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2022 (8) TMI 1481 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHIMaintainability of section 7 application - initiation of CIRP - Share subscription cum Shareholders agreement by and between IL & FS Trust Company Ltd. (as Trustee to the India REIT fund Scheme –IV) (the Investor) and Mr. Raj Singh Gehlot (the Promoter & Ambience Pvt. Ltd. (Developer & Ambience Projects and Infrastructure Pvt. Ltd.) - Financial Debt or not - HELD THAT:- It is made clear that Investment made in SPV/Joint Venture through Share Subscription & Shareholders Agreement will not come within the purview of Section 7 R/w Section 5(8) of the ‘Code’. It is also further stated that to get it covered under Section 7 R/w Section 5 (7) & (8) of the Code that there must be disbursal of fund by the Financial Creditor to the Corporate Debtor or in simple term, if there is no disbursal then even ‘Financial Debt’ will not attract Section 7 of the Code, as it looks from the bare reading of Section 5(8) of the Code in order to qualify under Section 7 of the Code, the following basic ingredients are a requirement to get covered under Section 7 of the Code: a). The Creditor must be a ‘Financial Creditor’ and be covered by Section 5(7) & (8) of the Code; b). The Financial Debt must be owed by the Corporate Debtor. However, the default may be occurred in respect of that Financial Creditor or any other Financial Creditor.; c). Financial Debt to carry interest element and be disbursed against the consideration of time value of money; d). Money borrowed against the payment of interest; e). Investment made with the object of profit sharing from revenue generated will also not be covered within the ambit of Section 7 of the Code; f). Award received under Arbitration and Conciliation Act, 1996 or amount emerged from the Settlement Agreement will not come within the purview of Section 7 of the Code. Even the Applicant has mentioned in the Form-1, Part-IV total amount of debt guaranteed as on 31st October, 2018 Rs. 234,69,62,791/- are in default as per Settlement Agreement dated 07.04.2017. This suggests that Section 7 of the Code is being invoked pursuant to Settlement Agreement which is not permissible under Section 7 of the Code. The order of Adjudicating Authority cannot be sustained - appeal allowed.
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