Corporate debtor's appeal dismissed as Rs. 5 crore disbursement constitutes financial debt under Section 7 IBC

NCLAT Principal Bench dismissed an appeal challenging admission of a Section 7 application under IBC. The tribunal held that Rs. 5 crore disbursed to the corporate debtor constituted financial debt as it involved disbursal against consideration for time value of money, citing Supreme Court precedents in Pioneer Urban Land and Jaypee Infratech cases. The corporate debtor failed to dispute the debt or prove repayment. The adjudicating authority correctly found financial debt existence, default above threshold limit, and properly admitted the corporate debtor into CIRP process under summary jurisdiction.

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Issues Involved:
1. Nature of the Rs. 5 crore disbursed by Respondent No. 1 to the Corporate Debtor.
2. Whether the disbursed amount qualifies as a "financial debt" u/s 5(8) of IBC.
3. Default in repayment of the alleged financial debt.
4. Admission of Section 7 application by the Adjudicating Authority.
5. Cooperation of the Appellant with the Resolution Professional.

Summary:

1. Nature of the Rs. 5 crore Disbursed:
The Appellant contended that the amount of Rs. 5 crore disbursed by Respondent No. 1 was not a loan but a part payment deposit for developing a land project. It was argued that the disbursal was not against the consideration of time value of money but was related to a joint venture project involving SKIL Infrastructure Limited.

2. Financial Debt u/s 5(8) of IBC:
The Tribunal examined the definition clauses in Sections 3 and 5 of IBC and relevant judgments. It was emphasized that for a debt to be treated as a financial debt, there must be a disbursal of money against the consideration for time value of money. The Tribunal found that the disbursal of Rs. 5 crore was indeed a loan as evidenced by the balance sheets of the Corporate Debtor, which showed the amount under 'Long Term Borrowings - Unsecured loan from Related Parties'. The Tribunal concluded that the transaction had the commercial effect of borrowing and thus qualified as a financial debt.

3. Default in Repayment:
The Tribunal noted that Respondent No. 1 had provided sufficient evidence, including RTGS transfer details and a bank certificate, to prove the disbursal of Rs. 5 crore. The Corporate Debtor did not deny the receipt of this amount nor claimed any repayment. The Tribunal held that there was a clear default in repayment, thus fulfilling the conditions for initiating CIRP u/s 7 of IBC.

4. Admission of Section 7 Application:
The Tribunal upheld the Adjudicating Authority's decision to admit the Section 7 application, stating that the Financial Creditor had successfully proved the financial debt and default. It was noted that the Adjudicating Authority had given the Corporate Debtor an opportunity to produce their books of accounts to defend their case, which they failed to do.

5. Cooperation with the Resolution Professional:
The Tribunal addressed the issue of non-cooperation from the Appellant with the Resolution Professional, which was causing difficulties in the verification of claims. The Tribunal directed the Appellant to extend sufficient cooperation as per the Adjudicating Authority's earlier direction.

Conclusion:
The appeal was dismissed, and the Tribunal found no reason to interfere with the impugned order passed by the Adjudicating Authority. The Resolution Professional was allowed to continue with the CIRP process in accordance with the law.

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