2024 (9) TMI 566 - AT - IBC

Appeal Dismissed: Tribunal Rules Advanced Amount as Investment, Not Financial Debt Under Insolvency and Bankruptcy Code.

Meehika Buildcon LLP Versus City Star Infrastructure Ltd.

The Tribunal dismissed the appeal under Section 7 of the Insolvency and Bankruptcy Code, 2016, affirming that the advanced amount was not a financial debt ... Dismissal of application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 - refund of the entire amount of advance alongwith interest - cancellation of amount which was disbursed as loan - whether appellant has given money as loan or not - HELD THAT:- The Appellant has not advanced the money as loan rather the money has been given to the Respondent for the purpose of clearing their title over the land in question which was to be shared by both of them in the ratio of 30% / 70%. It is pertinent to mention that the Appellant has not filed any financial statement on record in order to show that the money which has been given as per term sheet has been shown as a loan advanced to the Respondent. There are no reason to interfere with the well-considered findings of the Tribunal whereby the application filed by the Appellant has been rejected - there are no merit in the present appeal - appeal dismissed. Issues:Appeal against dismissal of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 for refund of advanced amount. Interpretation of term sheet as loan or investment. Applicability of judgments on financial debt definition. Lack of financial statement showing advanced money as loan.Analysis:The judgment pertains to an appeal against the dismissal of an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 seeking a refund of an advanced amount. The appellant claimed that the sum disbursed to the respondent was a loan based on a term sheet executed between the parties. The appellant argued that the Tribunal erred in treating the amount as an investment, citing specific clauses from the term sheet. However, the Tribunal, referring to relevant case law, concluded that the money advanced did not constitute financial debt under the Code as it was intended for a joint development agreement upon successful completion of obligations. The Tribunal emphasized that the appellant did not provide evidence of the advanced money being treated as a loan in financial statements.The appellant relied on a court decision and a Supreme Court case to support their argument, contending that the transaction should be considered a loan. Conversely, the respondent argued that the transaction was an investment, not a loan, as no interest rate or timeline for interest payment was specified in the term sheet. The respondent highlighted issues related to land title clearance and the involvement of sharecroppers, asserting that the term sheet reflected an investment arrangement rather than a loan agreement. The respondent also emphasized that the judgments cited by the appellant were not applicable to the case's specific circumstances.The Tribunal, after hearing arguments from both parties, determined that the money advanced was not a loan but was intended for clearing the respondent's land title, to be shared between the parties. The Tribunal noted the absence of financial statements showing the advanced money as a loan. Consequently, the Tribunal upheld the lower authority's decision to dismiss the appellant's application, stating that the judgments cited were not relevant to the case. No other points were raised, leading to the dismissal of the appeal without costs.