TMI Blog2020 (11) TMI 993X X X X Extracts X X X X X X X X Extracts X X X X ..... nder payment may be due would not fall within the ambit of Section 5(8) so as to constitute a Financial Debt - Admittedly, inter se the parties, there is no disbursement against the consideration for the time value of money. Principal borrower is not a party to Settlement Agreement. Viewed in the context of Settlement Agreement, there is no borrowing on the part of Respondent from the Appellant. Mere obligation to pay under a Settlement Agreement would not amount to disbursal of amount for consideration against the time value of money and breach thereof would not entitle the Appellant in the instant case to trigger Corporate Insolvency Resolution Process against the Respondent. It is found that bouncing of cheques issued in discharge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scharge the liability with respect to the financial debt advanced to the principal borrower- Tempo Appliances India Ltd. and this was independent of Settlement Agreement, whereunder the Corporate Guarantor had undertaken to discharge the liability arising out of dishonoring of cheques issued by the Principal Borrower in favour of the Financial Creditor. 2. After hearing learned counsel for the Appellant, we are of the considered opinion that the impugned order is not flawed. Admittedly, in terms of the Memorandum of Understanding dated 22.09.2017, Appellant agreed to advance a loan of ₹ 1,50,00,000/- to Tempo Appliances India Ltd. (Principal Borrower) with interest @18% per annum payable monthly. Respondent herein i.e. Tempo A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd to pay the outstanding amount of ₹ 86 lakh with interest calculated at ₹ 22 lakh and issued two cheques in consideration of such liability. It appears that the payment schedule had been agreed upon. A bare look at this Settlement Agreement would reveal that the same supersedes the Memorandum of Understanding dated 22.09.2017 entered between the Appellant and the Principal Borrower. The issue for consideration is that whether in terms of this agreement the obligation to pay the outstanding liability of ₹ 86 lakh together with interest on the part of Respondent constituted a financial debt within the purview of Section 5(8) of the I B Code and whether the Appellant can be treated as Financial Creditor entitled to tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent issued by a bank or financial institution; (i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause; 4. Mere obligation to pay does not bring the liability within the ambit of financial debt . The debt, along with interest, if any, should be disbursed against the consideration for the time value of money. Breach of terms of an agreement including a Settlement Agreement whereunder payment may be due would not fall within the ambit of Section 5(8) so as to constitute a Financial Debt . Admittedly, inter se the parties, there is no disbursement against the consideration for the time value of money. Principal borrower is not a party to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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