TaxTMI 
TaxTMI 
2022 (7) TMI 1251
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.... for R-3 JUDGEMENT Ashok Bhushan, J: 1. These two Appeals filed by the same Appellant have been heard together and are being decided by this common Judgement. Company Appeal (AT) Ins. No. 22 of 2022 has been filed by the Appellant challenging the Judgement and Order dated 07.02.2022 passed by the National Company Law Tribunal, Ahmedabad Bench, Ahmedabad (the Adjudicating Authority) rejecting the I.A. No. 658 of 2019 filed by the Appellant. By this I.A., Appellant prayed that his claim be admitted as a "Financial Debt" and he be declared to be "Member of Committee of Creditors". I.A. No. 658 of 2019 has been dismissed by the Impugned Judgement. Aggrieved by the Order, this Appeal has been filed. Company Appeal (AT) Ins. No. 21 of 2022 has been filed against the Order dated 27th May, 2020 passed by the National Company Law Tribunal, Ahmedabad Bench, Ahmedabad (the Adjudicating Authority) allowing the Application filed by the Resolution Professional (RP in short) for approval of the Resolution Plan. By the Order dated 27.05.2020, Resolution Plan was approved. Aggrieved by the Order dated 27.05.2020, this Appeal has been filed by the Appellant. 2. Brief facts of the case and sequen....
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....entire 'CIRP' which Application was dismissed vide Order dated 21st June, 2021. Appellant challenged the Order dated 21st June, 2021 before this Appellate Tribunal which Appeal was also dismissed on 29th July, 2021. The Appeal No. 21 of 2021 has been filed by the Appellant challenging the Order dated 27th May, 2020. 3. We have heard Shree Krishnendu Datta, Learned Sr. Counsel with Shree Ravi Raghunath, Learned Counsel for the Appellant. Mr. Pratik Thakkar has appeared for Resolution Professional and Mr. Atul Sharma, Advocate for CoC and Mr. Rohan Agrawal and Ms. Meghna Rao, Advocates appeared for R-3. 4. Learned Counsel for the Appellant submits that the Adjudicating Authority committed error in passing Order dated 07.02.2020 rejecting the claim of the Appellant as a Financial Creditor. He submitted that Appellant had paid sum of Rs. 7 Crores as earnest money to the Corporate Debtor with regard to which receipt was issued by the Corporate Debtor and payment has not been disputed by the Corporate Debtor. The Resolution Professional has admitted the payment of earnest money by the Appellant to the Corporate Debtor but has wrongly classified the Appellant as other Creditor. Learned ....
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....inancial Debt'. The Adjudicating Authority in its Order dated 07th February, 2020 has held that there was no contract between the parties for sale of any land. Essential conditions for holding a debt to be Financial Debt within the meaning of Section 5(8) of the Code are not present in the present case hence the Adjudicating Authority has not committed any error in not accepting the claim of the Appellant as a Financial Creditor. 7. There is no error in the decision of the CoC approving the Resolution Plan. The Appellant as other creditor was not entitled for any payment of any amount as per the provisions of the Code. Hence the Resolution Plan cannot be faulted. Appellant's I.A. No. 195 of 2021 where he had made a prayer to quash the CIRP was rejected by the Adjudicating Authority against which Company Appeal (AT) Ins. No. 522 of 2021 filed by the Appellant was also dismissed on 29th July, 2021. Appellant cannot be allowed to reagitate the same issue. 8. We have considered the submissions of Learned Counsel for the parties and have perused the record. 9. The first issue to be answered in this Appeal is as to whether the payment of earnest money of Rs. 7 Crores by the Appellant ....
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....id by the Appellant after submitting a proposal by the Appellant himself without their being any acceptance. There is neither any agreement between the parties nor any agreement has been brought on record. It is true that contract between the parties can be oral as well as in writing however, there is no foundation in the Application filed by the Appellant or materials brought by him to indicate that there was even an oral agreement with the Corporate Debtor for sale of the land to the Appellant. The Adjudicating Authority in the Impugned Order has discussed the entire sequence of the events and materials on record. The Adjudicating Authority returned findings in paragraphs 4 and 9. The Adjudicating Authority considered the claim of the Appellant based on clause (f) of Section 5(8). The Adjudicating Authority has even observed that there is no proof that this letter dated 14.09.2018 was served on the Corporate Debtor. We however proceed to examine the case on the premise that after sending letter dated 14.09.2018, the Appellant made payment of Earnest Money as claimed by him. 12. We now need to notice the statutory provisions of the Code defining "Financial Debt". Section 5(8) of ....
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.... time value of money. For a debt to be financial debt, essential condition to be proved is that the debt is disbursed against the consideration for the time value of money. The word 'time value money' has been defined in 'Black's Law Dictionary' to the following effect: "The price associated with the length of time that an Investor must call only when investment matures or the related income is earned." 14. Time value of money thus means the price received for the length of time for the money for which the money has been disbursed. The Hon'ble Supreme Court has occasion to consider sub-section (8) of Section 5 in several cases. A three bench Judgement which has been referred to and relied on time and again is the Judgement of Hon'ble Supreme Court in (2019) 8 SCC 416 "Pioneer Urban Land and Infrastructure Ltd. Vs. Union of India". The amendment made in the Code by which allottees of Real Estate were being treated Financial Creditor was challenged before the Hon'ble Supreme Court by filing a number of writ petitions. In the above context, the Hon'ble Supreme Court of India had occasion to consider the concept of financial debt under section 5(8). Paragraph 70 and 71 are as follow....
