- (1.) This order shall dispose of CP No. 6 and CP No. 7 of 2017. Both these petitions have been placed before us having been received after transfer from Hon'ble Delhi High Court. In accordance with the notification dated 07.12.2016 enforced with effect from 15.12.2016 the petitioner has filed an affidavit of compliance. It has been prayed that transfer application in CP Nos. 6 & 7 of 2017 be treated as the one u/s. 7 & 9 of the Insolvency and Bankruptcy Code 2016 (for brevity IBC). Both the petitions are directed against a construction company known as AMR Infrastructure Limited. The facts are that the respondent Company was incorporated on 15.06.2006. It has been developing Shopping Mall at Greater Noida. The detail facts have been taken from C.P. No. 6/2017. The petitioner booked shops in the aforesaid shopping mall as per the details given in para 6 of the petitions and they paid a total consideration of Rs. 53,71,452 in accordance with para 7 of CP 6 of 2017. The respondent company had undertaken obligations, inter alia, to pay a fix payment of Rs. 45,000 per month as its "committed return' from June 2008 till the date of delivery of possession. It was also obliged to make further payment of Rs. 5000 per month with effect from February 2010 till the date of possession, if the possession was not delivered by January 2010. According to the petitioner the amount of Rs. 45 lacs was paid in the belief that possession of the shops would be delivered within the agreed period. The possession of the shops has not been delivered by January 2010 and the respondent company has also failed to make payment of assured return from April 2014 onwards. Thus, there has been delay of over 6 1/2 years in completion of the project and delay of 8 1/2 years since the date of receipt of investment from the petitioner. Despite reminder sent by the petitioner, respondents have failed to pay back the investment and the amount of assured return. Even legal notices issued have not evoked any response. The petitioner has filed a petition before the Hon'ble Delhi High Court u/s. 433, 434 & 450 of the Companies Act, 1956. On the enforcement of the IBC the petition has been transferred to NCLT and posted before this Bench. In terms of notification dated 07.12.2016 an affidavit of compliance has also been filed. The affidavit states that these petitions be treated as one filed u/s. 7 and/or 9 of the IBC.
(2.) We have heard learned counsel at length and have perused the paper books with his able assistance. However, we find that the matter is squarely covered by the judgment of this Bench of the NCLT rendered on 23.01.2017 in CP No. (ISB) - 03(PB)/2017. In that case also the respondent was AMR infrastructure Ltd. and the agreement of purchase was similar in pith and substance.
(3.) We had considered the status of the petitioner in that petition as 'Financial Creditor u/s. 7 and have found that the petitioner could not be regarded as a 'Financial Creditor'. We further opined that the money owed by the respondent cannot be regarded as 'Financial Debt' within the meaning of Section 5(7) and Section 7(8) of IBC. The operative paras of the judgment dated 23.01.2017 contained complete answer to the arguments that the petitioner is a 'Financial Creditor' and the respondent owes a 'Financial Debt' to the petitioner. The operative paras 9 to 16 read as under: "9. We have heard learned counsel at some length. We confronted learned counsel for the Applicants with a query as to how the Applicants would be covered by the expression 'Financial Creditor' and the expression 'Financial Debt within the meaning of the term used in Section 7 and Section 5(7) & (8) of the IBC. According to the learned counsel, the default in payment of the amount of 'Assured Returns" payable by the Respondent would be sufficient to satisfy the requirement of Section 7 read with Section 5(7) and (8) of the IBC 10. In order to find out as to whether the Applicant answers the description of "Financial Creditor" and "Financial Debt" in terms of the aforesaid provision of the Act, it would be profitable to read the provisions of Sections 5(7) and (8) and Section 7 of IBC which are set out below: "5. Definitions: In this Part, unless the context otherwise requires,-- (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; (8) "financial debt" means a debt along with 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-materialized 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 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 may file an application for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred. Explanation.--For the purposes of this sub-section, a default includes a default in respect of a financial debt owed not only to the applicant financial creditor but to any other financial creditor of the corporate debtor. (2) The financial creditor shall make an application under sub-section (1) in such form and manner and accompanied with such fee as may be prescribed. (3) The financial creditor shall, along with the application furnish-- (a) record of the default recorded with the information utility or such other record or evidence of default as may be specified; (b) the name of the resolution professional proposed to act as an interim resolution professional; and (c) any other information as may be specified by the Board. 