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2021 (12) TMI 155 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate debtor failed to make repayment of its dues - Financial Creditors - Financial Debt or not - as per the Petitioner there is a default under Section 7 of IBC, 2016 as its “put option” was not entertained when the said demand notice dated 02.01.2018 was sent to the Respondent M/s. Hubtown Limited demanding exit by way of “put option” - HELD THAT:- The Bench notes that as per the SHA, GVFL invested in HBT Mehsana by purchasing the shares of ILFS group. This cannot be termed as an investment of GVFL by way of a loan. The money paid by GVFL to acquire the share of HBT Mehsana cannot be construed as a consideration for time value of money and it was solely for the purchase of shares of HBT Mehsana held by ILFS group to become a shareholder in the Company. The Bench also notes that as per shareholder of HBT Mehsana, GVFL had acquired various rights including that of appointing a Director, exercising votes in AGM/ EGM and exercising veto votes. It is abundantly clear to the Bench that no voting rights ever accrues to a Financial Creditor in any AGM/ EGM. The rights enjoyed by GVFL in HBT Mehsana like exercising votes in the AGM/ EGM are typically the rights of a Shareholder and not a Financial Creditor. This is because, Equity is not a debt and as such any contract for acquisition of shareholding in a body corporate can never result in the formation of a debt. The SPA and SHA are both contracts in relation to GVFL acquisition of equity shareholding in HBT Mehsana. The Bench is of the view that share purchase in HBT Mehsana by GVFL with exit option of inter alia “Annual Put Option” cannot be considered as a debt which is disbursed against consideration of time value for money. The Bench also notes that Internal Rate of Return (IRR) cannot be equated with interest payments. The relevance of IRR for an investor in shares is in relation to expected profit and dividend pay out and capital appreciation of the shares which is totally different to the interest which is return for any investment by way of loan - GVFL may be entitled to this claim under the SHA as a Shareholder of HBT Mehsana. However, the Bench has no doubt that the claim of GVFL cannot be termed as a Financial Debt as contemplated under IBC. Application allowed.
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