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

Michigan House Approves 'Right-to-Work' Bill

Amid raucous protests, the Republican-led Michigan House approved a contentious right-to-work bill on  Dec 11 limiting unions' strength in the state where the (Union for American Auto Workers)  UAW was born. The chamber passed a measure dealing with public-sector workers 58-51 as protesters shouted "shame on you" from the gallery and huge crowds of union backers massed in the state Capitol halls and on the grounds. Backers said a right-to-work law would bring more jobs to Michigan and give workers freedom. Critics said it would drive down wages and benefits. The right-to-work movement has been growing in the country since Wisconsin fought a similar battle with unions over two years ago. Michigan would become the 24th state to enact right-to-work provisions, and passage of the legislation would deal a stunning blow to the power of organized labor in the United States. Wisconsin Republicans in 2011 passed laws severely restricting the power of public s...
Post a Comment
Read more

Power to re-assess by AO and disclosure of material facts

In AVTEC Limited v. DCIT, the division of the Delhi High Court held that AO is bound to look at the litigation history of the assessee and cannot expect the assessee to inform him.  In the instant case, the Petitioner, engaged in the business of manufacturing and selling of automobiles, power trains and power shift transmissions along with their components, approached the High Court challenging the re-assessment order passed against them. For the year 2006-07, the Petitioner entered into a Business Transfer Agreement with Hindustan Motors Ltd, as per which, the Petitioner took over the business from HML.  While filing income tax return for the said year, the petitioner claimed the expenses incurred in respect of professional and legal charges for the purpose of taking over of the business from HML as capital expenses and claimed depreciation. Article referred: http://www.taxscan.in/assessing-officer-bound-look-litigation-history-assessee-delhi-hc-read-order/8087/
Post a Comment
Read more

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