The Tribunal dismissed an application for initiating CIRP under Section 7 of the IBC. It held that the Applicant was a speculative investor, not a financial creditor, and the claimed amount did not constitute financial debt under the Code.
Application for initiating CIRP under Section 7 of the Code is dismissed.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
THE NATIONAL COMPANY LAW TRIBUNAL
NEW DELHI COURT-III
Item No.06
IB-1078(ND)/2020
IN THE MATTER OF:
DALMIA FAMILY OFFICE TRUST
…… Applicant/Financial Creditor
Versus
M/s. ATS INFRASTRUCTURE LIMITED
…… Respondent/Corporate Debtor Order Pronounced On: 09.06.2023
CORAM:
SHRI BACHU VENKAT BALARAM DAS, HON'BLE MEMBER (JUDICIAL) SHRI ATUL CHATURVEDI, HON'BLE MEMBER (TECHNICAL)
APPEARANCES:
For the Applicant : Mr. Ajay Bhargava, Ms. Raddhika Khanna, Advs. For the Respondent : Mr. Krish Kalra, Adv.
ORDER
Order pronounced in open court vide separate sheets. (IB)–1078(ND)/2020 is dismissed
-SD- -SD-
(ATUL CHATURVEDI) (BACHU VENKAT BALARAM DAS) MEMBER (TECHNICAL) MEMBER (JUDICIAL)
IN THE NATIONAL COMPANY LAW TRIBUNAL
NEW DELHI, COURT-III (IB) – 1078(ND)/2020
Order under Section 7 of the Insolvency and Bankruptcy Code, 2016 read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.
IN THE MATTER OF:
DALMIA FAMILY OFFICE TRUST
(Earlier known as Mridu Hari Dalmia Parivar Trust)
Having Its Registered Office at:
04, Scindia House Connaught Place,
New Delhi, Delhi – 110001
…… Applicant/Financial Creditor
VERSUS
M/s. A TS HOUSING PRIVATE LIMITED
Having Its Registered Office at: 711/92, Deepali, Nehru Place,
New Delhi, Delhi – 110019
…… Respondent/Corporate Debtor
Order Pronounced On: 09.06.2023
CORAM:
SHRI BACHU VENKAT BALARAM DAS, HON'BLE MEMBER (JUDICIAL)
SHRI ATUL CHATURVEDI, HON'BLE MEMBER (TECHNICAL)
APPEARANCES:
For the Applicant : Mr. Ajay Bhargava, Ms Raddhika Khanna, Advocates
For the Respondent : Mr. Krish Kalra, Advocate
Dalmia Family Office Trust vs. M/s. ATS Infrastructure Private Limited. (IB) – 1078(ND)/2020 Date of Order : 09.06.2023
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ORDER
PER: ATUL CHATURVEDI, MEMBER (TECHNICAL)
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along with interest @ 20% per annum on the Loan Amount payable on a quarterly basis.
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Financial Creditor for payment of interest on the Loan Amount payable in terms of the Loan Agreement as per the details set forth in Annexure-D thereof. Copy of some of the post-dated cheques issued by the Corporate Debtor towards payment of interest are filed along with the application.
iii. Under Clause 5.1 and 5.2 of the Loan Agreement, the Corporate Debtor agreed to refund the Loan Amount within a period of forty-two (42) months from the date of disbursement of the Loan Amount along with interest calculated @ 20% per annum on the Loan Amount payable on a' quarterly basis. It is further highlighted that as per Clause 5.3, the interest was to be paid by Corporate Debtor to Applicant/Financial Creditor on a quarterly basis, within two (2) days of the close of every financial quarter and in case of delay in payment of interest on its due date, Corporate Debtor was made liable to pay default interest @ 2% per month for the period of default on the amount so defaulted.
