Home Case Index All Cases Insolvency and Bankruptcy Insolvency and Bankruptcy + Tri Insolvency and Bankruptcy - 2020 (1) TMI Tri This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (1) TMI 1488 - NATIONAL COMPANY LAW TRIBUNAL, NEW DELHI BENCHMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - transaction does not have consideration for the time value of money - Financial Creditors or not - Financial debt or not - existence of debt and dispute or not - HELD THAT:- A Financial Creditor is a person who has right to a financial debt. The key feature of financial transaction as postulated by section 5(8) is its consideration for time value of money. In other words, the legislature has included such financial transactions in the definition of 'Financial debt' which are usually for a sum of money received today to be paid over a period of time in a single or series of payments in future. It may also be a sum of money invested today to be repaid over a period of time in a single or series of instalments to be paid in future - It is pertinent to point out that the concept 'Financial Debt' as envisaged under section 5(8) of the IBC is distinctly different than the one prevalent in England as provided in its Insolvency Act, 1986 and the 'Rules' framed thereunder. It appears that in England there is no exclusive element of disbursement of debt laced with the consideration for the time value of money. However, forward sale or purchase agreement as contemplated by section - 5(8)(f) may or may not be regarded as a financial transaction. A forward contract to sell product at the end of a specified period is not a financial contract. It is essentially a contract for sale of specified goods. It is true that some time financial transactions seemingly restructured as sale and repurchase. Any repurchase and reverse repo transaction are sometimes used as devices for raising money. In a transaction of this nature an entity may require liquidity against an asset and the financer in return sell it back by way of a forward contract. The difference between the two prices would imply the rate of return to the financer - in the present case, it is not possible to conclude that any loan was advanced with interest. Certainly, there was no element of time value for money. The respondent has made categorical assertion which goes unrebutted establishing that no element of time value for money is attracted and it is a simple friendly loan. There is no document on record to prove the element of interest - thus, such a transaction would not acquire the status of a 'financial debt' as the transaction does not have consideration for the time value of money, which is a substantive ingredient to be satisfied for fulfilling requirements of the expression 'Financial Debt'. It is also relevant to note that under section 7(3)(c) of the Code, 2016 at the time of filing an application by the Financial Creditor before this Tribunal, along with such application the applicant is required to furnish any other information as may be specified by the IBBI. The Ministry of Corporate Affairs has framed Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 where under the form to be adopted by different categories of creditors have been specified and in relation to a Financial Creditor the form prescribed is form 1. A perusal of clause 5 of part V of form 1 shows that the Financial Creditor is required to place a latest and complete copy of the financial contract reflecting all amendments and waivers up to date and a copy is required to be attached - In the instant case no such financial contract has also been produced in compliance with the provisions of the Code or of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 either in the petition or additional affidavits. The petitioner does not answer the description of section 7 read with section 5(7) & 5(8) of IBC - Petition dismissed.
|