2021 (2) TMI 901 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI - Insolvency & Bankruptcy

Head Note / Extract:
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - clear-cut stand of the ‘Appellant’ is that the ‘Adjudicating Authority’ (National Company Law Tribunal) had failed to take into consideration that the amount paid by the ‘Applicants’ to the ‘Respondent’ was clearly of ‘Financial Debt’ - HELD THAT:- It is to be pointed out that Section 3(11) of the Code defines ‘Debt’ meaning, a liability or obligation in respect of ‘claim’ which is due from any person and includes a ‘financial debt’ and ‘operational debt’. Section 3(12) of the Code defines ‘default meaning, non-payment of debt when whole of any part or instalment of the amount of debt has become due and payable and is not (paid) by the debtor or the corporate debtor, as the case may be - It is to be remembered that for a ‘default’, there must be a subsisting debt. After all, the word ‘default’ is like not doing something which one should do. In fact, the term ‘default’ refers to an ‘omission’ or ‘failure’ to perform a legal or contractual duty. Suffice it to point that the word ‘default’, applies to a sum of money which was promised at a future date as against a sum now due and payable. It cannot be forgotten that Section 5(8) of the ‘Insolvency & Bankruptcy’ Code speaks of ‘time value’ and these words are interpreted to mean ‘compensation’ or the ‘price paid for the length of time for which the money was disbursed. An existing obligation to pay a sum of money is the sine qua non of a ‘financial debt’. The ‘Financial Creditor’ has a right to ‘financial debt’. Thus, the essence of any debt to be mentioned as ‘financial debt’ is the ‘time value of money’, as borrowing money is for monetary transaction - To determine the plea of ‘occurrence of default’ is the debt which must be due and become payable. An existence of ‘debt’ and ‘default’ are to be met for ‘admission’ of an ‘Application’ under section 7 of the ‘Insolvency and Bankruptcy’ Code. A ‘Debt’ is/was recoverable from the ‘Corporate Debtor’. There is no second opinion of an important fact that distinction between ‘Deposits’ and ‘Loans’ may not be a significant factor for interpreting the word, ‘Deposit’. One cannot ignore a candid fact that ‘maturity of claim’, ‘default of claim’ or ‘invocation of guarantee’ has no nexus in regard to the filing of claim before the ‘Interim Resolution Professional’ under section 18(1)(b) of the ‘Insolvency & Bankruptcy Code’ and the ‘Resolution Professional’ under section 25(2)(e) of the Code - As per the ‘Companies (Acceptance of Deposits) Rules, 2014’, the term ‘deposit’ is defined under rule 2(1) (c ) in an inclusive fashion. The meaning of ‘deposit’ is elongated by covering receipts of money in any other form. For approaching the jurisdiction of the ‘Tribunal’ as per Section 74(2) of the ‘Companies Act, 2013’, even a partial failure by the Company to repay the deposit was sufficient. Resting on the fact that the ‘Respondent’/’Corporate Debtor’ under the ‘Recurring Investment Plan’ had assured to provide the Investors’ interest on their investment sum along with the Investment amount, for the ‘time value of money’ (of course based on the amounts of investments made by the Investors) and in view of the fact that the ‘Respondent’/’Corporate Debtor’ failed in its commitment to offer the allotment and/or the possession of the ‘Plots of Land’ as promised by it or pay the assured returns, or repay the sums collected by it along with interest on the maturity of the schemes etc, this ‘Tribunal’ comes to a consequent conclusion that the ‘Appellant’s’ position is that of a ‘Financial Creditor’ as per Section 5(7) read with Section 5(8) of the ‘Insolvency & Bankruptcy Code’ and that there is default in payment of the accepted amounts by the ‘Respondent’/’Corporate Debtor’ - the ‘Respondent/’Corporate Debtor’ squarely comes within the ambit of definition of ‘Financial Debt’ and the contra conclusions arrived at by the ‘Adjudicating Authority’ (National Company Law Tribunal, New Delhi Bench-V) to the effect that ‘the amount which the applicants deposited does not come under the definition of ‘Debt’ and further that it was unable to accept the contention of the applicants that there was a default in payment of debt, are incorrect, invalid and the same is set aside by this ‘Tribunal’ to secure the ends of justice. The ‘Impugned Order’ of the ‘Adjudicating Authority’ (National Company Law Tribunal, New Delhi, Bench-V) is set aside by this ‘Tribunal’ for the reasons ascribed in the instant ‘Appeal’ - the ‘Adjudicating Authority’ (National Company Law Tribunal, New Delhi Bench-V) is directed to restore the Company Petition filed by the ‘Appellants’/’Financial Creditors’/’Petitioner’ (under Section 7 of the ‘Insolvency & Bankruptcy Code’) to its file and admit the same and to proceed further in accordance with Law.