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TMI Blog2018 (8) TMI 2054X X X X Extracts X X X X X X X X Extracts X X X X ..... 'Financial Creditors' as defined under Section 5(7) and (8) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as 'I&B Code'). 2. Factual matrix of the case germane to the disposal of instant appeal may briefly be noticed. Respondents No. 1 and 2 - the erstwhile Directors of 'M/s. Fantastic Buildcon Pvt. Ltd.' (Corporate Debtor) holding a total of 75% share holding of the Company advanced loan to the Corporate Debtor from time to time and also through Respondent No. 3 Company at an interest @ 18% p.a., which after adjustment of some part of the loan amount returned by the Corporate Debtor stood at Rs. 18,67,11,000/-. Respondents herein, claiming to be 'Financial Creditors' of the Company, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e instant appeal assailing the order of admission of petition under Section 7 of the I&B Code passed by the Adjudicating Authority on the ground urged in appeal. 3. Heard learned counsel for the parties and perused the records. The sole question for consideration is whether Respondents - 'Dinesh Chand Jain and two others' come within the meaning of 'Financial Creditors' as defined under Section 5(7) of the I&B Code. The expression 'Financial Creditor' is defined as under: "5(7) "financial creditor" means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to;" The expression 'Financial Debt' is defined under Section 5(8) of I&B Code, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to in sub-clauses (a) to (h) of this clause;" Respondent's claim of being 'Financial Creditors' rests on the premises that the Corporate Debtor owes a financial debt to them. In order to demonstrate that the admitted debt falls within the definition of 'Financial Debt', Respondents relied upon the admitted factual position that Respondents No. 1 and 2 holding 75% shareholding of the company besides being Directors of the Corporate Debtor had lent various amounts to the Corporate Debtor for a hotel project and the principle amount was to the tune of Rs. 18,67,11,000/-. Initially this amount was treated as a long time borrowing at the same was reflected in the Account Books of the Corporate Debtor as also the balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nduction of the nominee of Shri Lalit Modi to be inducted as Director in the Company. It is manifestly clear that Respondents No. 1 and 2 abided by the terms of Share Purchase Agreement and expected the Corporate Debtor to refund the amount of Rs. 18,67,11,000/- mutually agreed as outstanding unsecured loan amount before 31.03.2015, which had become payable. This is clearly borne out from the later portion of clause (2) of the Share Purchase Agreement, which reads as under: "The second party and third party jointly undertake to outgoing shareholders to refund the unsecured loan of Rs. 18,67,11,000/- to them or their nominee before 31.03.2015." It has already been noticed elsewhere in this judgment that the amount of loan was advanced by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000/- coupled with the fact that the Corporate Debtor jointly undertook to refund such unsecured loan to Respondents No. 1 and 2 in terms of clause (2) of the Share Purchase Agreement leaves no room for doubt that the outstanding unsecured debt had all the trappings of a 'Financial Debt'. Admittedly, Respondent No. 1 and 2 were treated as unsecured creditors and in terms of the Share Purchase Agreement they transferred their entire shareholding of 7500 shares in favour of Shri Lalit Modi. They were acknowledged as investors as regards the financial debt qua Shri Lalit Modi and the Corporate Debtor, the money having been borrowed initially and such investment having been made for earning interest. Refund of the investment was linked ..... X X X X Extracts X X X X X X X X Extracts X X X X
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