Development agreement landowner not a financial creditor without disbursal for time value of money

A landowner-collaborator under a development agreement is not a financial creditor unless the arrangement involves disbursal against consideration for the time value of money. The tribunal applied the Section 5(8) test under the Insolvency and Bankruptcy Code and found that contribution of land in exchange for a share in constructed area was a collaboration for development, not a borrowing transaction. On that basis, no financial debt arose and the challenge to exclusion from the Committee of Creditors failed.

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Issues: Whether the appellant, being a landowner/collaborator under a development agreement, could be treated as a financial creditor on the basis of any disbursal against the consideration for time value of money.

Analysis: The development agreement showed that the appellant contributed land for a real estate project and was entitled to a share in the constructed area, while the corporate debtor was to undertake construction and share the saleable area. The controlling test for financial debt under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 is disbursal against the consideration for time value of money. A development arrangement of this nature, without any lending or disbursal by the landowner, does not satisfy that requirement. The arrangement was treated as a collaboration for development and not as a borrowing transaction giving rise to financial debt.

Conclusion: The appellant was not a financial creditor and the challenge to removal from the Committee of Creditors failed.

Ratio Decidendi: A landowner under a development agreement is not a financial creditor unless the transaction involves a disbursal against the consideration for time value of money.

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