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2021 (4) TMI 1081 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - lease deed - financial lease as per the terms laid down under the guidelines of “Indian Accounting Standards” or not - HELD THAT:- Reliance placed in the case of ASEA BROWN BOVERI LTD. VERSUS INDUSTRIAL FINANCE CORPN. OF INDIA [2004 (10) TMI 325 - SUPREME COURT]. This matter of “Asea Brown” related to lease finance agreement dated 4th December, 1990 with Respondent No.3 of that matter, pursuant to which the Appellant took 56 cars under the lease finance from Respondent No.3 in that matter. Subsequently, Respondent No.3 became notified party under Section 3(2) of the Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992 due to certain illegal transactions covering period between 1.4.1991 and 6.6.1992. The transaction dated 4th December, 1990 was not referable to the concerned period. The Central Government appointed Respondent No.1 of that matter under Section 3(1) of 1992 Act over properties belonging to Respondent No.3. Under Section 5(8)(d), we are concerned with Indian Accounting Standards. With this in view, if para – 63 of the Indian Accounting Standards (referred supra) is perused, the present lease deed does not have any Clause of transfer of ownership of the underlying asset (which is land) (and not flats harped on by Appellant) to the lessee or flat buyers who would be sub-lessees at the end of the lease term - Material is Para – 62 of Accounting Standards (referred supra) which states that a lease is classified as a finance lease “if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset.” Paragraphs – 63 and 64 records the factors or indicators which individually or in combination are required to be seen if it is a financial lease. The Respondent has in comparative chart filed, referred to various clauses to forcefully put on record that the present lease deed is not a finance lease. Even without referring to them when we keep in view the guiding factor if the lease transfers “substantially all the risks and rewards incidental to ownership”, we find that the present lease deed hopelessly fails in this regard. The Appellant, even after creating the lease kept with itself all the rights to control and monitor the project which was to come up. The Appellant of course now has tried to say in the Appeal that it was “only exercising minor supervision over the land use” (see 9.12 of the Appeal), which we do not agree to. What we can see from the Lease Deed which we have just referred in brief, is that the acts which could be performed by the lessee, were fully controlled by the Appellant. The lessee, of course, had the liberty to construct and transfer the flats by way of sublease. The above discussion shows that while risks and liabilities were transferred to the lessee, the rewards incidental to ownership were not transferred. There is no Clause of transfer of ownership at the end of lease term - when we have gone through the Lease Deed keeping the classification of leases and the indicators mentioned above, we do not find that the lease deed in question can be said to be a finance lease. In the present matter, there is no sale of land. It is lease, for premium /rent with almost all rights controlled by the Lessor. We have gone through the provisions of Section 5(8)(f) and also when we keep the above observations of the Hon’ble Supreme Court of India, we are unable to persuade ourselves to accept the submission that when land is leased out, if premium is fixed and instalments are given, it should be treated as a financial lease. There are no substance in this arguement. Appeal dismissed.
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