Tribunal rules no financial debt in Insolvency case, absolves Corporate Debtor.

The Tribunal dismissed the application for Corporate Insolvency Resolution Process, finding no financial debt between the parties. It held that the amount claimed was not a loan but assurance money under the sale deed, absolving the Corporate Debtor of repayment liability. The decision aligned with the Insolvency and Bankruptcy Code, 2016, permitting the Financial Creditor to pursue alternative legal avenues for recovery.

---

---

Issues:
Initiation of Corporate Insolvency Resolution Process under Insolvency and Bankruptcy Code, 2016 based on default in loan repayment and sale deed execution.

Detailed Analysis:

Issue 1: Default in Loan Repayment
- The Financial Creditor filed an application seeking initiation of Corporate Insolvency Resolution Process due to non-repayment of a loan amounting to Rs. 4,06,10,000 by the Corporate Debtor.
- The loan was granted to various companies of Proplarity Home Pvt. Ltd. (PHPL), and the Corporate Debtor was involved in a sale deed where a sum of Rs. 3,86,10,000 was to be paid to the Financial Creditors, but the payment was not made.
- Additionally, an amount of Rs. 20,00,000 was paid to the Corporate Debtor, which remained unpaid, leading to the claim of default by the Financial Creditor.

Issue 2: Relationship between Financial Creditor and Corporate Debtor
- The Financial Creditor argued that a relationship existed between them and the Corporate Debtor due to the sale deed arrangement and acknowledgments made by the Corporate Debtor regarding the outstanding amount.
- However, the Corporate Debtor contended that no financial contract existed between the parties, and the loan agreement was solely between the vendor and the Financial Creditor, not involving the Corporate Debtor.
- The Corporate Debtor claimed that the amount of Rs. 20,00,000 was non-refundable and given as assurance money for executing the sale deed, not as a loan to be repaid.

Issue 3: Legal Obligations and Default
- The Tribunal analyzed the terms of the sale deed, specifically Clause 35, and concluded that no legal obligation was imposed on the Corporate Debtor to repay the loan taken by the vendor from the Financial Creditor.
- The Tribunal found that the amount of Rs. 20,00,000 was indeed given as assurance money and not as a loan, as claimed by the Financial Creditor, and no evidence was presented to prove otherwise.
- Consequently, the Tribunal held that there was no privity of contract between the Financial Creditor and the Corporate Debtor, and the application for Corporate Insolvency Resolution Process was dismissed.

Conclusion:
- The Tribunal dismissed the application, stating that there was no transaction constituting a financial debt between the parties, and the Corporate Debtor was not liable to repay the loan amount claimed by the Financial Creditor.
- The dismissal was in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016, allowing the Financial Creditor to seek other legal remedies for recovery if advised to do so.

---