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Applicant/Financial Creditor with a request for an extension of time for repayment of the outstanding dues payable to Applicant/Financial Creditor under the Loan Agreement.
h. Resultantly, the parties executed a Supplemental Agreement to the Loan Agreement, dated 18th December 2018 ("Supplemental Agreement"), whereby the Applicant/Financial Creditor agreed to an extension of time for repayment of the dues by Corporate Debtor under the Loan Agreement subject to the understanding that all other terms and conditions of the Loan Agreement shall remain the same except that interest shall now be levied @18.5% per annum on the Loan Amount payable on quarterly basis w.e.f. 21st November 2018. Further, as per clause I of the said Supplemental Agreement, the date of repayment of the Loan Amount was extended till 30th June 2019 ("Modified Repayment Date"). Copy of the Supplemental Loan Agreement dated 18th December 2018 is filed along with the application.
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demands, Corporate Debtor failed to repay the Loan Amount with interest.
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of the Code. As such, the present Application is wholly misconceived and a mere attempt to browbeat the Respondent into paying sums that are otherwise not due and payable.
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the Tribunal the present Application in any event cannot be entertained and ought to be dismissed on this ground alone.
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Agreement and the amendment/ supplemental agreement thereafter, is clearly oppressive and exorbitant and cannot be countenanced. In this regard any such agreements seeking to impose these unfair, unjust, onerous terms and interest on the Respondent cannot be relied upon and the amounts as contained therein cannot be stated to be the due amount from the Respondent.
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proposals for settlement of their dues towards the Financial Creditor/Dalmia Group, vide emails dated 27th October 2020 and 07th November 2020, clearly establishes that no such "global settlement", or any settlement whatsoever had ever been arrived at, especially not prior to that. Even vide email dated 07th November 2020 issued by the Corporate Debtor, the Corporate Debtor issued a fresh proposal, nowhere referring to any "global settlement" of August 2020 or otherwise, and clearly exploring mere options for settlement with no concrete offer on the total liability towards Dalmia Group. Thus, alleged global settlement of 17th August 2020 (alleged date of global settlement) is nothing but a figment of the Corporate Debtor's imagination with a view to wriggling out of its outstanding admitted crystallised Financial Debt.
5. Analysis and Findings
The relevant clauses of the Loan Agreement are extracted below for the better understanding of the case: -
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a) “The Lender hereby agrees to grant a secured loan amounting to Rs. 15,00,00,000/- (Rupees Fifteen Crores Only) (hereinafter referred to as the "Loan Amount") to the Borrower for the purpose of construction and development of the Project and working capital requirements of the Borrower, subject to the terms and conditions specified in this Agreement.
b) The Borrower shall allot 36 number of flats in the Project ("Said Flats"), details whereof is set forth in Annexure C, on fully paid basis to the Lender simultaneously with execution hereof. The Borrower shall issue allotment letters for the Said Flats to the Lender and shall execute individual flat buyer agreements with the Borrower for the Said Flats simultaneously with execution hereof. The said allotment letters and the flat buyer agreements shall contain a specific clause that the Said Flats are fully paid up including PLC, EDC, IDC and applicable taxes. The Lender shall not be liable to make payment of any other charges including maintenance charges until receipt of repayment of the Loan Amount in terms of this Agreement;
c) Mr. Getamber Anand shall give his personal guarantee in favor of the Lender.
d) Simultaneously with disbursement of the Loan Amount, the Borrower shall deposit an undated cheque for the Loan Amount with the Lender.
e) Simultaneously with disbursement of the Loan Amount, the Borrower shall issue post-dated cheques to the Lender for payment towards the interest on the Loan Amount payable in terms of this Agreement as per details set forth in Annexure D hereof.
f) The Borrower shall not be entitled to create any third party rights in the Said Flats prior to repayment of the
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Loan Amount and other amounts due thereon in terms of this Agreement to the Lender.
g) In consideration of grant and disbursement of the Loan Amount to the Borrower in terms of this Agreement, the Borrower shall pay the following to the Lender: (i) Interest at the rate of 20% per annum on the Loan Amount payable on a quarterly basis ("Interest"); and
(ii) Refund of the Loan Amount.
h) On receipt of the refund of the Loan Amount along with interest thereon and other amounts payable in terms of this Agreement, ("Outstanding Obligations") by the Lender, the Lender shall release the charge created pursuant to this Agreement.
