AI Drafter 
TaxTMI 
TaxTMI 
2019 (3) TMI 1192
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....reinafter referred to as 'I&B Code') has been admitted, moratorium slapped and Interim Resolution Professional appointed with certain directions, has assailed the impugned order primarily on the ground that the amount claimed by Respondent No. 1 is not a 'Financial Debt' within the meaning of Section 5(8) and Respondent No. 1 cannot be treated as a 'Financial Creditor' for the purposes of I&B Code. 2. For better understanding of the controversy involved in this appeal it would be apposite to refer to the factual matrix of the case. Respondent No.1, claiming to be a Shareholder of Respondent No. 2 (hereinafter referred to as Corporate Debtor), filed an application under Section 7 of I&B Code before the Adjudicating Authority (National Company Law Tribunal) Mumbai Bench, seeking initiation of Corporate Insolvency Resolution Process against the Corporate Debtor on the ground that the Respondent No. 1 had granted unsecured loan repayable on demand from time to time to the Corporate Debtor which stood at Rs. 3,23,46,475/- as on 31st March, 2008, major portion whereof was repaid by the Corporate Debtor from year 2008 to 2010 leaving an amount of Rs. 1,45,36,475/- as outstanding which ....
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...., that no TDS amount was ever deducted in respect of the part payments made, that there was no tenure for the repayment of amounts granted by Respondent No.1 to Corporate Debtor and that there was no time value of money in the transaction and no consideration for the time value of the money was agreed between the parties at the time of disbursement of moneys by Respondent No.1. 4. Per contra it has been argued on behalf of Respondent No.1 that he had provided moneys to the Corporate Debtor by way of interest free unsecured loans between the period starting on 1st April, 2002 and ending on 29th November, 2007, totalling to Rs. 3,23,46,475/-, portion whereof to the tune of Rs. 1,78,10,100/- stands repaid by the Corporate Debtor leaving a balance amount of Rs. 1,45,36,475/- as outstanding, which is reflected in the balance sheet of the Corporate Debtor as unsecured loan. It is further submitted that by way of confirmation of accounts dated 1st April, 2016, the Corporate Debtor has admitted the outstanding loan amount being due to Respondent No. 1 which is further clarified by the statutory auditor of the Corporate Debtor vide its email dated 5th December, 2017. It is further submit....
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....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, 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 l....
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....th obligation on the part of Company to discharge the same. Viewed thus, it can be said without any amount of contradiction that in such cases the amount taken by the Company is in the nature of a 'financial debt'. 7. Adverting to the facts of the instant case be it seen that in the balance sheet of 2009 forming Annexure B of the reply affidavit filed by Respondent No. 1 under the heading 'unsecured loans' name of Respondent no. 1 figures with particulars of loan. Same is extracted as under:- PRIORITY MARKETING PRIVATE LIMITED. Schedules forming part, of Balance Sheet as at 3lst March, 2009 Schedule Amt in Rs. Amt in Rs. SHARE CAPITAL SCHEDULE : A PARTICULARS 31.03.2009 31.03.3008 SHARE CAPITAL AUTHORISED (100,000)100,000 Equity Shares of Rs. 10 each 1,000,000 1,000,000 ISSUED, SUBSCRIBED AND PAID UP: (100,000)100,000 Equity Shares of Rs. 10 each fully paid 1,000,000 1,000,000 Total 1,000,000 ....
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....n of Accounts 1-Apr-2015 to 31-Mar-2016 Date Particulars Debit Amount Date Particulars Credit Amount 1-Apr-2015 Opening Balance 1,45,35,475,00 Closing Balance 1,45,36,475,00 1,45,36,475,00 1,45,36,475,00 1,45,36,475,00 I/We hereby confirm the above yours faithfully IT PAN No. ABUPC5468P Authorised Signatory 9. The balance sheet as on 31st March, 2017 at page 83 of the reply affidavit filed by Respondent No.1, inter alia, reflects a non-current liability of Rs. 4,72,76,182/- treated as 'long term borrowings' and not treated as shareholder's funds. Same factual position is reflected in the communication made by the Company Auditor 'Ganesh Mehta', Partner 'Ganesh and Rajendra Associates' addressed to Respondent No.1 in his communication dated 5th December, 2017 forming Annexure D to the reply affidavit of Respondent no.1 which is reproduced hereinbelow:- This communication reflects total unsecured loan of Rs. 4,72,76,182/- against the Corporate Debtor in the bo....