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....tech Limited Vs. Axis Bank Limited and Ors" (2020 8 SCC 401) elaborately discussing Section 5(8) of the Code laid down following in paragraph 46 while considering the essential for financial debt. "The essentials for financial debt and financial creditor 46. Applying the aforementioned fundamental principles to the definition occurring in Section 5(8) of the Code, we have not an iota of doubt that for a debt to become 'financial debt' for the purpose of Part II of the Code, the basic elements are that it ought to be a disbursal against the consideration for time value of money. It may include any of the methods for raising money or incurring liability by the modes prescribed in sub-clauses (a) to (f) of Section 5(8); it may also include any derivative transaction or counter-indemnity obligation as per sub-clauses (g) and (h) of Section 5(8); and it may also be 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). The requirement of existence of a debt, which is disbursed against the consideration for the time value of money, in our view, remains an essential part even in respect of any of the tran....
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....The definitions provided in Sections 5(7) and 5(8) show that a 'Financial Creditor' refers to a person to whom 'Financial Debt' is owed and includes even a person to whom such a debt has been legally assigned or transferred to. A 'Financial Debt' is a debt alongwith interest which is disbursed against the consideration for the time value of money and it may include any of the events specified in sub-Clause (a) to (i). The Legislature has included any financial transaction in the definition of 'Financial Debt' which are usually for a sum of money received today to be paid over a period of time in instalments, or in a single payment in future. 18. The expression time value has been defined in Black's Law Dictionary as 'the price associated with the length of time that an investor must wait until an investment matures or the related income is earned'. To reiterate, any of the transactions specified in Clauses (a) to (i) of Section 5(8) would fall within the ambit of the definition of 'Financial Debt' only in the event if they include the essential elements stated in the principal clause that is element of disbursal, against the consideration for time value of money and has the comme....
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....Adjudicating Authority which does not contemplate any payment to the other creditors. The Respondent No. 2-Successful Resolution Applicant has referred to Para 4.6.3 of the Resolution Plan which is to the following effect: "4.6.3 As per the IM dated 01.02.2020, the other creditors other than Financial Creditors/Operational Creditors/Employees and workmen, have submitted claim of Rs. 39.35 crore and the claim is admitted by the RP which includes Rs. 13.40 crore by the related parties. The resolution plan envisages NIL payment to these "other creditors". In this category no payment is envisaged towards the related parties claim admitted by RP neither to any other parties including against Claim of Rs. 16.95 Crores filed by M/s DLF Limited, which is disputed by the corporate debtor and pending before the court of law and admitted subject to finality" 22. The Resolution Plan envisages Nil payment to other Creditors. Now we come to the law laid down by the Hon'ble Supreme Court in Essar Steel (supra) in paragraph 72 and 73 of the Judgement following has been laid down down: "72. This is the reason why Regulation 38(1A) speaks of a resolution plan including a statement as to how it ....
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....ittee of Creditors to re-submit such plan after satisfying the aforesaid parameters. The reasons given by the Committee of Creditors while approving a resolution plan may thus be looked at by the Adjudicating Authority only from this point of view, and once it is satisfied that the Committee of Creditors has paid attention to these key features, it must then pass the resolution plan, other things being equal." 23. The Hon'ble Supreme Court in the above judgement has laid down that judicial review by the Adjudicating Authority as well as Appellate Tribunal has to confine as to whether the requirement referred to in Section 30(2) has been met. It was clearly held that the Adjudicating Authority may not interfere with the merits of the commercial decision of the CoC. The limited judicial review available is to see that CoC has taken into account the fact that Corporate Debtor needs to be kept as a going concern, it needs to maximise the value, and interest of all the stakeholders including Operational Creditor have been taken care of. Section 30(2) provides as follows: "30(2) The resolution professional shall examine each resolution plan received by him to confirm that each resolut....
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.... Plan. We thus are of the view that the Resolution Plan which has been approved by the Adjudicating Authority on 27th May, 2020 does not require any interference. We may also refer to the Judgement of this Tribunal in 2020 SCC Online NCLAT 199 "Hammond Power Solutions Pvt. Ltd. Vs. Sanjit Kumar Nayayk and Ors." where this Tribunal had set aside the Order of the Adjudicating Authority approving the Resolution Plan and remitting the matter back to the Adjudicating Authority to send back plan to CoC. This Tribunal relies on the Judgement of the Hon'ble Supreme Court in the matter of "Essar Steel" (supra). Following was reasons given in paragraph 15-16: "15. If the above minutes are perused, it can be hardly said that there are any reasons given by the Committee to demonstrate that it has taken care of interest of all stakeholders. Para - 46 of the Judgement in the matter of "Essar Steel" requires to see "the reasons given by the Committee of Creditors while approving a resolution plan" from point of view stated in the paragraph. The reasons for giving NIL to Operational Creditors is not reflected from record. We have already reproduced portion from Part B - Financial Proposal with r....