TMI Blog2018 (8) TMI 2054X X X X Extracts X X X X X X X X Extracts X X X X ..... It is apt to notice that the expression 'debt' defined under Section 3(11) means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt. Non-payment of such debt which has become due and payable and is not repaid by the Debtor or Corporate Debtor falls within the mischief of 'default' defined under Section 3(12) of I B Code. It would therefore be futile on the part of learned counsel for the Appellant to contend that the unsecured loan aforestated did not fall within the definition of 'Financial Debt'. Admittedly, Respondent No. 1 and 2 were treated as unsecured creditors and in terms of the Share Purchase Agreement they transferred their e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anced loan to the Corporate Debtor from time to time and also through Respondent No. 3 Company at an interest @ 18% p.a., which after adjustment of some part of the loan amount returned by the Corporate Debtor stood at ₹ 18,67,11,000/-. Respondents herein, claiming to be 'Financial Creditors' of the Company, through Respondent Nos. 1 and 2, entered into an agreement with one Mr. Lalit Modi, Director and Shareholder in the Corporate Debtor and the Company for sale of the shares of the Respondent Nos. 1 and 2 vide Share Purchase Agreement executed on 02.02.2015 by virtue whereof Mr. Lalit Modi and the Corporate Debtor jointly undertook to refund the entire unsecured loan of ₹ 18,67,11,000/- to Respondents 1 and 2 on or bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the I B Code. The expression 'Financial Creditor' is defined as under: 5(7) financial creditor means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to; The expression 'Financial Debt' is defined under Section 5(8) of I B Code, which reads as under: 5(8) financial debt means a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money and includes- (a) money borrowed against the payment of interest; (b) any amount raised by acceptance under any acceptance credit facility or its de-materialised equivalent; (c) any amount raised pursuant to any note purchase facility ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding 75% shareholding of the company besides being Directors of the Corporate Debtor had lent various amounts to the Corporate Debtor for a hotel project and the principle amount was to the tune of ₹ 18,67,11,000/-. Initially this amount was treated as a long time borrowing at the same was reflected in the Account Books of the Corporate Debtor as also the balance sheet of the Company. This clearly borne out from the audited balance sheet of the Company, for the year ending 31.03.2014. Subsequently, Respondents No. 1 and 2 entered into a Share Purchase Agreement with the Corporate Debtor, which provided for transfer of entire shareholding of Respondents 1 and 2 by way of sale at par value to Shri Lalit Modi, Director and Shareholder of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clearly borne out from the later portion of clause (2) of the Share Purchase Agreement, which reads as under: The second party and third party jointly undertake to outgoing shareholders to refund the unsecured loan of ₹ 18,67,11,000/- to them or their nominee before 31.03.2015. It has already been noticed elsewhere in this judgment that the amount of loan was advanced by Respondents No. 1 and 2 to Corporate Debtor subject to payment of interest @ 18% p.a. and the amount of ₹ 18,67,11,000/- stood outstanding as unsecured loan against the Corporate Debtor after adjusting the amount repaid to Respondents No. 1 and 2. It is in this factual background emerging from record that it can be said without any amount of ambigui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsecured creditors and in terms of the Share Purchase Agreement they transferred their entire shareholding of 7500 shares in favour of Shri Lalit Modi. They were acknowledged as investors as regards the financial debt qua Shri Lalit Modi and the Corporate Debtor, the money having been borrowed initially and such investment having been made for earning interest. Refund of the investment was linked with the transfer of shareholding by the Respondents. Viewed thus, the Respondents can safely be held to be 'Financial Creditors'. Contention raised to the contrary being devoid of merit is repelled. 4. In view of the foregoing discussion, we are of the firm view that the impugned order does not suffer from any legal infirmity or factu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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