AI Drafter 
TaxTMI 
TaxTMI 
2025 (11) TMI 11
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....ieved by the impugned order, the present appeal has been preferred by the Appellant. 2. Introducing the facts of the present case, Shri Jaimin K. Dave, Ld. Counsel for Appellant, the Ld. Counsel for the Appellant submitted that the Respondent/Corporate Debtor-M/s Accurate Infrabuild Pvt. Ltd. had undertaken to construct a project named "Madina Heights" (hereinafter referred to as the "project") and for this purpose had approached M/s Meck Pharmaceuticals and Chemicals Ltd. ("Meck" in short) for advancing a sum of Rs 1 Cr. only. The Corporate Debtor-Respondent had purportedly assured to repay the advance with interest @ 18% p.a. besides offering 15% share in the profit of the project. The amount of Rs 1 Cr. was given by Meck to the Corporate Debtor on 19.02.2010. Though the Corporate Debtor was to repay the outstanding loan on completion of the project, they did not release payments to Meck as per the terms even though the project was purportedly completed. Meck issued a Legal Notice on 03.11.2020 claiming repayment of the outstanding amount from the Corporate Debtor. On not receiving the outstanding amount from the Corporate Debtor, the Appellant-Meck issued a Demand Notice on 0....
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.... and hence was within the limitation period. Assailing the impugned order, it was further stated that the Adjudicating Authority had erred in holding that there is no case of debt and default. 4. Shri Gaurav Mitra, Ld. Advocate representing the Respondent rebutted the contentions made by the Appellant and stated that the Appellant was not a Financial Creditor in terms of Section 5(7) of IBC. The sum advanced by them was not in the nature of 'financial debt' in terms of the statutory provisions of IBC as it was bereft of the commercial effect of borrowing. The Appellant had failed to place on record any document executed between the parties regarding the tenure of loan given, terms of repayment or rate of interest and has not been able to establish that the disbursal had taken place against consideration for time value of money. It was asserted that the Adjudicating Authority had rightly held that when money given by the Appellant to the Corporate Debtor was without an end tenure but linked to the completion of Madina project, this was clearly a case of investment for speculative profit and not for time value of money. It was vehemently contended that the primary obligation of ma....
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....ebtor, as the case may be; 5(7) "financial creditor" means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to; 5(8) "financial debt" means a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes- (a) money borrowed against the payment of interest; (b) any amount raised by acceptance 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 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 th....
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....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 transactions/dealings stated in sub-clauses (a) to (i) of Section 5(8), even if it is not necessarily stated therein. In any case, the definition, by its very frame, cannot be read so expansive, rather infinitely wide, that the root requirements of 'disbursement' against 'the consideration for the time value of money' could be forsaken in the manner that any transaction could stand alone to become a financial debt. In other words, any of the transactions stated in the said sub- clauses (a) to (i) of Section 5(8) would be falling within the ambit of 'financial debt' only if it carries the essential elements stated in the principal clause or at least has the features which could be traced to such essential elements in the principal clause. In yet other words, the essential element of disbursal, and that too against the consideration for time value of money, needs to be found in the genesis of any debt before it may be treated as 'financial debt'....
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.... is owed and a financial debt is defined in Section 5(8) to mean a debt which is disbursed against consideration for the time value of money. As opposed to this, an operational creditor means a person to whom an operational debt is owed and an operational debt under Section 5(21) means a claim in respect of provision of goods or services. XXXX XXXX XXXX XXXX 30. On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is "due" i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise". (Emphasis supplied) 11. When we peruse....
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.... time value of money on the understanding with the Corporate Debtor that they would repay the amount with interest @ 18% p.a. That TDS was deducted by the Corporate Debtor on the interest amount payable to the Appellant as is evident from the TDS Certificate placed at page 99 of APB for the month of March 2010 shows that disbursal had been made against consideration for time value of money. 14. It was contended that there is no need of a written contract to prove the existence of a financial debt and in support of their contention reliance has been placed on the judgment of this Tribunal in Agarwal Polysacks Ltd. Vs K.K. Agro Foods and Storage Ltd. in CA(AT)(Ins) No. 1126 of 2022 and Pradeep Tayal Vs Essbert Fashion Pvt. Ltd. in CA(AT)(Ins) No. 950 of 2022 which have held that written contract is not mandatory nor a necessary precondition for the purpose of proving existence of financial debt. Submission was pressed that the terms and conditions of the loan including the period of loan and the purpose of the loan was not documented but rested on an oral understanding mutually arrived at between the two parties that the loan amount advanced would be returned by the Corporate Debt....
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....ledgement of liability having been placed on record. Thus, the Section 7 petition being time-barred, in such circumstances, the Appellant cannot be allowed to revive a stale claim. 17. Coming to our analysis and findings, we would like to first address the question of limitation. We notice that in Form 4 of the Demand Notice dated 30.06.2021 at page 123-124 of the APB, it has been shown that the unpaid operational debt "fell due from 18.02.2010 @18% interest per annum as a running interest till 30.06.2021". In Form 3 of the Demand Notice dated 01.07.2021 at pages 116-118 of the APB, it has been stated that the "debt fell due from the date of finance being 18.02.2010 and when on completion of the project in August 2019 when the amount with interest is not paid". The Appellant has however contended that they had submitted this notice under wrong legal advice. In Form 1 in Part IV of Section 7 application at page 69 of the APB, we notice that the Appellant has linked the date of default to the date of completion of the Madina Project which has been held to be 01.09.2019. The relevant part is as reproduced below: Part - IV PARTICULARS OF THE FINANCIAL DEBT 2. AMOUNT CLAI....
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....tor has not been controverted by the Corporate Debtor. Further, this fact of disbursal gets reinforced when we find that the financial statements of the Corporate Debtor ending financial years 2010 and 2011 clearly reflects receipts of Rs 1,01,07836/- from Meck Pharma and Chem. Pvt. Ltd. In view of the above, we entertain no doubts in our mind that there exists sufficient proof that disbursal had taken place. Having satisfied ourselves that there was a disbursal of Rs. 1 Cr to the Corporate Debtor by the Appellant sans any written contract or agreement between them, we next would like to see whether there was a disbursal with the consideration of time value of money. 21. It is an admitted fact that there was no written contract or agreement between the Appellant and the Corporate Debtor governing the terms and conditions by which the sum was advanced by the Appellant and disbursed to the account of the Corporate Debtor. Be that as it may we are guided by the decision of this Tribunal in Agarwal Polysacks judgement supra wherein it has been held by that requirement of written financial contract between parties is not a pre-condition for determining whether any amount disbursed is....
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.... Debtor seeking interest payment. For the transaction to have been interest-bearing in the true sense, the interest payment should have been paid annually and by logical corollary corresponding TDS deductions ought to have been reflected. This does not seem to have happened. Thus, we are of the view that deduction of TDS for only two years is insufficient to determinatively conclude that interest liability was a quintessential adjunct of the sum disbursed by the Appellant. 25. Coming to the balance sheets of the Corporate Debtor, we notice that for financial years ending 2010 and 2011, the amount of loan of the Corporate Debtor qua the Appellant in both the years is shown as Rs. 1,01,07,836/-. However, no other balance sheets of subsequent years have been placed on record thereafter to show that the debt and interest amount continued to be reflected in their balance-sheets. Though the Appellant has claimed that the 2021 balance sheet of the Corporate Debtor also mentions unsecured loans from Director and other related parties, on a pointed query made by this Bench, it was admitted that the balance sheet ending 2021 had not been produced before the Adjudicating Authority. Hence, ....