable an is not 1(paid) by the debtor or the corporate debtor, as the case may be." 12. Mere plain reading of the provisions shows that default means non-payment of debt, whereas in the aforementioned para, I held that the amount which the Petitioner deposited does not come under the definition of the debt. Therefore, I am unable to accept the contention of the Petitioner that there is a default in payment of debt." and was of the considered view that though the petitioner had some other remedy under the law to recover the amount which he had deposited with the 'Corporate Debtor' but in regard to the initiation of Section 7 of the 'I&B' Code held that the present application was not maintainable and rejected the prayer of the Appellant / Petitioner to initiate the proceedings u/s 7 of the Code and dismiss the application. However, the 'Adjudicating Authority' had granted liberty to the Appellant/Petitioner to file an appropriate application under Chapter V of the Companies Act, 2013. Appellant's Submissions 13. According to the Learned Counsel for the Appellant the impugned order is an erroneous one both on facts as well as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . & Anr.' V. 'Union of India & Ors.' reported in 2019 (8 SCC 416 (vide para 71). 18. The Learned Counsel for the Appellant points out that while a debt may be a financial debt without bearing interest, money borrowed against payment of interest by itself is a financial debt. In fact, the definition of financial debt as per section 5(8) of the code money borrowed against payment of interest, even if 'time value of money' is not separately and additionally established. 19. The Learned Counsel for the Appellant proceeds to takes a legal plea that the Depositors / fixed deposit holders are financial creditors and in this regard relies on the judgement of the Hon'ble Supreme Court in the matter of 'Pioneer Urban Land and Infrastructure Ltd.' & Anr. V. 'Union of India & Ors.' reported in (2019) 8 SCC p.416 vide para (43). 20. The other contention advanced on behalf of the Appellant is that the agreement between the Appellant and the Respondent as evident from the documents placed on record exhibit that the receipt of money by the Respondent / Corporate Debtor and credit of interest by the 'Corporate Debtor' to the Appellant. Moreover, the e.mail communications between t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cating Authority ('NCLT') Mumbai Bench in CP No. 66/IBC/NCLT/MB/MAH/2018 dated 25.02.2019 wherein at paragraph 22 it is observed as under:- ".....All the more, the acknowledgements of the Corporate Debtor to the debt, be it statement of accounts, the statement of confirmation of accounts duly signed by the Corporate Debtor, or the reply to this petition, the Corporate debtor has time and again acknowledged the outstanding dues payable to the Financial creditor. It is a well-known principle of law that, quote 'Admissions' are the best proof of the facts admitted. Admissions in pleadings or judicial admissions, made by the parties during the hearing of the case are fully binding on the party that makes them and constitute a waiver of proof' unquote. Hence, in the present case, by admitting the liability in affidavit in reply to this petition, the Corporate Debtor is estopped to prove the non-existence of debt by raising any kind of 'dispute' or defence as the same is all cliché' for deciding the fate of present proceedings. The petitioner's claim of existence of debt and default has been corroborat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporate Debtor' which can be termed to be disbursement of an amount for consideration for the time value of money as required u/s 5(8). Merely grant of loan and admission of taking loan will ipso facto not treat the second and third respondents as 'financial creditors' till they show that it complies with the substantive definition or anyone or other clause of section 5(8). 13. Mere fact that the company paid interest @ 12% per annum, during certain period cannot be the ground to hold that the 'debt' comes within the meaning of 'Financial Debt to treat the 2nd and 3rd Respondents as 'Financial Creditors'......." Discussions 30. At the outset, this Tribunal points out that in the application filed by the Appellant / 'Financial Creditor' to initiate 'Corporate Insolvency Resolution Process' (under Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016) dated 16.07.2019 under part IV at S. No. 2 the amount to be claimed in default was mentioned as INR 21,94,771/- (including principal amount of INR 18,63,108 along with unpaid accumulated interests at 13.5% p.a. amounting to INR 3,31,663, as on 01.07.2019. 31. Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim or invocation of guarantee has no nexus with the filing of claim before the 'Interim Resolution Professional' u/s 18(1)(b) and the 'Resolution Professional' u/s 25(2)(e) of the Code. 37. It cannot be gainsaid that the term 'deposit' includes any receipt of money by a company either as deposit or loan or in any other form by it. Under the Companies (acceptance of deposits) Rules, 2014 the term 'Deposit' is defined under Rule 2(1)(c) in an inclusive manner. The meaning of 'Deposit' is enlarged by covering receipts of money in any other form. After all, a deposit is something more than a mere loan of money. 38. For invoking the jurisdiction of the Tribunal as per Section 74(2) under the Companies Act, 2013, even a partial failure by the Company to repay the deposit was sufficient. In fact, Section 2(31) of the Companies Act speaks of the meaning of deposit. Also, that the Tribunal has vide discretionary powers regarding the repayment of 'Deposit'(s) but it must exercise its discretion objectively taking into consideration all the relevant aspects in a conspectus judicial manner. In reality, the distinction between deposit and loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch amounts for a continuous period of five years, as pleaded by the Appellant and also that the 'Corporate Debtor' had accepted money from the Appellant against the payment of interest and bearing in mind the payment of interest on the amounts borrowed by the Respondent Company is nothing but a consideration for the time value of money and in as much as the 'interest' is the compensation paid by the borrower to the lender for using the lender's money over a period of time, this Tribunal comes to an inevitable and inescapable conclusion that the Appellant's status is that of a 'Financial Creditor' as per Section 5(7) read with Section 5(8) of the Code and that there is a default in payment of the accepted amounts by the Respondent/CD and in short, the Respondent / Corporate Debtor comes within the purview of the definition of 'Financial Debt'. Viewed in that perspective, the contra view taken by the Adjudicating Authority in coming to the conclusion that the application filed by the Appellant / Financial Creditor is not maintainable for initiation of Section 7 of the Code is clearly unsustainable in the eye of law, as held by this Tribunal, to prevent an aberration of justice. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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