2019 (8) TMI 914 - AT - Insolvency and Bankruptcy

Financial creditor status denied as disbursement was to the borrower, not the builder. Appeal dismissed under Insolvency Code.

Indiabulls Housing Finance Ltd. Versus Rudra Buildwell Projects Private Ltd

Indiabulls Housing Finance Ltd. Versus Rudra Buildwell Projects Private Ltd - TMI Issues: Determination of financial creditor status under the Insolvency and Bankruptcy Code based on loan agreements and tripartite agreements.Analysis:The judgment by the National Company Law Appellate Tribunal, New Delhi involved a challenge by Indiabulls Housing Finance Ltd, the appellant and financial creditor, against the order passed by the Adjudicating Authority rejecting their application under Section 7 of the Insolvency and Bankruptcy Code, 2016. The main issue was whether the appellant could claim to be a 'Financial Creditor' of Rudra Buildwell Projects Pvt Ltd, the Corporate Debtor. The loan agreement between the appellant and the borrower, Mr. Davendra Singh, clearly established the financial creditor status of the appellant. Additionally, a tripartite agreement was executed between the appellant, Corporate Debtor, and the borrower, making them jointly and severally liable for payment obligations. The Adjudicating Authority held that the application under Section 7 was not maintainable against the Corporate Debtor as they had not taken a loan from the appellant.Further examination of the agreement dated April 6, 2015, revealed that the borrower had informed the appellant about an arrangement where the builder assumed liability for interest payments to the appellant for a specified period. As per the definitions under Sections 5(7) and 5(8) of the Insolvency and Bankruptcy Code, a 'financial creditor' is someone to whom a financial debt is owed, and a 'financial debt' includes money borrowed against interest payments. The disbursement made by the appellant to the borrower for the time value of money established their financial creditor status.The Tribunal concluded that since the appellant had disbursed the amount for the time value of money to the borrower and not to the builder, the Corporate Debtor was not liable to the appellant. Therefore, the Adjudicating Authority's decision that the Corporate Debtor was not the debtor of the appellant and the application under Section 7 was not maintainable was upheld. The appeal was dismissed due to lack of merit, with no costs awarded.