TaxTMI 
TaxTMI 
2018 (2) TMI 447
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....ch, 2017 in Company Petition (IB)/19/7/HBD/2017 held that the Appellant do not come within the meaning of 'Financial Creditor' and failed to satisfy the Adjudicating Authority about requisite ingredients of Section 7 of the "I&B Code" to claim any relief and thereby rejected the application. 2. The case of the Appellant is that loans totalling Rs. 91,47,864/- were advanced by the Appellant to the Respondent in fifty-two transactions between 26th April, 2013 and 9th March, 2015 for the purpose of (a) repaying interest/instalments on bank loans taken by the Respondent so that loans are not defaulted upon or rendered NPA; and (b) ensuring payment of salaries and money due to suppliers/ vendors, so that business continues unabated. 3. Further, according to Appellant though the terms of the loan were not recorded in writing, it was agreed that money advanced would carry interest, as evidenced by the following: (a) E-mail from the Managing Director of the Respondent directing that interest should be added for loans advanced by shareholders. (b) The Auditor of the Respondent, in the auditor's report dated 31st August, 2016, states that interest has been credited fo....
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....dent remains a 'going concern', and preventing it from going bankrupt, which evidenced that the loans were given for a commercial purpose. Thus, according to Appellant, the Time value of money to be calculated by expected future value of the Appellant's investment in the Respondent for allowing it to continue as a "on-going concern" and to make profits. This would include the profit she would make on a future sale of her shares in the Respondent, which would increase in value, as well as dividends she would receive from the Respondent, in the event the Respondent made profits. 10. It was submitted that the definition of "Financial Debt", uses the words "means and includes", is inclusive, rather than an exhaustive definition. Hence, a loan advanced by the Appellant to the Respondent against the time value of money, as discussed hereinabove, would nevertheless fall within the ambit of "Financial debt", even if it does not specifically fall within sub-clauses (a) to (i) of sub-section (8) of Section 5. 11. It was contended that finding of the Adjudicating Authority that the Appellant is not a 'Financial Creditor' under sub-section (7) of Section 5 of the "I&B Code" is devoid of ....
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....t against consideration of time value and money. The amounts as reflected in the earlier Balance Sheet of the Company merely describes certain 'unsecured loan' being payable to the Appellant as on 31st March, 2014. The Respondent Company has already placed on record the Auditor certificate, which categorically states that no amount is due and payable to the Appellant and further the Audited Balance Sheet of the Respondent Company as on 31st March, 2017 also nowhere reflects any amount being due and payable to the Appellant either as the 'financial debt' or as an 'unsecured loan'. The qualification of the Auditor in the Balance Sheet of the Respondent Company as on 31st March, 2016, also categorically states that in absence of any document pertaining to approval of any loan taken, interest erroneously paid on account of an alleged loan given by the Appellant herein is not to be provided and accounted for. 16. Learned counsel for the Respondent relied on decision of the Hon'ble Supreme Court in "M/s. Innoventive Industries Ltd. Vs. ICICI Bank & Anr.─ 2017 SCC OnLine SC 1025", and submitted that the Adjudicating Authority has to be satisfied as to existence of a default. The ....
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.... Ended 31.03.2013 Rs. SCHEDULE-A SHARE CAPITAL AUTHORISED CAPITAL 13,90,000 EQUITY SHARES OF Rs. 10/- EACH (Previous year 10,000 equity shares of Rs. 10 each 1,39,00,000 1,39,00,000 PAID UP CAPITAL 10,000 EQUITY SHARES OF RS.10/- EACH 3,90,000 80,50,000 (Previous year 10,000 equity shares of Rs. 10 each) 3,90,000 80,50,000 SCHEDULE - B SHARE APPLICATION - 58,50,000 MONEY - 58,50,000 SCHEDULE - C SECURED LOAN ....
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....ank A/c 6124317562 Journal 1,00,000.00 10-6-2014 By Travelling & Convyence Journal 11,334.00 By Travelling & Convyence Journal 50,298.00 12-6-2014 By Kedarnath Indian Bank A/c 6124317562 Journal 70,000.00 19-6-2014 By Younus Petty Cash Cash Receipt 2,000.00 By Travelling & Convyence Journal 13,334.00 23-6-2014 By Kedarnath Indian Bank A/c 6124317562 Journal 50,000.00 30-6-2014 By Indian Bank A/c No:887783615-Nellore Bank Receipt 3,50,000.00 24-7-2014 By Travelling & Convyence Journal 60,559.00 26-7-2014 By Younus Petty Cash Cash Receipt 2,500.00 28-8-2014 By Venkat Reddy Current A/C Journal 2,000.00 5-9-2014 By Younus Indian Bank A/c 6124549605 Journal 25,000.00 7-9-2014 By Petty Cash Mastanalah Cash Receipt 7,200.00 9-9-2014 By Petty Cash Mastanalah Cash Receipt 5,000.00 10-9-2014 By Younus Indian Bank A/c 6124549605 Journal 4,49,940.00 26-9-2014....
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....which is as follows:- '5(8) "financial debt" means a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money and includes- (a) money borrowed against the payment of interest; (b) any amount raised by acceptance under any acceptance credit facility or its de-materialised equivalent; (c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument; (d) the amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital lease under the Indian Accounting Standards or such other accounting standards as may be prescribed; (e) receivables sold or discounted other than any receivables sold on non-recourse basis; (f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing; (g) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price and for calculating the value of any derivative transaction, onl....
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....ice associated with the length of time that an investor must wait until an investment matures or the related income is earned". In both the cases, the inflows and outflows are distanced by time and there is a compensation for time value of money. It is significant to notice that in order to satisfy the requirement of this provision, the financial transaction should be in the nature of debt and no equity has been implied by the opening words of Section 5(8) of the IBC. It is true that there are complex financial instruments which may not provide a happy situation to decipher the true nature and meaning of a transaction. It is pertinent to point out that the concept 'Financial Debt' as envisaged under Section 5(8) of the IBC is distinctly different than the one prevalent in England as provided in its Insolvency Act, 1986 and the 'Rules' framed thereunder. It appears that in England there is no exclusive element of disbursement of debt laced with the consideration for the time value of money. However, forward sale or purchase agreement as contemplated by Section-5(8)(f) may or may not be regarded as a financial transaction. A forward contract to sell product at the end of a specified ....