TaxTMI 
TaxTMI 
2024 (10) TMI 726
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....by the Learned Adjudicating Authority (National Company Law Tribunal, Kolkata Bench, Court - I), by which order, Section 7 application filed by the Respondent - Avani Towers Pvt. Ltd. has been admitted. Aggrieved by the admission of the Section 7 application, this appeal has been filed. 2. Brief facts of the case necessary to be noticed for deciding the appeal are: i. The Corporate Debtor is an owner of land measuring 10.19 acres, situated at Ramrajtala, district Howrah. In the year 2008 the Corporate Debtor purchased the assets from sale conducted by UCO Bank under SARFAESI Act 2002. ii. On 16.06.2008, the Corporate Debtor entered into a Development Agreement with Avani Towers Pvt. Ltd. iii. According to the Clause 8.1 of the Development Agreement, Avani Towers Pvt. Ltd. was required to provide the refundable Security Deposit of Rs.12 Crores with option to add an extra Rs.3 Crores. The initial deposit of Rs.12 Crores would not accrue interest while any additional deposit up to maximum Rs. 3 Crores (increase to Rs.3.5 Crores mutually by the conduct between the parties) bear the interest at the rate of 18% compounded and payable quarterly. iv. ....
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....nerji and Sh. Krishnendu Datta Sr.Advocates for the Appellant. Sh. Abhijeet Sinha, Sr. Advocate and Mr. Shaunak Mitra has appeared for the Respondent. 5. Learned Counsel for the Appellant challenging the order submits that subject matter of the application filed under Section 7 is not a Financial Debt within meaning of Section 5(8) of the Insolvency and Bankruptcy Code, 2016, (hereinafter referred to as `The Code'). No default was committed with regard to payment of Security Deposit under the terms Development Agreement. The Respondent having asserted subsistence of Development rights under the Development Agreement in the Corporate Insolvency Resolution Process (CIRP) of the Respondent, which Development Rights have been confirmed by the Supreme Court vide its Judgment dated 14.03.2023, Respondent is estopped from asserting the claim for refund of Security Deposit without completing the development work under the Development Agreement. Respondent having been provided for interest only till 2014-15 on its book, it cannot claim default after more than three years from last date of provision of interest on his book. Respondent has classified the refundable Security Deposit togethe....
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....tor. 11. We have considered the submissions of the Counsel for the parties and perused the record. 12. Before we proceed to consider the respective submissions of the Counsel for the parties, it is useful to notice certain clauses of Development Agreement dated 16.06.2008, which is the basis of application filed under Section 7. Development Agreement dated 16.06.2008 was entered between Energy Properties Pvt. Ltd., the owner of land and Avani Towers Pvt. Ltd who is referred as developer. Clause 8 of the Development Agreement deal with Security Deposit and refund. Clauses 8, 8.1, 8.2 and 8.3 are as follows: "8 Security Deposit and Refund: 8.1 Refundable Deposit: The Developer will keep in deposit with Owner a sum of Rs. 12,00,00,000/- (Rupees twelve crore) (hereinafter referred to as the Security Deposit) which will not carry interest and will be payable & refundable in the manner as would appear from the Part-I of the Third Schedule hereunder written. The Developer as on date has already paid Rs. 7,86,83,108/- (Rupees seven crores eighty-six lac eighty three thousand one hundred eight). The said sum of Rs. 12,00,00,000/- (Rupees twelve crore) agreed to be pa....
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....which was treated as Security Deposit. The Clause further states that any further sum subject to maximum of Rs. 3 Crores if advanced by developer to owner shall form part of Security Deposit and shall carry interest at agreed rate of 18% p.a. compounded and payable quarterly. Thus, the further sum in addition to Rs. 12 Crores of Security Deposit was given a different treatment and it was treated as advance by developers which was part of Security Deposit but was to carry interest at agreed rate of 18%. Clause 8.1 uses the expression "carry interest at agreed rate of 18% p.a., compounded and payable quarterly". Thus the Interest of 18% was payable quarterly which was unrelated to the Security Deposit of Rs. 12 Crores. Clause 8.2 deal with refund of refundable deposit and clause 8.3 recovery of Security Deposit in event the owner fails to refund said Security Deposit. In the present proceeding, we are not concerned with Clauses 8.2 or 8.3, since the application which was filed by Financial Creditor was not for the refund of the Security Deposit. In Part IV in the Column 2 with regard to amount claim to be in default and the date on which default has been occurred, following has been ....
