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of <h1>NCLAT upholds rejection of CIRP initiation under Section 7 IBC for joint venture investment not qualifying as financial debt</h1> <h3>Ansal Housing Limited (Erstwhile Ansal Housing & Construction Limited) Versus Samyak Projects Private Limited</h3> Ansal Housing Limited (Erstwhile Ansal Housing & Construction Limited) Versus Samyak Projects Private Limited - TMI Issues Involved:1. Whether the financial assistance of Rs.25 crore given by the Appellant to the Respondent can be construed as a financial debt in terms of IBC.2. Whether the Appellant qualifies as a Financial Creditor under Section 5(7) of IBC.3. Whether the Section 7 application filed by the Appellant for initiating CIRP against the Respondent was maintainable.Summary:Issue 1: Financial DebtThe primary issue was whether the Rs.25 crore given by the Appellant to the Respondent under an Inter-Corporate Deposit Agreement (ICD) for purchasing land for a real estate project can be considered a financial debt under the Insolvency and Bankruptcy Code (IBC). The Appellant argued that the disbursement was made with 24% compound interest, indicating it was against the consideration for the time value of money. They contended that the ICD and the Joint Venture Agreements (JVAs) were independent, and the loan was a financial debt. The Respondent countered that the ICD and JVAs were inter-dependent, and the Rs.25 crore was an investment for profit, not a financial debt.Issue 2: Financial CreditorThe Appellant claimed they were a Financial Creditor under Section 5(7) of IBC as the Rs.25 crore loan was disbursed for time value of money. The Respondent argued that the ICD and JVAs were collaborative agreements for developing real estate projects, making the Appellant a partner rather than a Financial Creditor. The Adjudicating Authority found that the ICD and JVAs were linked, and the financial arrangement was a commercial business transaction, not a financial debt.Issue 3: Maintainability of Section 7 ApplicationThe Adjudicating Authority held that the Appellant was not a Financial Creditor and the loan was not a financial debt. Consequently, the Section 7 application for initiating Corporate Insolvency Resolution Process (CIRP) against the Respondent was dismissed. The Tribunal upheld this decision, stating that the primary intent of IBC is the resolution of the Corporate Debtor, not debt recovery. The Tribunal found no error in the Adjudicating Authority's conclusion that the Appellant and Respondent were joint venture partners, and the transaction was an investment for profit, not a financial debt.Conclusion:The appeal was dismissed, affirming the Adjudicating Authority's decision that the Appellant was not a Financial Creditor under IBC, and the Section 7 application was not maintainable. The Appellant was advised to seek other legal remedies to protect their interests.
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