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bound thereby and to act accordingly. The Parties shall continue to perform such of their respective obligations that do not relate to the subject matter of the dispute. without prejudice to the final determination”
From the perusal of the abovementioned clauses of the Loan Agreement, it appears that the Loan Agreement is not in the nature of Financial Debt.
iv. We are of the view that the alleged interest @ 20% per annum on the Loan Amount payable on a quarterly basis is ex-facie illegal as contested and barred by the provisions of the Usurious Loans Act, 1918. As per the provisions of the said Act, a maximum interest of 7.50% per annum is payable on the secured loan and 12.50% per annum is payable on unsecured loans. Even otherwise, the interest @ 20% per annum on the Loan Amount payable on a quarterly basis (revised interest levied @18.5% per annum on the Loan Amount payable on quarterly basis w.e.f. 21st November 2018) is completely ex-facie illegal and exorbitant. Without prejudice, after perusing the relevant clauses of the Loan Agreement, the Financial Creditor is a speculative investor and cannot claim the status and benefits as a Financial Creditor under Explanation (i) of Section 5(8)(f) of the Code, and it is not an interested party in the financial well-being, growth, and vitality of the Corporate Debtor, but is just interested in his investment. Guidance in this regard is also available in the judgment of Hon’ble NCLAT in Sudha Sharma vs Mansi Brar and Anr. [Company Appeal (AT) (INS) No. 83 of 2020] emphasized: “that money deposited/invested for speculative purpose does not entitle a person to take advantage of clause (f) of section 5(8) and be considered a financial creditor by virtue of being an allottee of a housing unit/flat.”
While determining Issue (a), We are of the view that the status of “Financial Creditor” cannot be accorded to a person who, in the
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v.
garb of a lender comes in the project as a speculative investor and for mere recovery of monies files exorbitant claims. Therefore, the benefit of section 5(8)(f) of the Code will not enure in his favour and the amount claimed in Part IV of the application doesn’t amount to become Financial Debt as per code.
At this stage, it is pertinent to refer to the definition of the expression “Financial Creditor” in sub-section 7 of Section 5 of the Code.
Section 5 of sub-section 7 reads as follows: -
“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;”
vi. At this stage, it is also pertinent to refer to the definition of the expression “Financial Debt” in sub-section 8 of Section 5 of the Code.
Section 5 of sub-section 8 “Financial Debt” reads as follows: - “Financial Debt” means a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes—
money borrowed against the payment of interest;
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(f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing;
vii. While determining Issue (b), we are of the considered view that the amount involved in the present case cannot be considered as a Financial Debt within the definition of sub-section 8 of Section
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Hence, we are inclined to dismiss this application.
6. Order
In light of the above facts and circumstances, it is hereby ordered as
follows: -
-SD- -SD-
(ATUL CHATURVEDI) (BACHU VENKAT BALARAM DAS) MEMBER (TECHNICAL) MEMBER (JUDICIAL)
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3 issues framed by the court
Whether the Applicant qualifies as a Financial Creditor under Section 5(7) of the Code?
Whether the amount claimed constitutes a Financial Debt under Section 5(8)(f) of the Code?
Whether the Application under Section 7 is maintainable given the absence of a recognized financial debt?
Colour shows how this judgement treated each authority
Sudha Sharma vs Mansi Brar and Anr.Distinguished¶138
Sudha Sharma vs Mansi Brar and Anr. [Company Appeal (AT) (INS) No. 83 of 2020]
2 provisions across 1 enactments
Dalmia Family Office Trust
M/s. ATS Infrastructure Limited
Bachu Venkat Balaram Das
Atul Chaturvedi
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