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....sold or discounted other than any receivables sold on nonrecourse basis; (f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing; [Explanation. - For the purposes of this sub-clause, - (i) any amount raised from an allottee under a real estate project shall be deemed to be an amount having the commercial effect of a borrowing; and (ii) the expressions, "allottee" and "real estate project" shall have the meanings respectively assigned to them in clauses (d) and (zn) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016);] (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 liability in respect of any of....
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....e letter contains clear understanding of the Corporate Debtor of the nature of transaction. Corporate Debtor requested the Avani Towers Pvt. Ltd. not to provide interest income on the abovementioned sum for Financial Year 2013-14. Avani Towers Pvt. Ltd has sent a letter dated 05.04.2014 in reference to letter dated 31.03.2014, where it was reiterated that Avani Towers Pvt. Ltd. is well within its rights to claim interest on the additional Security Deposit as per Clause 8.1. 21. Learned Counsel for the Respondent has also referred to notes of Financial Statements of the Corporate Debtor as on 31.03.2015, Note 4 of the notes which deals with long-term borrowings is as follows: NOTE 4-Long Term Borrowings Particulars 31.03.2015 31.03.2014 Rs. Rs. Secured Loan- HDFC Car Loan - 54,536 Less: Current Maturities of Long Term Debt [Refer Note No. 5] - 54,536 - - Unsecured Loan- From Associate 55,424,439 55,424,439 55,424,439 55,424,439 Total 55,424,439 55,424,439 22. In the above Financial Statements under Note 19, ....
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....re is no commission payable to the first respondent on the quantity of sales. Clause (6) provides for termination of the appointment by giving thirty days' notice. Though clause (10) provides for the payment of the security deposit by the first respondent, it is pertinent to note that there is no clause for the forfeiture of the security deposit. The amount specified in clause (10) has no correlation whatsoever with the performance of the other conditions of the contract by the first respondent. As there is no clause regarding forfeiture of the security deposit or part thereof, the corporate debtor was liable to refund the security deposit after the period specified therein was over with interest @21% per annum. Since the security deposit payment had no correlation with any other clause under the agreements, as held by the NCLAT, the security deposit amounts represent debts covered by subsection (11) of Section 3 of the IBC. The reason is that the right of the first respondent to seek a refund of the security deposit with interest is a claim within the meaning of subsection (6) of Section 3 of the IBC as the first respondent is seeking a right to payment of the deposit amount w....
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....ances in the financial statement of the corporate debtor for the Financial Year 2015-2016. Moreover, in the financial statement of the corporate debtor for the Financial Year 2016-2017, the amounts paid by the first respondent were shown as "other long-term liabilities". Therefore, if the letter mentioned above and the financial statements of the corporate debtor are considered, it is evident that the amount raised under the said two agreements has the commercial effect of borrowing as the corporate debtor treated the said amount as borrowed from the first respondent." 25. Conclusion has been recorded by the Hon'ble Supreme Court in Paragraph 18, Hon'ble Supreme Court held that amount covered by the Security Deposit under the Agreement constitutes Financial Debt. In the said case also Corporate Debtor has provided interest in the Books of Accounts of the Corporate Debtor. Hon'ble Supreme Court has also noticed the Clause 10 of the Agreement dated 01.04.2014 between the parties in which Clause provides as follows: "10. You have to deposit minimum security of Rs. 53,15,000/- with the Company which will carry interest @21% p.a. We will provide you interest on Rs. 7,85,850/....