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2019 (5) TMI 331 - AT - Insolvency and BankruptcyInitiation of Corporate Insolvency Resolution Process - financial creditor - default in discharging the financial debt - Section 7 of the Insolvency and Bankruptcy Code, 2016 - The Appellant and the Respondent entered into an agreement for construction of a residential building on a turnkey basis which was abandon - advance money was given in pursuant to agreement - Respondent retained the money received from the Appellant as loan and started paying interest - HELD THAT:- Respondent has not denied the transaction which initially related to execution of a construction project for which the Appellant had disbursed amount of ₹ 1.5 Crores as advance money but on the project becoming commercially unviable got transformed into a ‘financial debt’ and was treated so. Payment of interest thereon, as admitted by the Respondent is compatible with this proposition and speaks of no exception. The money disbursed by the Appellant cannot be said to have been bestowed upon the Respondent as largesse nor as alms. It was disbursed in pursuance of an agreement in the nature of a financial transaction against consideration of time value of money as the building raised in pursuance of such agreement would fetch fortunes for the Appellant. The project however fell through on account of market considerations. If there were any doubt in the nature of transaction, same got cleared as even according to Respondent interest was paid on the advance money. There is no impediment in holding that the debt in question fell within the purview of ‘financial debt’ and the Appellant’s status was that of a ‘financial creditor’ and not an ‘operational creditor’ as erroneously held by the Adjudicating Authority. Once we hold that the Appellant was a ‘financial creditor’ qua the Respondent – Corporate Debtor and the application under Section 7 being in the prescribed format and not being defective was required to be admitted on proof of default, we find that the Respondent has failed to discharge onus of proof of discharge of debt. The impugned order holding the Appellant as ‘operational creditor’ and declining to initiate Insolvency Resolution Process on account of pre-existence of dispute is unsustainable - Application admitted.
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