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TMI Blog2020 (1) TMI 1488X X X X Extracts X X X X X X X X Extracts X X X X ..... terial to the controversy raised may first be noticed. The pleaded case of the Petitioner is that it is an RBI registered Non-Banking Financial Company and is engaged in the business of granting loans and financing facilities. In the month of May, 2016, the Respondent approached the Petitioner for seeking certain unsecured loans. After verifying the financial health of the Respondent, the Petitioner agreed to advance a loan. Thereafter on 17-5-2016, the Petitioner advanced a sum of Rs. 1,15,00,000/- as an unsecured loan to the Respondent on specific terms that the loan would be paid on demand along with interest @ 12% per annum. 4. It was then submitted that despite specific understanding that the interest payment was to be paid on time, the Respondent failed to pay interest over the said loan. 5. The Petitioner, through its counsel, sent a written demand notice dated 6-5-2019 at the registered office address of the Respondent recalling the financial facility and called upon it to refund the monies paid by it along with interest @ 12% per annum. Despite receipt of the said notice, the Respondent failed to refund the amount advanced by the petitioner along with interest. 6. In su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce sheet for the financial year 2016-2017. As per the said balance sheet the principal amount of Rs. 1,15,00,000/- given by the Petitioner is depicted under the heading "long-term borrowings" and classified as Business Development Loan. It has then placed reliance on a confirmation of accounts from 1-4-2017 to 31-3-2018 showing the aforesaid amount of Rs. 1,15,00,000/- as bed debts. The reason showing the said amount as bed debts is that as the present petition has been filed after more than 3 years i.e. beyond the limitation period as specified in the limitation act and due to said fact the same has been depicted as bad debt. 10. The Petitioner has filed rejoinder to controvert the aforesaid assertion of the respondent-Corporate Debtor. It has been highlighted that there has been an oral contract upon the Corporate Debtor having approached the Petitioner for seeking an unsecured loan, which was granted because of trust. The said loan was not just a business advance, it was a financial loan through proper banking channel as is evident from the Note-4 to the Balance Sheet of the Corporate Debtor as at March 31, 2017 whereby they have classified the same as "Business Development Loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transferred to; (8) "financial debt" means a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money and includes-- (a) money borrowed against the payment of interest; (b) any amount raised by acceptance under any acceptance credit facility 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 non-recourse 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion financial Creditor', the requirements of expression 'financial debt' have to be satisfied which is defined in section 5(8) of the IBC. The opening words of the definition clause would indicate that a financial debt is a debt along with interest which is disbursed against the consideration for the time value of money and it may include any of the events enumerated in sub-clauses (a) to (i). Therefore, the first essential requirement of financial debt has to be met viz. that the debt is disbursed against the consideration for the time value of money and which may include the events enumerated in various sub-clauses. A Financial Creditor is a person who has right to a financial debt. The key feature of financial transaction as postulated by section 5(8) is its consideration for time value of money. In other words, the legislature has included such financial transactions in the definition of 'Financial debt' which are usually for a sum of money received today to be paid 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord to prove the element of interest. Therefore, such a transaction would not acquire the status of a 'financial debt' as the transaction does not have consideration for the time value of money, which is a substantive ingredient to be satisfied for fulfilling requirements of the expression 'Financial Debt'. 16. It is also relevant to note that under section 7(3)(c) of the Code, 2016 at the time of filing an application by the Financial Creditor before this Tribunal, along with such application the applicant is required to furnish any other information as may be specified by the IBBI. The Ministry of Corporate Affairs has framed Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 where under the form to be adopted by different categories of creditors have been specified and in relation to a Financial Creditor the form prescribed is form 1. A perusal of clause 5 of part V of form 1 shows that the Financial Creditor is required to place a latest and complete copy of the financial contract reflecting all amendments and waivers up to date and a copy is required to be attached. 'Financial Contract' has been defined under clause (d) of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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