TaxTMI 
TaxTMI 
2025 (5) TMI 1841
X X X X Extracts X X X X
X X X X Extracts X X X X
....te Bank of India and was in need of funds to settle the OTS Amount. In lieu of the same, the Respondent approached the Appellant herein, as they had done in past, for loan to settle the said dues. The Appellant had already disbursed a sum of Rs. 48,36,540 (Rupees Forty-Eight Lakhs Thirty-Six Thousand Five Hundred and Forty) upto 12.11.2018. In light of One Time Settlement with SBI, the Respondent was in dire need of more funds. At that stage and in lieu of the same, the Appellant and the Respondent executed an Agreement to Sale dated 09.04.2019, wherein the earlier disbursal of Rs. 48,36,540/ was acknowledged by the Respondent and the Appellant had further agreed to lend another sum of Rs. 1,00,00,000/- (Rupees One Crore only). The payment of Rs. l,00,00,000/- was made by the appellant directly in the respondent's OTS account on 12.04.2019. The Respondent was required to repay the said sum on or before 31.03.2020 and upon failure, Respondent had agreed to execute Sale Deed for its plots of land being "Plot No. 17, 18 and 19, Gut No. 53, Sajapur, Tq. Gangapur, Dist. Aurangabad - 431 136 ("Plot"), otherwise, as per clause 3, upon receipt of entire payment on/before 31.03.2020 to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itor' under Section 5(7) of the Insolvency and Bankruptcy Code, 2016. 4. Further it is argued the Ld. Adjudicating Authority ought to have appreciated the Respondent has in the First Agreement dated 09.04.2019; Second Agreement dated 01.04.2020 and MoU dated 09.04.2020 unequivocally acknowledged the financial assistance given by the Appellant as loans and advances. More over, the Appellant had also fulfilled its obligation of payment of One Time Settlement of the Respondent to State Bank of India, therefore, the Ld. Adjudicating Authority ought to have appreciated that the financial assistance provided by the Appellant to the Respondent constitutes a commercial effect of borrowing. It is argued the Ld. Adjudicating Authority failed to appreciate, the 'debt' satisfies the threefold criteria of 'disbursal, 'time value of money 'and commercial effect of borrowing 'for being a 'financial debt. The disbursal of the loans and advances have been acknowledged all through by the Respondent and have no where been disputed by the Respondent. The MoU entered into between the Appellant and the Respondent clearly~ stipulates the Respondent has agreed to pay int....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l and agreed to make the further payment of Rs.1,00,00,000/- by way of R GS on 10 April 2019 to party of first part Akshay Techiorge Pvt Ltd. 3. Whereas party of first part Akshay Techforge Pvt Ltd and second part Advantagesai Projects Pvt Ltd has mutually agreed that, the Loans & Advances given by party of first part Akshay Techforgc Pvt Ltd to party of second part Advantagesai Projects Pvt Ltd shall be repaid on or before the. 31/03/2020 and if same is repaid the this agreement to sale shall be deemed to be cancelled. 4. Whereas party of first part has agreed to repay the amount taken from second party of second part Advantagesai Projects* Pvt Ltd on or before 31 March 2020 of Rs.1,49,00,000/- and if they failed to do same then they will execute the Sale Deed in favor of party of second part Advantagesai Projects Pvt Ltd before the 30 April 2020 by receiving the balance payment ofRs.17,00,000/-. 5. Whereas-party of first part Akshay Techforge Pvt Ltd has clearly stated that the funds received from party of second part Advantagesai Projects Pvt Ltd will be utiIised towards the repayment of OTS of State Bank of India, MIDC, Waluj, Aurangabad where Land & ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vt Ltd agreed to pay the interest on monthly basis @ 18% per annum or 30% of profit whichever is higher, the interest shall be payable on compounding basis on the balance outstanding as on 01st April, 2020 and the calculation of interest shall be from 01st September, 2018 till the date of payment to the party of second part Advantagesai Projects Pvt Ltd. 11. Admittedly the words 'interest' and 'profit' were mentioned in the last document viz MOU dated 09.04.2020 yet it was never paid as admittedly the respondent did not have either the capacity to repay or had no intention. A bare perusal of the documents above would show the intention of the parties was never to purchase/sell the aforesaid plots. 