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TMI Blog2019 (12) TMI 1547X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 for over a period of time in a single or series of payments in future - It is essentially a contract for sale of specified goods. It is true that some time financial transactions seemingly restructured as sale and repurchase. Any repurchase and reverse repo transaction are sometimes used as devices for raising money. In a transaction of this nature an entity may require liquidity against an asset and the financer in return sell it back by way of a forward contract. The respondent has made categorical assertion which goes unrebutted establishing that no element of time value for money is attracted and it is a simple friendly loan. There is no document on record to prove that element of interest - such a transaction would not acquire the status of a & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (for brevity 'Rules, 2014) was paid. The petitioner then placed reliance on the Income Tax Notice dated 24.09.2018 (Annexure A-3) issued to him by the Office of the Assistant Commissioner of Income Tax, Central Circle-18, New Delhi under Section 133(6) of the Income Tax Act, 1961 seeking various information including the nature of the transaction of the amount paid by the Petitioner to the Respondent Company. 6. It is stated that the default occurred on 09.02.2018 when the principal amount was returned. However, the money was to be returned with 18% interest inter alia as per Rule 17 of the Rules, 2014 and therefore, the default is continuing even as on date. 7. The Petitioner has thus claimed that the total interest amount in default due to the Petitioner till 09.02.2018 is ₹ 85,35,000/-. 8. In response to the notice of the petition the respondent has filed reply. Except other pleadings, in paras 6, 7, 8 10 of the reply the assertions made are set out below for facility of reference: 6. .. a. Absence of Agreement: The applicant has approached this tribunal without any documentary evidence proving that there was any interest that was payable toward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on a plain paper without any receipt of delivery, stated to be sent by him to the Income Tax Department with respect to query made by the IT Department vide aforesaid notice (Annexure A-3). It has been highlighted that the Auditor of the Respondent has sent a mail to the Petitioner with a letter attached confirming that the amount of ₹ 40 lacs was share application money. It has then submitted that as per Section 2(31) of the Companies Act read with Rules, 2014 the amount made to the Respondent is a Deposit . It further placed reliance on the provisions of Section 73 74 of the Companies Act, 2013 to argue that the Respondent could not have accepted deposits from unrelated parties and it had to repay the said amount being deposit along with interest. At this stage it would be profitable to read the relevant contents of the said e mail which is as under: Attach ur bank statement and income tax return copy. Also mention ur address and PAN in the letter. 10. Thereafter another additional affidavit has been filed by the Petitioner vide diary dated 25.09.2019 along with a letter dated 14.05.2019 (Annexure A-I) issued by the Registrar of Companies, Ministry of Corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 to in sub-clauses (a) to (h) of this clause; .. 7. Initiation of Corporate Insolvency Resolution Process by financial creditor- (1) A financial creditor either by itself or jointly with other financial creditors, or any other person on behalf of the financial creditor, as may be notified by the Central Government, may file an application for initiating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... auses. 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 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 is to be implied by the opening words of Section 5(8) of the IBC. It is true that there are complex fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inistry 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 being form l. 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 sub rule (1) of Rule 3 as follows: 'Financial Contract' means a contract between a Corporate Debtor and a Financial Creditor setting out the terms of the financial debt, including the tenure of debt, interest payable and the date of repayment. 18. In the instant case no such financial contract has also been produced in compliance with the provisions of the Code or of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 either in the petition or additional affidavits. 19. As a sequel to the above discussions, we are unable to persuade ourselves to accept that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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