NCLAT (29.01.2021) in Satish Chand Gupta Vs Servel India Private Limited [Company Appeal (AT) (Insolvency) No. 502 of 2020] held that;
The answer to the question as to whether a decree holder would fall within the definition of ‘financial creditor’ has to be an emphatic ‘No’ as the amount claimed under the decree is an adjudicated amount and not at debt disbursed against the consideration for the time value of money and does not fall within the ambit of any of the clauses enumerated u/s 5(8) of the ‘I&B’ Code”.
In this connection, it is not out of place for this Tribunal to make a pertinent mention that the maturity of claim, default of claim or invocation of guarantee has no nexus with the filing of claim before the ‘Interim Resolution Professional’ u/s 18(1)(b) and the ‘Resolution Professional’ u/s 25(2)(e) of the Code.
that the ‘Corporate Debtor’ had accepted money from the Appellant against the payment of interest and bearing in mind the payment of interest on the amounts borrowed by the Respondent Company is nothing but a consideration for the time value of money and in as much as the ‘interest’ is the compensation paid by the borrower to the lender for using the lender’s money over a period of time, this Tribunal comes to an inevitable and inescapable conclusion that the Appellant’s status is that of a ‘Financial Creditor’ as per Section 5(7) read with Section 5(8) of the Code
Excerpts of the order;
The Appellant has preferred the instant Appeal being dissatisfied with the order dated 13.02.2020 passed by the ‘National Company Law Tribunal’, New Delhi, Bench-V in (IB) 1886 (ND)/2019.
# 2. The ‘National Company Law Tribunal’ while passing the impugned order dated 13.02.2020 had interalia at paragraph 10 to 12 had observed the following:-
“10. At this juncture, I would like to refer Companies (Acceptance of Deposits) Rule, 2014, which has come into force on 1st April, 2014, along with Section 73 and 74 of the Companies Act, 2013 and the same is quoted below:-
11. So far, the initiation of proceeding under Section 7 of the Code is concerned, in my view, is not liable to be accepted. At this juncture, I would also like to refer the arguments of the Petitioner that there is a default in pay ent of debt, therefore, Section 7 application is maintainable. At this juncture, I would like to refer the definition of default as defined in Section 3(12) of the Code:-
- “Section 3(12) “default” means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable an is not 1(paid) by the debtor or the corporate debtor, as the case may be.”
12. Mere plain reading of the provisions shows that default means nonpayment of debt, whereas in the aforementioned para, I held that the amount which the Petitioner deposited does not come under the definition of the debt. Therefore, I am unable to accept the contention of the Petitioner that there is a default in payment of debt.”
and was of the considered view that though the petitioner had some other remedy under the law to recover the amount which he had deposited with the ‘Corporate Debtor’ but in regard to the initiation of Section 7 of the ‘I&B’ Code held that the present application was not maintainable and rejected the prayer of the Appellant / Petitioner to initiate the proceedings u/s 7 of the Code and dismiss the application. However, the ‘Adjudicating Authority’ had granted liberty to the Appellant/Petitioner to file an appropriate application under Chapter V of the Companies Act, 2013.
Appellant’s Submissions
# 17. The Learned Counsel for the Appellant comes out with a plea that payment of interest on the amounts borrowed by the Respondent / Company is nothing but the consideration for the time value of money, as it increases the value of investment/debt with time. Moreover, interest is the compensation paid by the borrower to the lender for using the lenders money over a period of time and in this regard, the Appellant refers to the decision of this Tribunal in the matter of ‘Nikhil Mehta and Sons’ v. AMR Infrastructure Limited reported in 2017 SCC online, NCLAT 859(vide para 17) and the decision of the Hon’ble Supreme Court in the matter of ‘Pioneer Urban Land and Infrastructure Ltd.& Anr.’ V. ‘Union of India & Ors.’ reported in 2019 (8 SCC 416 (vide para 71).
# 19. The Learned Counsel for the Appellant proceeds to takes a legal plea that the Depositors / fixed deposit holders are financial creditors and in this regard relies on the judgement of the Hon’ble Supreme Court in the matter of ‘Pioneer Urban Land and Infrastructure Ltd.’ & Anr. V. ‘Union of India & Ors.’ reported in (2019) 8 SCC p.416 vide para (43).