12. In Shivam Agrioils Pvt Ltd Vs Shree Krishan Vanaspathi Industries Pvt Ltd 2023 SCC OnLine NCLAT 233 this Tribunal held as follows:- 15. Before we proceed to answer the questions as delineated above, a prefatory glance at certain definition clauses which find place in Section 3 under Part I Preliminary and in Section 5 under Part II Chapter I Preliminary of the IBC would be constructive: - Sections 3(6)"claim" means-- (a) a right to payment, wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct" 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 the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause; 16. Now coming to answer the first question, we need to notice in precise terms the sequence of events and nature of transaction which has taken place between the Appellant and the Respondent pursuant to the two MoUs which have been Company Appeal (AT)(Insolvency) No.982 of 2022 entered into between them in the background of OTS proposal as well as the contemporaneous execution of A2S. 17.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....terest on loan is not the only binding criterion for determining time value of money. The Insolvency Law Company Appeal (AT)(Insolvency) No.982 of 2022 Report, 2018 has also held time value of money to mean compensation or the price paid for the length of time for which money has been disbursed. Thus, time value of money is not only a regular or timely return received for the duration for which the amount is disbursed as an amount in addition to the principal, but also covers any other form of benefit or value accruing to the creditor as a return for providing money for a long duration. 30. We also notice that the Adjudicating Authority in the impugned order has held that in the absence of time fixed for repayment, it cannot be said that the loan was advanced for time value of money. Even if the loan extended was not interest-bearing and no time was fixed for repayment, it would be both skewed and misconstrued to hold that the loan was disbursed without time value of money. The Appellant had advanced the payment with an intent to gain from the land, plant and machinery and factory building changing hands from the Corporate Debtor to the Appellant as borne out from Clause 4....
X X X X Extracts X X X X
X X X X Extracts X X X X
....peal (AT) (Insolvency) No. 717 of 2020 would thus clearly include the kind of financing arrangement by allottees to real estate developers when they pay installments at various stages of construction, so that they themselves then fund the project either partially or completely. 76. Sub-clause (f) Section 5(8) thus read would subsume within it amounts raised under transactions which are not necessarily loan transactions, so long as they have the commercial effect of a borrowing. We were referred to Collins English Dictionary & Thesaurus (Second Edition, 2000) for the meaning of the expression "borrow" and the meaning of the expression "commercial". They are set out hereinbelow: borrow-vb 1. to obtain or receive (something, such as money) on loan for temporary use, intending to give it, or something equivalent back to the lender. 2. to adopt (ideas, words, etc.) from another source; appropriate. 3. Not standard. to lend. 4. (intr) Golf. To putt the ball uphill of the direct path to the whole: make sure you borrow enough. commercial.-adj. 1. of or engaged in commerce. 2. sponsored or paid for by an advertiser: commercial television. 3. having profit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t dated 09.04.2019, second agreement dated 01.04.2020 and MOU dated 09.04.2020 executed by the respondent, has not been disputed. Now to find the real nature of financial assistance, if was against time value of money, one would need to go through various clauses of these agreements. Admittedly the agreement dated 09.04.2019 clearly mention the funds received from the appellant were to be utilised towards repayment of OTS of State Bank of India, Aurangabad where the land and building stated above and even its plant and machinery was mortgaged. The agreement provided that was once the mortgaged property was released then the original papers were to be handed over to the Managing Director of the appellant and/or in the alternative Plots No. 17, 18 and 19 situated at Distt. Aurangabad viz the subject property could be mortgaged to any financial institution to release the said loan of the appellant. 15. Thus as above the intention was only to repay the loan of the appellant per these agreements. The respondent was rather authorised to mortgage the subject property to repay such loan. Hence it cannot be said the real intention of he parties was sale/purchase of the subject property. ....