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2022 (5) TMI 875 - SC - Insolvency and BankruptcyCIRP - Status of NOIDA authority - Financial Creditors or Operational Creditors - dues outstanding under the lease - NCLAT finds that the lease deed does not have any clause of transfer of ownership of the underlying asset, which is land and not flat, as harped upon by the appellant - whether section 5(8) of IBC itself suffices to embrace the lease in question? - HELD THAT:- While, it may be true that the word ‘transaction’ includes transfer of assets, funds or goods and services from or to the corporate debtor, in the context of the principal provisions of Section 5(8) of the IBC, we are of the view that to import the definition of ‘transaction’ in Section 2(33), involving the need to expand the word ‘disbursement’, to include a promise to pay money by a debtor to the creditor, will be uncalled for straining of the provisions. ‘Disbursement’, within the meaning of Section 5(8), is the payment of money, which flows to the debtor. In the word ‘claim’, as defined in Section 3(6), right to payment is one of the components. The golden thread that runs through the word ‘claim’, is the right to payment. The right to payment may arise from a Judgement. It may or may not be fixed. It may be disputed or undisputed. It may be legal or equitable. It may be secured or unsecured, but what is indispensable is, there must be a right to payment. Similarly, in cases of breach of contract, under any law in force, if it gives rise to a right to payment, irrespective of whether it is reduced to a Judgment or fixed or matured or unmatured, disputed or undisputed, secured or unsecured, as long as there is a right to payment, a claim arises. In the lease in question, there has been no disbursement of any debt (loan) or any sums by the appellant to the lessee. The appellant would, therefore, not be a financial creditor within the ambit of Section 5(8). Whether appellant is a Financial Lessor? - HELD THAT:- In Asea Brown Boveri Ltd. v. Industrial Finance Corporation of India and Others [2004 (10) TMI 325 - SUPREME COURT] the appellant entered into a lease and finance agreement with the third respondent therein under which the subject matter of the lease was 57 cars. The third respondent became a notified party under a law under which the special court found that the transaction was only a lease and not a finance lease. In Section 5(8)(d), it is necessary to notice the opening words of the provision, viz., ‘the amount of any liability in respect of’. The Law Giver, in other words, has contemplated that should there be any liability arising out of a lease or hire-purchase, which is deemed as a finance or a capital lease in terms of the Indian Accounting Standards, then, the person, who has incurred the liability, would become the debtor and the person, in respect of whom, the liability has been incurred, would become the financial creditor. It is such property, viz., immovable property, in the case of a lease of an immovable property, which can be treated as the underlying asset, for the purpose of the Rules made under Section 133 of the Companies Act, 2013 - At any rate there is no right within the meaning of criteria with the Lessee to purchase the asset. This criterion is also not fulfilled as there is no option to purchase at all that is vested with the lessee. Having made a survey of the various situations and examples under the Statutory Rules, which would persuade the Court to ‘deem’ a lease as a finance lease and, having found that none of the situations or indicators suit the case of the appellant, the case should rest and the point must be answered against the appellant. However, the time is now ripe to examine the contents of Rule 62 and Rule 65. They declare as to when a lease is to be classified as a financial lease. It provides that a lease may be so classified as a financial lease, if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. The converse position applies to an operating lease and a lease is to be classified as an operating lease, if the lease does not substantially transfer all the risks and the rewards incidental to the ownership of the underlying asset. The lease in question, is a lease of the plot of land, as already found by us. The underlying asset is the plot of land. Therefore, we cannot treat the subject matter of the lease, as containing both land and building elements. - In fact, it is, no doubt, true that the lease actually contemplates that, as regards the build-up area/plot or land, the transfer to the allottee is to be made only by way of a sub-lease - The lease, therefore, contemplates a sub-lease, whereunder, the rights over the apartments, are regulated. Not unnaturally, therefore, the appellant cannot project the case that the flats/apartments, would constitute part of the underlying asset. Therefore, we would find on the whole that the appellant is not the financial lessor under section 5(8)(d) of the IBC. No doubt we would observe that we have arrived at the findings based on the prevailing statutory regime. Needless to say there is always power to amend the provisions which essentially consist of the Indian Accounting Standards in the absence of any rules prescribed under Section 5(8)(d) of the IBC by the Central Government. Scope of Section 5(8)(f) of IBC - HELD THAT:- In fact, a perusal of Part III of IBC which deals with Insolvency Resolution for individuals and partnership firms will show that it does not contain the concept of financial debt as indicated in Section 5(8). Section 5(8)(c) comprehensively refers to raising of any amount based on note purchase facility, issue of bonds, notes, debentures, loan stock or any similar instrument. Thus, what is contemplated is ordinarily the corporate debtor raises funds by issuing bonds, notes, debentures or loan stock which are well known instruments usually used by corporate bodies to generate funds for its needs. These instruments are ordinarily transferable. We need not further explore the scope of the said clause 5(8)(c) except to notice that the word similar instrument would indicate instruments similar to the instruments which are specifically enumerated. - The words used in Section 5(8)(g) appear to suggest that the law giver has contemplated any derivative transaction, in connection with the protection of the benefit from fluctuation in the rate or price. There appears to be an intricate and complex web of transactions which can take place under a derivative transaction. The important aspect is, however, a debt in the context of its mention as a financial debt. Section 5(8)(d) of the IBC provides for is, any liability in respect of any lease, inter alia, which is, however, confined to a finance or capital lease. We are not ruling out the possibility that, in a lease, not a finance or a capital lease, falling under Section 5(8)(d), if it otherwise fulfils the requirements of Section 5(8)(f), it would not fall under the definition of the word ‘financial debt’. In other words, Section 5(8)(d) includes only a finance or a capital lease, which is deemed, as such, under the Indian Accounting Standards. Section 5(8)(f) is a residuary and catch all provision. A lease, which is not a finance or a capital lease under Section 5(8)(d), may create a financial debt within the meaning of Section 5(8)(f), if, on its terms, the Court concludes that it is a transaction, under which, any amount is raised, having the commercial effect of the borrowing. All that we are finding, in the facts of this case, is that the lease in question does not fall within the ambit of Section 5(8)(f). Whether the appellant is an Operational Creditor? - HELD THAT:- When questioned further, as to what her position is, if this Court found that the appellant is not a financial creditor, the appellant may be entitled, at least, to be treated as an operational creditor. We would think that, having regard to the fact that both the NCLT and NCLAT have proceeded on the basis that the appellant is an operational creditor, we need not stretch the exploration further and pronounce on the questions, which may otherwise arise. We must not be oblivious to the following prospect, should we find that the appellant is not an operational creditor, even under the IBC Regulations apart from claims by financial creditors and operational creditors, claims can be made by other creditors. However, there are, undoubtedly, certain advantages, which an operational creditor enjoys over the other creditors. We would proceed on the basis that, while the appellant is not a financial creditor, it would constitute an operational creditor. Appeal dismissed.
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