# 21. The Learned Counsel for the Appellant cites the decision of this Tribunal in the matter of ‘Shailesh Sangani’ v. ‘Joel Gardoso & Anr.’ reported in 2019 SCC online NCLAT p. 52 (2) whereby and whereunder this Tribunal, had allowed an application under Section 7 of the Code by a shareholder who gave an unsecured loan with no fixed time period and repayable on demand from time to time by the ‘Corporate Debtor’.
# 24. The Learned Counsel for the Appellant relies on the judgement of this Tribunal in Co. Appl.(AT)(Ins.) No. 452 of 2020 in the matter of ‘Sh. Sushil Ansal’ V. ‘Ashok Tripathi and two Ors.’ dated 14.08.2020 wherein at paragraph 20 it is observed as under:-
“…….The answer to the question as to whether a decree holder would fall within the definition of ‘financial creditor’ has to be an emphatic ‘No’ as the amount claimed under the decree is an adjudicated amount and not at debt disbursed against the consideration for the time value of money and does not fall within the ambit of any of the clauses enumerated u/s 5(8) of the ‘I&B’ Code”.
Discussions
# 33. It must be borne in mind that a ‘Financial Creditor’ is a person to whom the financial debt is owed. A ‘Financial Creditor’ is a person who has a right to financial debt. A ‘Financial Creditor’ can be either a secured creditor or an unsecured creditor.
# 34. A ‘Corporate Debtor’ is a person who owes a debt to any person. The term ‘debt’ means a liability or an obligation in respect of a claim due from any person and includes (i) a Financial Debt (ii) An Operational Debt. As a matter of fact, Section 3(6) of the Code speaks of ‘Definition of Claim’ meaning (a) a right to payment, whether or not such right is reduced to judgement, fixed, disputed, undisputed, legal, equitable, secured or unsecured.
# 35. Any person who has the right to claim payment, as defined u/s 3(6) of the Code is supposed to file the claim whether matured or unmatured. The question is as to whether there is a default or not. Section 3(11) of the Code defines debt meaning a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt.
# 36. In this connection, it is not out of place for this Tribunal to make a pertinent mention that the maturity of claim, default of claim or invocation of guarantee has no nexus with the filing of claim before the ‘Interim Resolution Professional’ u/s 18(1)(b) and the ‘Resolution Professional’ u/s 25(2)(e) of the Code.
# 37. It cannot be gainsaid that the term ‘deposit’ includes any receipt of money by a company either as deposit or loan or in any other form by it. Under the Companies (acceptance of deposits) Rules, 2014 the term ‘Deposit’ is defined under Rule 2(1)(c) in an inclusive manner. The meaning of ‘Deposit’ is enlarged by covering receipts of money in any other form. After all, a deposit is something more than a mere loan of money.
# 39. The Learned Counsel for the Appellant refers to the judgement of this tribunal dated 18.12.2020 in Co. Appl. (AT)(Ins.) 519 of 2020 in the matter of Mr. Rajnish Jain, the promoter, stakeholder and Managing Director of suspended Board of Directors V. ‘Anupam Tiwari’ (Resolution Professional for M/s Jain Mfg. (India) Pvt. Ltd. & Anr. wherein it is held that the 3rd Respondent therein ‘BVN Traders’ is a ‘Financial Creditor’ within the meaning of Section 5(7) f the Code and the debt in question is a ‘financial debt’ within the meaning of Section 5(8) of the Code.
# 42. On a careful consideration of respective contentions and in view of the fact that the Respondent / Corporate Debtor had accepted certain amounts from the Appellant and credited the interest in a consistent manner against such amounts for a continuous period of five years, as pleaded by the Appellant and also that the ‘Corporate Debtor’ had accepted money from the Appellant against the payment of interest and bearing in mind the payment of interest on the amounts borrowed by the Respondent Company is nothing but a consideration for the time value of money and in as much as the ‘interest’ is the compensation paid by the borrower to the lender for using the lender’s money over a period of time, this Tribunal comes to an inevitable and inescapable conclusion that the Appellant’s status is that of a ‘Financial Creditor’ as per Section 5(7) read with Section 5(8) of the Code and that there is a default in payment of the accepted amounts by the Respondent/CD and in short, the Respondent / Corporate Debtor comes within the purview of the definition of ‘Financial Debt’. Viewed in that perspective, the contra view taken by the Adjudicating Authority in coming to the conclusion that the application filed by the Appellant / Financial Creditor is not maintainable for initiation of Section 7 of the Code is clearly unsustainable in the eye of law, as held by this Tribunal, to prevent an aberration of justice. Consequently, the Appeal succeeds.
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