2022 (2) TMI 19 - AT - Insolvency and Bankruptcy

Tribunal Rules Speculative Investor Not a Financial Creditor Under IBC

Mrs. Nidhi Rekhan Versus M/s. Samyak Projects Private Limited

The Tribunal dismissed the appeal, ruling that the Appellant, characterized as a speculative investor, did not meet the criteria to be considered a ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - default in payment on the basis of settlement agreement - default of Financial Debt or not - HELD THAT:- In the present case, where an unduly high rate of interest of 24% p.a. on the deposited amount has been assured by the Corporate Debtor, coupled with the fact that after one year of booking the flats the first party (the allottee) can cancel or rescind the agreement and take back refund along with assured interest, the depositor cannot be considered a person who is genuinely interested in purchasing of flats/apartments and can therefore get the status of financial creditor being an allottee in accordance with Explanation (i) of section 5(8) of IBC. The status of Financial Creditor cannot be provided to a person who, in the garb of an allottee comes in the project as a speculative investor and for no reason cancels the allotment, which is the case in the present appeal. Therefore, the benefit of section 5(8)(f) of IBC will not enure in her favour. In the Agreement dated 20th July 2016 that the Appellant is relying on, there are no specified repayment schedules or consequences in the event of default. The assurance mentioned by the Appellant, and also claimed in the Corporate Debtor”s letter dated 15.06.2019 are not in the nature of consequences in the event of default in payment of debt. It is also noted by us is that this letter dated 15.6.2019 was issued almost three years after the original Agreement dated 20.7.2016 was executed, and is certainly part of the agreement. Neither there is a date of default in the section 7 application, nor any repayment schedule has been outlined in the said agreement - the Appellant cannot claim the status and benefits as a financial creditor by virtue of being an allottee/homebuyer under explanation (i) to section 5 (8)(f) of the IBC. The Appellant, who is a speculative investor, cannot claim status and benefits as financial creditor under Explanation (i) of Section 5(8)(f) of the IBC, and is not interested in the financial well-being, growth and vitality of the Corporate Debtor, but is just interested in her investment and has come in the garb of an allottee. In such a situation, the Appellant is certainly not a financial creditor holding financial debt, which is in default of payment by the Corporate Debtor. Appeal dismissed. Issues Involved:1. Determination of whether the Appellant qualifies as a 'financial creditor' under Section 5(7) of the Insolvency and Bankruptcy Code (IBC).2. Assessment of whether the amount invested by the Appellant constitutes 'financial debt' under Section 5(8) of the IBC.3. Evaluation of the nature of the transaction between the Appellant and the Corporate Debtor.4. Examination of the applicability of previous judgments to the current case.5. Analysis of the implications of speculative investment in the context of IBC.Detailed Analysis:1. Determination of whether the Appellant qualifies as a 'financial creditor' under Section 5(7) of the Insolvency and Bankruptcy Code (IBC):The Appellant claimed to be a financial creditor based on an investment of Rs. 1,00,00,000 in the Corporate Debtor's project, which was supposed to yield an assured return of 24% per annum. The Appellant argued that this investment and the subsequent agreement entitled her to the status of a financial creditor. However, the Tribunal found that the Appellant was a speculative investor, not genuinely interested in the possession of the flats but rather in the assured returns. The Tribunal held that the Appellant could not be considered a financial creditor under Section 5(7) of the IBC.2. Assessment of whether the amount invested by the Appellant constitutes 'financial debt' under Section 5(8) of the IBC:The Appellant argued that the amount invested should be considered a financial debt as it was disbursed against the consideration for the time value of money, citing the judgment in Nikhil Mehta & Sons vs AMR Infrastructure Ltd. The Tribunal, however, found that the high assured return of 24% per annum and the nature of the agreement indicated that the transaction was more of an investment rather than a financial debt. The Tribunal concluded that the amount invested did not qualify as financial debt under Section 5(8) of the IBC.3. Evaluation of the nature of the transaction between the Appellant and the Corporate Debtor:The Tribunal examined the agreement dated 20.07.2016 and found that it lacked essential elements of a Builder-Buyer Agreement, such as clauses related to the construction/completion of the flats, penalties for delay, and other protections for the allottee. Instead, the agreement focused on the down payment and assured returns, indicating that the Appellant was more interested in the financial returns rather than the actual possession of the flats. The Tribunal concluded that the Appellant was a speculative investor.4. Examination of the applicability of previous judgments to the current case:The Appellant cited several judgments, including Pioneer Urban Land & Infrastructure Ltd. vs Union of India and M/s Orator Marketing Pvt. Ltd. vs M/s Samtex Desinz Pvt. Ltd., to support her claim of being a financial creditor. The Tribunal distinguished these cases, noting that the Appellant was not a genuine homebuyer but a speculative investor. The Tribunal also referred to the judgment in Anuj Jain Interim Resolution Professional for Jaypee Infratech Ltd. vs Axis Bank Ltd., emphasizing that a financial creditor should be genuinely interested in the corporate debtor's viability and not merely in financial returns.5. Analysis of the implications of speculative investment in the context of IBC:The Tribunal highlighted that speculative investors, who are not genuinely interested in the possession of the property but are seeking high returns on their investment, cannot be considered financial creditors under the IBC. The Tribunal referred to the judgment in Sudha Sharma vs Mansi Brar, where it was held that speculative investors do not qualify as financial creditors. The Tribunal concluded that the Appellant, being a speculative investor, could not claim the status and benefits of a financial creditor under the IBC.Conclusion:The Tribunal dismissed the appeal, concluding that the Appellant, being a speculative investor, could not be considered a financial creditor under the IBC. The amount invested by the Appellant did not qualify as financial debt, and the nature of the transaction indicated that the Appellant was more interested in financial returns rather than the actual possession of the flats. The Tribunal emphasized that speculative investors do not qualify for the status and benefits of financial creditors under the IBC.