11. From a bare perusal of Section 7 of the IBC, it is patent that the insolvency process can be triggered by a 'Financial Creditor" individually or jointly against a corporate debtor when default has occurred. The first question arises for consideration is as to who is a 'Financial Creditor'. In order to ascertain the meaning of that expression we have to examine its definition as provided by Section 5 which is applicable to Part II. We have already extracted the provisions of Section 5(7) and 5(8) of the IBC which are relevant to the issue raised. Section 5(7) of IBC defines the expression "Financial Creditor" and Section 5(8) of IBC defines the expression "Financial Debt" which has been used in Section 5(7) of IBC. 12. A perusal of definition of expression 'Financial Creditor' would show that it refers to a person to whom a Financial Debt is owed and includes even a person to whom such debt has been legally assigned or transferred to. In order to understand the expression '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-clause (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 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 installments 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 has been implied by the opening words of Section 5(8) of the IBC. It is true that there are complex financial instruments which may not provide a happy situation to decipher the true nature and meaning of a transaction. It is pertinent to point out that the concept 'Financial Debt as envisaged under Section 5(8) of the IBC is distinctly different than the one prevalent in England as provided in its Insolvency Act, 1986 and the 'Rules' framed thereunder. It appears that in England there is no exclusive element of disbursement of debt laced with the consideration for the time value of money. However, forward sale or purchase agreement as contemplated by Section 5(8)(f) may or may not be regarded as a financial transaction. A forward contract to sell product at the end of a specified period is not a financial contract. 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 difference between the two prices would imply the rate of return to the financer. (See Taxman's Law Relating to IBC, 2016 by Vinot Kothari & Sikha Bansal) when we examine the nature of transactions in the present case, we find that it is a pure and simple agreement of sale or purchase of a piece of property. The agreement to sell a flat or office space etc. Merely because some "Assured amount" of return has been promised and it stands breached, 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. 13. Essentially in the case in hand 'Assured Returns' is associated with the delivery of possession of the aforementioned properties and has got nothing to do with the requirements of sub-section (8) of 5 of IBC. It is the consideration for the time value of money which is mercifully missing in the transaction in hand. The classical transaction which would cover the definition of financial debts is illustrated in sub-clause (a) of sub-section (8) of Section 5 i.e. the money borrowed against the payment of interest. Learned counsel of Applicants has not been able to show from any material on record or otherwise that it is a financial transaction in which a debt has been disbursed against the consideration for the time value of money and he being the Financial Creditor is entitled to trigger the insolvent process against the Respondent in accordance with Section 7 of the IBC. 14. Even otherwise the present petition would not be maintainable as many winding up petitions have been filed before Hon'ble Delhi High Court being Company Petition No. 477 of 2014, Company Petition Nos. 689, 691, 692, 693, 694, 695, 700 and 722 of 2015 along with CP No. 238 and 244 of 2016. Even the Official Liquidator has been appointed as a provisional liquidator although the matter is presently pending before the Appellate Bench with interim directions. 15. As a sequel to the above discussions, we are unable to persuade ourselves to accept that the applicants are covered by the expression "Financial Creditor" in term. The arrears of "assured returns" would also not be covered by the expression 'financial debt. Therefore the applicants do not answer the description of Section 7 read with section 5(7) and 5(8) of IBC. The application is accordingly dismissed. The remedy of the Applicant may lie elsewhere. 16 The aforesaid judgment should have ordinarily satisfied the petitioner. However, learned counsel for the petitioner has insisted that his alternative prayer to treat the petitioner as an operational creditor u/s. 9 may also be considered.";