Tribunal Admits Financial Creditor's Application for Corporate Insolvency Resolution Process

The Tribunal determined the applicant as a 'Financial Creditor' and the debt as a 'Financial Debt' under the Insolvency & Bankruptcy Code, 2016. Finding default by the Corporate Debtor, the Tribunal admitted the application under Section 7, initiating the Corporate Insolvency Resolution Process. A moratorium was declared, appointing an Interim Resolution Professional and scheduling a meeting of the Committee of Creditors. The matter was listed for a progress report on 2nd July, 2018.

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Issues Involved:
1. Determination of the status of the applicant as a 'Financial Creditor'.
2. Qualification of the debt as a 'Financial Debt'.
3. Occurrence of default and initiation of Corporate Insolvency Resolution Process (CIRP).

Issue-wise Detailed Analysis:

1. Determination of the Status of the Applicant as a 'Financial Creditor':

The petitioner filed the application under Section 7 of the Insolvency & Bankruptcy Code, 2016, seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The applicant contended that an agreement was concluded for the purchase of a plot under the 'Appreciation Clause', which allowed for a refund of the entire consideration amount along with appreciation in the form of interest upon payment within the stipulated time. The applicant argued that this arrangement qualifies them as a 'Financial Creditor' under Section 5(7) of the I&B Code.

The Tribunal referred to the case of Nikhil Mehta & Sons (HUF) & Ors. Vs. M/s AMR Infrastructures Ltd., where the NCLAT held that the debt in question was disbursed against the consideration for the 'time value of money', thus qualifying it as a 'Financial Debt'. The Tribunal found this precedent applicable, concluding that the applicant qualifies as a 'Financial Creditor'.

2. Qualification of the Debt as a 'Financial Debt':

The applicant claimed a total default amount of Rs. 12,09,638, which included the principal sum, appreciation, and interest. The Tribunal examined the definitions under Sections 5(7) and 5(8) of the I&B Code, which define 'Financial Creditor' and 'Financial Debt', respectively. The Tribunal emphasized that a financial debt must involve disbursement against the consideration for the time value of money.

The Tribunal cited the definition of 'time value of money' from Black's Law Dictionary, emphasizing that the transaction should involve compensation for the time value of money. The Tribunal concluded that the debt in question, involving assured returns associated with the delivery of possession of the property, qualifies as a 'Financial Debt'.

3. Occurrence of Default and Initiation of CIRP:

The Tribunal noted that the Corporate Debtor failed to refund the amount even after the stipulated period, despite several notices and emails from the applicant. The Tribunal found that the application was complete and there was an occurrence of default.

The Tribunal referred to the case of Innoventive Industries Ltd. Vs. ICICI Bank, where it was held that if the adjudicating authority is satisfied with the occurrence of default and the completeness of the application, the application under Section 7 of the I&B Code is liable to be admitted. The Tribunal found no sustainable objections from the Corporate Debtor and admitted the application.

Order:

The Tribunal admitted the petition filed by the applicant under Section 7 of the I&B Code for initiating the CIRP. A moratorium was declared as per Section 14 of the I&B Code, prohibiting certain actions against the Corporate Debtor. The Tribunal appointed Mr. Manmohan Jhawar as the Interim Resolution Professional (IRP) and directed him to make a public announcement and convene a meeting of the Committee of Creditors.

The Tribunal ordered the Registry to communicate the order to the Financial Creditor, Corporate Debtor, and IRP, and listed the matter for filing the progress report on 2nd July, 2018.

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