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2022 (11) TMI 953 - AT - Insolvency and BankruptcyMaintainability of petition - initiation of CIRP - Financial Creditors - interest of three quarters which accrued and became payable as a debt - Application dismissed by Adjudicating Authority on the ground that only the interest amount would not fall within the definition of financial debt until and unless principal amount has also become due and payable - whether amount of interest only claimed by the Appellant is not covered by the definition of financial debt? - HELD THAT:- A Financial Creditor would be entitled to file an application for the initiation of CIRP against the Corporate Debtor before the Adjudicating Authority when the default has occurred. As per Section 7(5), if the Adjudicating Authority is satisfied that a default has occurred and the application filed under Section 7 is complete in so far as the conditions are provided in Section 7(2) are concerned and there is no disciplinary proceedings pending against the RP then it may order admission of the application. Whereas Section 7(5)(b) provides that if the Adjudicating Authority is satisfied that no default has occurred or the application filed under Section 7 is incomplete in so far as Section 7(2) is concerned or any disciplinary proceeding is pending againstthe proposed resolution professional then it may reject the application. In order to maintain the application under Section 7 of the Code the financial creditor has to show the default as a condition precedent - The debt has also been defined as a liability in respect of claim towards a financial debt or operational debt and the claim means the right to payment. There is no dispute, in so far as the facts of this case are concerned that the amount of interest became due and payable by the Corporate Debtor to the Appellant on 01.07.2021 to the tune of Rs. 71,80,274/- in view of the condition enumerated in the debenture which says that the debenture shall carry a coupon rate of 6% p.a. on the face value plus securities premium on quarterly rests and also in view of Section 71(8) of the Act. Reliance placed in the Judgment of the Hon’ble Supreme Court, rendered in the Case of M/s Orator Marketing Pvt. Ltd. [2021 (8) TMI 314 - SUPREME COURT], in which the question was raised by the Respondent therein that interest free loan would not come within the purview of financial debt, therefore, the application filed as a Financial Creditor would not be maintainable. The Hon’ble Supreme Court held that The definition of ‘Financial Debt’ in Section 5(8) of IBC does not expressly exclude an interest free loan. ‘Financial Debt’ would have to be construed to include interest free loans advanced to finance the business operations of a corporate body. After referring to various definition appearing in Part I and Part II of the Code and explaining the scheme with the help of the decision in the case of Innovative Industries Ltd. and taking a cue from the decision of the Hon’ble Supreme Court in the case of M/s Orator Marketing Pvt. Ltd, we are of the considered opinion that in the facts and circumstances of the present case the application filed under Section 7 of the Code could be maintained in respect of the component of interest which became due and payable, without asking for the principal amount which has not yet become due and payable. Appeal allowed.
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