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TMI Blog2024 (2) TMI 1026X X X X Extracts X X X X X X X X Extracts X X X X ..... should have remained confined to one year only. The reason for calculating the interest amount for a different time-period in the present Section 7 application, prima-facie, appears unjustified and irrational - the findings of the Adjudicating Authority that the interest calculation in the present Section 7 application has been unduly inflated and enhanced by the Appellant with the ulterior motive of crossing the threshold limit, agreed upon. Whether commission on sale amount which has been excluded by the Adjudicating Authority should have been included in the computation of debt amount? - HELD THAT:- It is a well settled proposition of law that any debt to be treated as financial debt , there must take place disbursal of money and the disbursal must be against consideration for time value of money and also includes anything which is equivalent to the money that has been loaned as long as commercial effect of borrowing or profit is discernible. There are no good reason to disagree with the findings referred in the impugned order that commission on sale amount neither falls in the menu of transactions delineated at sub clauses (a) to (i) of Section 5(8) of the IBC nor does it fall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the said Agreement, the Appellant made a refundable security deposit of Rs. 70,00,000/- with the Respondent which deposit was to be treated as an investment on which the Respondent was to provide a return of 1% per month besides a commission amount of 1% per month on monthly sales turnover. 3. It was further submitted that the Appellant on being dissatisfied with the business chose to terminate the Agreement on 11.12.2019 and thereafter sought refund of the security deposit amount which was followed up by multiple reminders. Since the Respondent did not clear the outstanding dues of the refundable security deposit along with interest and commission, the Appellant filed a Section 7 petition against the Respondent. However, the said application was rejected by the Adjudicating Authority on the fallacious ground that the outstanding amount of default did not meet the threshold limit in terms of Section 4 of the IBC. It was also contended that though the Appellant was entitled to charge interest and penalty on the outstanding amount as per the Agreement, the Adjudicating Authority has erroneously failed to take this factor into consideration while working out the outstanding dues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application has been enhanced by the Appellant to Rs. 41,63,151/- thus, aggregating a total outstanding amount of Rs. 1,11,63,151/-. 9. We also notice that the Adjudicating Authority has proceeded to unearth the reason as to how and why the interest amount stood at variance between the two Section 7 applications filed by the Appellant. The Adjudicating Authority in the impugned order has taken the trouble of comparing the computation of debt amount inclusive of principal amount and interest as made out by the Appellant in both the Section 7 applications as may be seen at para 10 of the impugned order. From the comparative analysis made by the Adjudicating Authority, it has been recorded that the difference in the interest amount claimed in the two applications arose since the Appellant calculated "Interest up to the date of Demand Notice" without however indicating the specified period for which the interest amount has been calculated for making the claim in both the applications. 10. We however find that in the interest of justice, the Adjudicating Authority did not outrightly dismiss the interest calculations made by the Appellant in respect of both the applications. Instead, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 applications remained constant and the duration of Agreement was only one year, the interest calculations should have remained confined to one year only. The reason for calculating the interest amount for a different time-period in the present Section 7 application, prima-facie, appears unjustified and irrational. We are therefore inclined to agree with the findings of the Adjudicating Authority that the interest calculation in the present Section 7 application has been unduly inflated and enhanced by the Appellant with the ulterior motive of crossing the threshold limit. 12. This now brings us to the other major contention as to whether "commission on sale" amount which has been excluded by the Adjudicating Authority should have been included in the computation of debt amount. We find that the Adjudicating Authority in the impugned order at para 17 has referred to the definition of 'financial debt' as given under Section 5(8) of the IBC and thereafter recorded its reasoned findings as to why "commission on sale" does not qualify to be a "financial debt". The relevant findings contained in para 18 of the impugned order is as extracted below: "18. On a perusal of the definitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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;" 14. Furthermore, it is a well settled proposition of law that any debt to be treated as "financial debt", there must take place disbursal of money and the disbursal must be against consideration for time value of money and also includes anything which is equivalent to the money that has been loaned as long as commercial effect of borrowing or profit is discernible. 15. Tested against this statutory construct of IBC with regard to "financial debt" and the settled position of law as mentioned in the preceding paragraphs, we do not find any good reason to disagree with the findings referred in the impugned order that "commission on sale" amount neither falls in the menu of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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