TMI Blog2022 (9) TMI 906X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2016. From provision of Section 5(8)(f) Explanation (i) and (ii), it is clear that pre-condition for a debt being a Financial Debt is disbursement against the time value of money and when any amount is raised from an allotment under real estate such transaction is also covered under Section 5(8)(f). The pre-condition for application of Explanation (i) of Section 5(8)(f) is raising of an amount from allottee. The present is not a case where an amount has been raised from the Appellants the Landowners - On looking into the real nature of the transaction entered between the Corporate Debtor and the Appellants Landowners, the landowners were entitled to share the constructed area in the ratio of 45:55 and allotment of flats and commercial units in lieu of their entitlement under the Development Agreement does not make the transaction of allotment a Financial Debt within the meaning of Section 5(8)(f). There are no error in the decision of the Adjudicating Authority holding the Appellants-Landowners as not Financial Creditors - appeal dismissed. - Company Appeal (AT) (Insolvency) No. 821 of 2021 Company Appeal (AT) (Insolvency) No. 940 of 2021 - - - Dated:- 19-9-2022 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitted the claim of the Appellants as a Financial Creditor and Appellants were invited to participate in the 6th CoC Meeting as Financial Creditors. The Bank of India, Financial Creditor objected to the inclusion of Appellants Landowners in the CoC in the 7th CoC Meeting held on 29.04.2021. (v) An application I.A. No. 1035/MB/2021 was filed by the Bank of India against the inclusion of Appellants as Financial Creditors in the CoC. The Appellants Landowners were not party to I.A. No. 1035 of 2021, hence, they filed I.A. No. 1450 of 2021 to intervene in the said I.A. No. 1035 of 2021. The Adjudicating Authority heard the parties as well as Resolution Professional and by impugned order dated 08.09.2021 allowed the I.A. No. 1035 of 2021 filed by the Bank of India and dismissed the I.A. No. 1450 of 2021 filed for intervention by the Landowners/Appellants. 2. Company Appeal (AT) (Ins.) No. 821 of 2021 has been filed by the two out of six landowners who had filed the claim before the Resolution Professional. Company Appeal (AT) (Ins.) No. 940 of 2021 has been filed by Vishal G. Jain, Resolution Professional . In these appeals following prayers have been made:- Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shops which allotment was made consequent to the Development Agreement entered between the parties dated 23.01.2006. It is submitted that Appellants are allottee within the meaning of the Real Estate (Regulation and Development) Act, 2016. Hence, they are also Financial Creditors within the meaning of Section 5 Sub-section (8) of the I B Code, 2016. The Adjudicating Authority committed error in holding the Appellants as not Financial Creditors. 5. Shri Krishnendu Datta, learned senior counsel appearing for the Appellant in Company Appeal (AT) (Ins.) No. 940 of 2021 submits that even if the decision of the Resolution Professional admitting the claim of the landowners as Financial Creditors was an error of judgment, there is no malafide on part of the Resolution Professional so as to send a copy of the order to the IBBI. Observations made by the Adjudicating Authority in Para 31 and directions in Para 32(iii) ought to be expunged. 6. Learned counsel appearing for the Bank of India refuting the submissions of learned counsel for the Appellant contended that Resolution Professional committed serious error in admitting the claim of Landowners as Financial Creditors whereas the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. A Development Agreement was entered between the parties where area sharing was in the ratio of 45:55 percent. The Landowners has also received a refundable security deposit of Rs.1.75 Crores from the Corporate Debtor. Learned counsel for the Appellants has much emphasized on the fact that as per the Development Agreement 117 flats and 20 commercial shops have been allotted to the landowners and they are allottee within the meaning of RERA Act, 2016. It is submitted that when Appellants are allottees then they cannot be held to be Promoters as has been held by the Adjudicating Authority. It is submitted that by virtue of the allotment made by the Corporate Debtor, the Appellants are Financial Creditors within the meaning of Section 5(8) of the I B Code. 10. Section 5(8) of the Code which is relevant for the present case, is as follows:- 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 dematerialised equivalent; (c) any amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Section 5(8)(f) is as follows:- [Explanation. -For the purposes of this subclause,- (i) any amount raised from an allottee under a real estate project shall be deemed to be an amount having the commercial effect of a borrowing; and (ii) the expressions, allottee and real estate project shall have the meanings respectively assigned to them in clauses (d) and (zn) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016);] 13. When we look into the provision of Section 5(8)(f) Explanation (i) and (ii), it is clear that pre-condition for a debt being a Financial Debt is disbursement against the time value of money and when any amount is raised from an allotment under real estate such transaction is also covered under Section 5(8)(f). The pre-condition for application of Explanation (i) of Section 5(8)(f) is raising of an amount from allottee. The present is not a case where an amount has been raised from the Appellants the Landowners. The submission of the Appellant that they are allottees within the meaning of Section 2(d) of RERA Act does not make their transaction as a Financial Debt within the meaning of Section 5(8)(f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h). The requirement of existence of a debt, which is disbursed against the consideration for the time value of money, in our view, remains an essential part even in respect of any of the transactions/dealings stated in sub-clauses (a) to (i) of Section 5(8), even if it is not necessarily stated therein. In any case, the definition, by its very frame, cannot be read so expansive, rather infinitely wide, that the root requirements of disbursement against the consideration for the time value of money could be forsaken in the manner that any transaction could stand alone to become a financial debt. In other words, any of the transactions stated in the said sub- clauses (a) to (i) of Section 5(8) would be falling within the ambit of financial debt only if it carries the essential elements stated in the principal clause or at least has the features which could be traced to such essential elements in the principal clause. In yet other words, the essential element of disbursal, and that too against the consideration for time value of money, needs to be found in the genesis of any debt before it may be t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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