Skip to main content

NCLT : Landowner in a Development Agreement is not a Financial Creditor

Cause Title : Ashoka Hi-Tech Builders Pvt. Ltd. vs Sanjay Kundra & Anr., National Company Law Appellate Tribunal, Company Appeal (AT) (Insolvency) No. 46 of 2023

Date of Judgment/Order : 18.01.2023

Corum : Justice Ashok Bhushan (Chairperson) & Barun Mitra (Member-Technical)

Citied: 

  1. Pioneer Urban Land and Infrastructure Ltd. vs. Union of India, (2019) 8 SCC 416
  2. Namdeo Ramchandra Patil and Ors. Vs. Vishal Ghisulal Jain, Company Appeal (AT) Ins. No. 821 and 930 of 2021 decided on 19.09.202
  3. Anuj Jain, Interim Resolution Professional for Jaypee Infratech Limited vs. Axis Bank Ltd. & Ors., (2020) 8 SCC 401

Background

Appellant was a land owner on which a development project was to be constructed by the Corporate Debtor and he had filed the claim before the Resolution Professional which was admitted and he was inducted in the Committee of Creditors however subsequently on an Application filed by the Home-Buyers, impugned Order has been passed removing the Appellant from the Committee of Creditors holding that he is not the financial creditor.

Appellant challenged the Order by referring to the Development Agreement between the parties which  clearly indicates that Appellant is an owner of 11.40 acres agriculture land on which development agreement, construction to be executed. The agreement further states that corporate debtor was to carry on the construction and the out of total saleable construction, 32% will be of the Appellant that is the first party and remaining 68% shall be owned by the second party, the Corporate Debtor.

Looking into the terms and conditions of the development agreement, the Adjudicating Authority has come to the conclusion that the Appellant was not a financial creditor since no amount was disbursed for the time value of money on the basis of which the Appellant can be held to be financial creditor.

Judgment

The Ld. NCLAT rejecting the appeal and referring to Namdeo Ramchandra (supra), observed that as per the the definition of “financial debt” in Section 5(8) of the Insolvency and Bankruptcy Code,  a “debt” must be “disbursed” against the consideration for time value of money. Disbursement” is defined in Black’s Law Dictionary (10th ed.) to mean:
1. The act of paying out money, commonly from a fund or in settlement of a debt or account payable.
2. The money so paid; an amount of money given for a particular purpose.

The requirement of existence of a debt, which is disbursed against the consideration for the time value of money, remains an essential part even in respect of any of the transactions/dealings stated in the clauses, even if it is not necessarily stated therein. The definition cannot be read so broadly that any transaction could stand alone to become a financial debt. 

This debt may be of any nature but a part of it is always required to be carrying, or corresponding to, or at least having some traces of disbursal against consideration for the time value of money.

In view of the above judgments, the NCLAT concluded that the terms and conditions of development agreement entered between the appellant and the corporate debtor, makes it clear that the appellant was a collaborator in the development agreement and not a financial creditor. There was no disbursement for time value of money by the appellant within meaning of Section 5(8) of the IBC.


Comments

Post a Comment

Most viewed this month

Amendment of plaint under Order VI Rule 17 of the CPC explained

Cause Title :  Ganesh Prasad vs Rajeshwar Prasad, SLP (C) NO. 28377 OF 2018, Supreme Court Of India Date of Judgment/Order : 14/3/2023 Corum : J. B. Pardiwala, J. Citied:  Revajeetu Builders and Developers v. Narayanaswamy & Sons and Others reported in (2009) 10 SCC 84 North Eastern Railway Administration, Gorakhpur v. Bhagwan Das reported in (2008) 8 SCC 511 P.A. Jayalakshmi v. H. Saradha and Others reported in (2009) 14 SCC 525 B.K. Narayana Pillai v. Parameswaran Pillai and Another reported in (2000) 1 SCC 712 A.K. Gupta and Sons Ltd. v. Damodar Valley Corporation reported in AIR 1967 SC 96 Life Insurance Corporation of India v. Sanjeev Builders Private Limited and Another, Civil Appeal No. 5909 of 2022 dated 01.09.2022 Firm Sriniwas Ram Kumar v. Mahabir Prasad and Others reported in AIR 1951 SC 177 G. Nagamma and Another v. Siromanamma and Another reported in (1996) 2 SCC 25 Praful Manohar Rele v. Krishnabai Narayan Ghosalkar and Others reported in (2014...
Post a Comment
Read more

Owner of vehicle is not expected to verify the genuineness of the driving license before appointing a driver

Cause Title : Rishi Pal Singh Versus New India Assurance Co. Ltd & Ors., Civil Appeal No. 4919 Of 2022, The Supreme Court Of India Date of Judgment/Order : July 26, 2022 Corum : Hemant Gupta; J., Vikram Nath; J. Background the truck owned by the appellant met with an accident. The owner deposed before the court that before employing the driver, he had taken his driving test and that he was driving the vehicle satisfactorily and  that the driver was employed with him for 3 years before the date of the accident. He produced his driving license. This was reaffirmed by the driver who deposed that the driving license was obtained from the driver and it was issued from Nagaland, but no such license was produced on record. Both the Motor Accident Claims Tribunal and the High Court have held that the owner has alleged that the driver had a driving license from Nagaland but the same was not produced and therefore, the Insurance Company is entitled to recover the awarded amount...
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