Skip to main content

Insolvency - Dues between Joint Venture Partners are not Financial Debt

IN THE MATTER OF M/s. Vipul Limited vs M/s. Solitaire Buildmart Pvt. Ltd., the application under Section 7 filed by the appellant was rejected by the Adjudicating Authority of NCLT holding that this Bench is of the opinion that the issue involved herein arises out of breach of a Contract and therefore initiation of CIRP against the Respondent is not justified. The Petition is devoid of the essential ingredients of the Section 5(8) of IBC, 2016 and is therefore Rejected.

On appeal, the NCLAT observed that the two litigants had entered into a Joint Venture as partners and the appellant had addressed itself as an ‘Operational Creditor’ and called upon the Respondent to pay the ‘unpaid Operational debt’. The Appellant has admitted that it is a ‘Joint Partnership Agreement’. This emphasizes that the parties have a mutual right to control the enterprise involving mutual duties and obligations. Further, this Tribunal whiledealing with a Joint Venture in a real estate Project, in Mamatha V/s. AMB Infrabuild Pvt. Ltd. and Ors. dated 30.11.2018, has held as follows;

’14. If the two ‘Corporate Debtors’ collaborate and form an independent corporate unity entity for developing the land and allotting the premises to its allottee, the application under Section 7 will be maintainable against both of them jointly and not individually against one or other.’

Based on the above observations, the NCLAT decided that that in such a kind of a Joint Venture Project, both the parties, if they are a Corporate should be jointly treated to be one for the purpose of initiation of CIRP and hence this Application under Section 7 is not maintainable.

The NCLAT further held that the Joint Development Agreement entered into, is a contract of reciprocal rights and obligations, both parties are admittedly ‘Joint Development Partners’, who entered into a consortium of sorts for developing an Integrated Township and for any breach of terms of contract, Section 7 Application is not maintainable as the amount cannot be construed as ‘Financial Debt’ as defined under Section 5(8) of the Code. Therefore, we are of the considered view that the Appellant cannot be termed to be a ‘Financial Creditor’ as envisaged under Section 5(7) of the IBC, 2016.

Comments

Post a Comment

Most viewed this month

The recovery of vehicles by the financier not an offence - SC

Special Leave Petition (Crl.) No. 8907  of 2009 Anup Sarmah (Petitioner) Vs Bhola Nath Sharma & Ors.(Respondents) The petitioner submitted that  respondents-financer had forcibly taken away the vehicle financed by them and  illegally deprived the petitioner from its lawful possession  and  thus,  committed  a crime. The complaint filed by the petitioner had been  entertained  by  the Judicial Magistrate (Ist Class), Gauhati (Assam) in Complaint Case  No.  608 of 2009, even directing the interim custody of the vehicle (Maruti  Zen)  be given to the petitioner vide order dated  17.3.2009.  The respondent on approaching the Guwahati High  Court against this order, the hon'ble court squashed the criminal  proceedings  pending   before  the  learned Magistrate. After hearing both sides, the Hon'ble Supreme Court decided on 30th...
7 comments
Read more

Mere Agreement To Sell The Leased Property To Tenant Would Not Terminate Landlord-Tenant Relationship

In CIVIL APPEAL Nos. 1237­1238 OF 2019, Dr. H.K. Sharma vs Shri Ram Lal, the tenant had objected against the eviction suit filed by the landlord, claiming that the landlord-tenant relationship between them had ceased to exist by virtue of an agreement for sale entered between them and that he has already paid some money in advance based on the agreement. The tenant contented as the landlord-tenant relationship did not exist, the landlord cannot evict him. The matter went through various forums and finally landed before the Supreme Court in appeal. The Supreme Court referring to the judgment in Shah Mathuradas Maganlal & Co. vs. Nagappa Shankarappa Malage & Ors., held that in the instant case the lease agreement included no clauses on the fate of the tenancy. A fortiori, the parties did not intend to surrender the tenancy rights despite entering into an agreement of sale of the tenanted property. In other words, if the parties really intended to surrender their tenancy ...
2 comments
Read more

Valuation Report of Jewellery once made is effective for Four Assessment Years

The division Bench of the Delhi High Court in Pr.Commissioner of Wealth Tax vs. Raghu Hari Dalmia held that a valuation report made by a registered valuer once adopted shall be in effect for four assessment years unless an event has occurred whereby the value is increased or decreased. The High Court made it clear that the event of “search” under Section 132 of the Income Tax Act, 1961 cannot compel the assessee to undertake a fresh valuation.
2 comments
Read more