TMI Blog2019 (1) TMI 1813X X X X Extracts X X X X X X X X Extracts X X X X ..... st it is the responsibility of the person to deduct TDS at the time of payment or on passing the credit entry as interest in its books of accounts. Keeping this provision of Income Tax Act in mind, the Debtor Company had deducted the TDS and issued a certificate on Form 26-AS, already furnished by the Petitioner as a part of the evidence. Because of this reason a conclusion can be drawn that the Respondent Company has unequivocally recorded the transaction in question as a Financial Liability. In the present case, the cause of action had arisen when the Debtor company had refused to return the loan. However, in the Civil proceedings the cause of action is in operation when the litigating parties file a suit of divorce. Both the legal proceedings are independent having no nexus with each other, therefore, can be independently adjudicated by two different judicial forum. This Bench is of the view that the transaction is within the definition of Financial Debt, hence the Petition u/s 7 deserves to be Admitted - Application admitted - moratorium declared. - C.P.(IB)-1712(MB)/2017 - - - Dated:- 14-1-2019 - Hon ble Shri. M.K. Shrawat, Member (Judicial) For the Petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f date) Sr. No. Date Loan Amt. (₹) Amt. Returned Interest paid Outstanding Amount. 1. 20.12.2016 8,00,000 2. 21.12.2016 2,00,000 3. 22.12.2016 7,00,000 4. 26.12.2016 4,00,000 5. 27.12.2016 10,00,000 6. 29.12.2016 9,00,000 7. 30.12.2016 10,00,000 8. 31.12.2016 5,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay. Therefore, ₹50,00,000/- is retained by the Respondent/Debtor Company for the final decision on the Petition of their sister in the Family Court, Bombay. The said amount of ₹50 lakhs is thus retained by them as an escrow amount for the alimony of their sister who is seeking divorce from the Petitioner. It is further pleaded that it is clear from the petition itself that no documentary evidence for the loan given is placed on record hence in this situation such an arrangement must not be treated as a loan liability on the on going Company, which is not an Insolvent under any law. Although it is agreed that TDS was deducted but argued that when a payment was made on the request of the Petitioner, TDS deducted under compulsion as it is necessary as per the law. Therefore, through other letters between them, it had been clearly informed to the Petitioner that the amount will not be released until the order of Family Court. 7. In the rejoinder the Petitioner has contested that the payment of interest is evidenced by a handwritten workings of the accounts department of Corporate Debtor sent to him by email. Further pleaded that in the absence of any Court Order the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing known as Prabhat Building to the Petitioner and out of the sales proceeds of the Flat deposited the said amount in the Company. It was therefore, not the individual money but belongs to the family hence, the wife had demanded her share. Thereafter, on arriving at a family arrangement, it was deposited with the Company to give financial security to Petitioner s wife. It is also necessary to mention that wife of the Petitioner belongs to the family of the Debtor Company. Undisputedly, brothers of his wife are managing this ongoing concern. It is also affirmed by both sides that there was a matrimonial dispute between husband and wife. 8.2 In the light of the above factual matrix, the issue to be decided is that whether the impugned amount falls under the definition of Financial Debt or not? The Definition as prescribed u/s 5(8) of the Code is that a Financial Debt has a component of Interest and in other words has a component of Time Value of Money . In my view, the present position of the transaction is thus coming within the definition of Financial Debt as defined u/s 5(8) of the Code, because of few reasons as below: i. That the transfer of money has the element of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [Company Appeal (AT) (Insolvency) No. 249 of 2017 dtd. 01.11.2017], an investment was made towards allotment of shares which was not considered by the Respected NCLAT as a debt in the nature of Financial Debt, hence, rejected the claim. As against that, what we have noticed in the present case is that the transaction was made to overcome the financial problem of the debtor company. Also, it is an admitted fact that on 03.04.2017 and on 28.8.2017 interest was paid of ₹1,43,803/- and ₹1,34,630/- for each quarter. When there was a default of non-payment of interest a letter was issued through Counsel dated 11.10.2017 wherein it was reiterated that the transaction under consideration was an interest bearing liability of the Corporate Debtor:- 3. That subsequently between January March 2017, our client made requests to you on call to pay him back his money. You returned to him an amount of ₹5 lakhs and the rest is still pending till date. 4. That it was mutually agreed between you and our client that an interest @12% per annum would be paid by you to our client and the payment would be made on a quarterly basis. It was agreed that the payment of interest would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when the litigating parties file a suit of divorce. Both the legal proceedings are independent having no nexus with each other, therefore, can be independently adjudicated by two different judicial forum. 8.7 Ld. Counsel of the Respondent has also placed a reliance on an order of NCLT Mumbai bench passed u/s 7 dated 07.07.2017 (TCP 411/IBC/NCLT/MB/MAH/2017) cited as 2017 SCC OnLine NCLT 7655 in the case of Mr. Vir Vikram Vaid v. M/s. Offshore Testing Inspection Services (I) Pvt. Ltd. for the legal proposition that a related party cannot file a Petition under Insolvency Code and that in the absence of any documentation to demonstrate that the money transaction was having the consideration of time value of money or it was an interest bearing transaction, therefore, out of the ambit of the provisions of section 7 of the Insolvency Code. Facts of the cited precedent are altogether different because the Petitioner in that case happened to be a Director of the Respondent Company. Because of this status of the Petitioner, a view was taken that in a situation even if his claim has accepted, the Petitioner shall be debarred to be a member of Committee of Creditors. In addition, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransferred to (ii) The debt along with interest, if any, is disbursed against the consideration for time value of money and include any one or more mode of disbursed as mentioned in clause (a) to (i) of subsection (8) of Section 5 . 9.2 In the said decision, the claim of the Petitioner as a Financial Creditor was dismissed by the Adjudicating Authority, which was challenged by the Financial Creditor as Appellant before respected NCLAT. The Hon ble Tribunal has taken into account the fact that on the impugned amount TDS was deducted, has also happened in the case in hand, and that the amount in question was disbursed against the consideration for time value of money, hence it was held that the rejection was incorrect, therefore, set aside the said order. The twin condition as discussed by the Hon ble NCLAT stood satisfied in the case in hand, therefore, the transaction in question can safely be held as a Financial Debt . 10. In the light of the detailed discussion, held hereinabove, and considering the facts and circumstances of the case in the light of the case laws discussed supra, this Bench is of the view that the transaction is within the definition of Financial Debt, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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