Promoter funding in a real estate joint venture was not financial debt, so insolvency proceedings could not be initiated.

Funds advanced by a promoter under a memorandum of understanding and joint venture agreement were not a financial debt because they were contributed for development of a real estate project, not disbursed against consideration for the time value of money. The arrangement contained no assured return, no repayment linked to the passage of time, and no borrowing-like feature. The statutory explanation to section 5(8)(f) on amounts raised from allottees in a real estate project did not apply because the contributor was not an allottee under RERA. The transaction also did not have the commercial effect of borrowing, so the contributor was not a financial creditor and the insolvency petition was rejected in limine.

---

---

Issues: Whether the amount advanced by the petitioner under the memorandum of understanding and joint venture agreement constituted a financial debt so as to make the petitioner a financial creditor entitled to initiate insolvency proceedings under the Insolvency and Bankruptcy Code, 2016.

Analysis: The relevant test under section 5(8)(f) is whether the money was disbursed against consideration for the time value of money. The arrangement between the parties showed that the petitioner was a promoter participating in the real estate project and contributing funds for development and construction. There was no stipulation for assured returns, repayment linked to lapse of time, or any borrowing-like feature. The explanation inserted to section 5(8)(f) concerning amounts raised from an allottee in a real estate project did not assist the petitioner, because the petitioner was not an allottee within the meaning of the Real Estate (Regulation and Development) Act, 2016. The transaction was therefore not a forward sale or purchase arrangement having the commercial effect of borrowing.

Conclusion: The petitioner was not a financial creditor and the amount invested did not constitute a financial debt. The insolvency petition was rejected in limine.

---