TMI Blog2021 (3) TMI 413X X X X Extracts X X X X X X X X Extracts X X X X ..... al Services Ltd., M/s. Sameer Sales which was related party to the Corporate Debtor, extended interest free unsecured loan to the Corporate Debtor payable on or after 1st February, 2020 and that too upon demand by the lenders. It has been then argued that the Appellant after execution of the Assignment Agreement in its favour, not being related party and having taken the assignment for consideration, the loan extended would have to be treated as a Financial Debt. We are unable to accept such argument - The basic nature of the loan as witnessed from the Loan Agreement (Annexure A-2) will not change. If it was a simple debt extended to the sister concern, merely because the original lender has now assigned the debt to the Appellant will not change the nature of the transaction. There are no error in the findings recorded by the Adjudicating Authority where the Adjudicating Authority found that the transaction is not a transaction of financial debt and thus declined to admit the Application under Section 7 of IBC - appeal dismissed. - Company Appeal (AT) (Ins) No. 1064 of 2020 - - - Dated:- 8-3-2021 - [ Justice A.I.S. Cheema ] Member ( Judicial ) And [ Mr. V. P. Singh ] Memb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appeal states that subsequently M/s. Sameer Sales Pvt. Ltd. (the original lender) assigned the outstanding loan to the Appellant. The Respondent acknowledged the fact that the loan has been assigned. The Appellant claims that as the debt was due, Appellant on 3rd February, 2020 sent Notice (Annexure A-9 Page 51) to the Respondent and demanded payment of the debt. Yet another Notice was sent on 14th February, 2020 (Annexure A-10 Page 52) making demand of the outstanding debt. The Respondent replied on 18th February, 2020 (Annexure A-11 Page 53) referring to market conditions and labour problem and sought time to make the payment in instalments. 4. The Appellant subsequently filed Application under Section 7 of Insolvency and Bankruptcy Code, 2016 (IBC in short) and the Adjudicating Authority after hearing Counsel for both sides, rejected the Application under Section 7 holding that there was a mere grant of loan and it was not a financial debt. It noted that it was an admitted fact that the loan was interest free. It also found that there was no evidence that the amount was disbursed for time value of money. The Adjudicating Authority thus concluded that the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emnity for any of the items referred to in sub-clauses (a) to (h) of this clause; IBC separately defines debt under Section 3(11) as under:- (11) debt means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt; It is apparent that there can be debts which do not necessarily fall in the definition of financial debt or operational. Money borrowed against payment of interest comes within the definition financial debt. However, if the money borrowed is not against payment of interest, under the definition of financial debt, the core requirement is to find whether there is consideration for the time value of money . The facts of the matter disclose and the Appeal also records that when the Corporate Debtor was unable to get any further loan from the market after having taken loan from M/s. Tata Capital Financial Services Ltd., M/s. Sameer Sales which was related party to the Corporate Debtor, extended interest free unsecured loan to the Corporate Debtor payable on or after 1st February, 2020 and that too upon demand by the lenders. It would be appropriate to reproduce the Loan Agreement itself t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... early show that no interest was charged on the loan amount . 9. It has also been argued by the learned Counsel for the Appellant that after a period of two years when the loan still remained due, it must be thereafter treated as financial debt. We are not impressed by this submission also. A simple debt by default would continue to remain simple debt and only by default, nature of the debt would not change. 10. The learned Counsel for the Appellant relied on Judgement of this Tribunal in the matter of Mack Soft Tech Pvt Ltd. Versus Quinn Logistics India Ltd. in Company Appeal (AT) (Ins) No.143 of 2017 dated 21st May, 2018 to submit that when there is disbursement and default, it should be treated as financial debt. It is also argued that in that matter also, there was loan given to the sister concern and the same was treated as financial debt. We have gone through the said Judgement, copy of which has been filed. What appears from that Judgement is that there was no document in support of the entries in the account and there was absence of any correspondence (see para 13 of that Judgement). This Tribunal had, in the facts of that matter, considered the main object of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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