TaxTMI 
TaxTMI 
2018 (2) TMI 447
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....17 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 for loans advanced. 4. The stand of the Appellant is that the lo....
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....e 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 merit. 12. According to Respondent, the Appellant is not a 'Financial Creditor' in absence of any 'Financial....
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....s 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 term 'default' has been defined in Section 3(12) of the 'I&B Code'. For the purpose of ascertainment of default, it is imperative to po....
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....sp; (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 INDIAN BANK OCC A/C 36,67,937 10,67,370 INDIAN BANK T/L 6106957536 67,04,081 3,77,845 INDIAN BANK T/L 899902028 2,10,74,989 1,97,63,812 3,14,47,007 2,12,09,027....
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....ipt 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 By Younus Indian Bank A/c 6124549605 Journal 50,000.00 31-10-2014 By Younus Indian Bank A/c 6124549605 Journal 10,00,000.00 7-11-2014 By Indian Bank CA 6241424998 Bank Receipt 1,20,000.00 14-11-2014 To Younus Indian Bank A/c 6124549605 Journal 25,000.00 1-12-2014 By Younus Indian Bank A/c 6124549605 Journal 30,000.00 31-12-2014 By Travelling & Convyence Journal 1,41,676.00 13-1-2015 By Younus Indian Bank A/c 6124549605 Journal 50,000.00 9-3-2015 By Indian Bank CA 6241424998 Bank Receipt 1,09250.00 25,000.00 75,28,462.00 To Closing Balance 75,03,462.00 75,28,462.00 7528,462.00 22. Learned counsel appearing on behalf of the Resp....
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....) 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, only the market value of such transaction shall be taken into account; (h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution; (i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause;' 28. In Nikhil Mehta & Sons case (supra) this Appellate Tribunal while noticed sub-section (8) of Section 5 of the 'I&B Code' observed: - "17. The first question arises for consideration is as to who is a 'Financial Creditor'. Learned Adjudicating Authority, for determination of the aforesaid issue examined the definition provided in Section 5(7) and 5(8) and in the impugned judgement rightly observed: - 12. A perusal of definition of expression 'Financial Creditor' would show that it refers to a person to whom a Financial debt is owed and includes even a person to whom such debt has been le....
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....e 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 period is not a financial contract. It is essentially a contract for sale of specified goods. It is true that some time financial transactions seemingly restructured as sale and repurchase. Any repurchase and reverse repo transaction are sometimes used as devices for raising money. In a transaction of this nature an entity may require liquidity against an asset and the financer in return sell it back by way of a forward contract. The difference between the two prices would imply the rate of return to the financer. (See Taxman's Law Relating to IBC, 2016 by Vinod Kothari & Sikha Bansal)." 29. For coming within the definition of 'Financial Debt' as defined under sub-section (8) of Section 5, the Claimant is required to show that (i) there is a debt alongwith interest, if any, which has been disbursed and (ii) such disbursement has been made against the 'consideration for the time value of money'. Thereby, if the Claimant claims to be 'Financial Creditor' he will have to show that debt is due which he has disbursed against ....