The NCLT dismissed an application under Section 7 of the IBC filed by financial creditors against ATS Infrastructure Ltd. The court held that the investment was speculative in nature and the underlying transaction was a sale agreement, not a debt with commercial effect of borrowing.
Application for initiating CIRP under Section 7 of the IBC 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.02
IB-906(ND)/2022
IN THE MATTER OF:
M/s. KOHINOOR APPARELS PVT LTD & ORS.
…… Applicants/Financial Creditors 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. Piyush Singh, Mr. Akshay Srivastava,
Mr. Adithya Ramani, Ms. Riddhi Jain, Advs.
For the Respondent : Mr. Krish Kalra, Adv.
ORDER
Order pronounced in open court vide separate sheets. (IB)–906(ND)/2022 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) – 906(ND)/2022
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:
M/s. KOHINOOR APPARELS PVT LTD & ORS.
…… Applicants/Financial Creditors
VERSUS
M/s. ATS INFRASTRUCTURE LTD.
…… Respondent/Corporate Debtor
MEMO OF PARTIES
M/s. KOHINOOR APPARELS PVT LTD & ORS.
1. M/s. KOHINOOR APPARELS PRIVATE LIMITED
Having Its Registered Office at:
D-17, Maharani Bagh, New Delhi-110065.
…… Financial Creditor No. 1
2. Mr. VIPUL GUPTA
S/o Mr. S.P. Gupta
R/o K-115, S.D.A,
Hauz Khas, South West Delhi-110016.
…… Financial Creditor No. 2
3. Mr. VIPUL NAGPAL
S/o Mr. Darshan Lal Nagpal
R/o 1015B, Magnolias,
Golf Course Road, Gurgaon, Haryana-122003.
…… Financial Creditor No. 3
VERSUS
M/s. Kohinoor Apparels Pvt Ltd & Ors vs. M/s. ATS Infrastructure Ltd. (IB) – 906(ND)/2022 Date of Order : 09.06.2023
Page 1 of 24
M/s. ATS INFRASTRUCTURE LTD.
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. Piyush Singh, Mr. Akshay Srivastava, Ms. Riddhi Jain, Advocates For the Respondent : Mr. Krish Kalra, Advocate
ORDER
PER: BACHU VENKAT BALARAM DAS, MEMBER (JUDICIAL)
Description of the Parties:
M/s. Kohinoor Apparels Pvt Ltd & Ors vs. M/s. ATS Infrastructure Ltd.
(IB) – 906(ND)/2022 Date of Order : 09.06.2023
Page 2 of 24
Rs.11,09,57,715/- of Principal amount along with Rs.32,76,596/of Interest amount] as on 09.09.2022.
4. Submissions of the Financial Creditors:
M/s. Kohinoor Apparels Pvt Ltd & Ors vs. M/s. ATS Infrastructure Ltd. (IB) – 906(ND)/2022 Date of Order : 09.06.2023
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real estate project namely, "ATS Pristine", situated at Plot No. SC-1/A-1, Sector-150, Noida (hereinafter referred to as the "Project") being constructed by ATS Housing Private Limited (hereinafter referred to as "AHPL") i.e. the associate company of the Corporate Debtor.
b) The Financial Creditors had invested in the Project by way of a Financial Arrangement entered into between the parties on the assurances given by the Corporate Debtor that their respective units shall be bought back at a contractually agreed sale consideration on expiry of the prescribed time period. It is on the basis on these assurances that the Financial Creditors invested in the Project and thereby opted for a "buy-back" scheme. As a result, the total amount due to the Financial Creditors consists of the "buy-back" amount which was to be paid by the Corporate Debtor along with interest classifying it as "debt" under Section 3(11) of the Code. A copy of the tabulated sheet reflecting the details of the investment made by the Financial Creditors and units allotted by the Corporate Debtor is filed along with the application.
c) The Corporate Debtor along with AHPL had launched the Project with various representations and promises regarding the purchase of units rendering huge returns in terms of the "buy-back" scheme which was so being offered. The Corporate Debtor assured that in case the Financial Creditors invested in the Project and purchased units in the Project, the Corporate Debtor shall "Buy-Back" the same from the Financial Creditors within a stipulated time period which shall yield huge returns. Based on such representations made by the Corporate Debtor, the Financial Creditors invested in the Project in the year 2018 and booked 2 units each and 1 Villa, individually. Up to this point, the Financial Creditors continued to be overburdened by not only being departed from a significant amount of money that they had paid to the AHPL towards their unit but also by
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the mala fide conduct of the Corporate Debtor as well which had undertaken the sole responsibility to "buy-back" the units of the Financial Creditors at a contractually agreed consideration amount. Against this, the Corporate Debtor in connivance with AHPL has been enjoying the hard-earned money of the Financial Creditors under the Financial Arrangement entered into between them, as they have gone about collecting a significant total sale consideration of the units from the Financial Creditors without adhering to its own contractual obligations. It is hereby abundantly clear that the Corporate Debtor is not in sound financial health and is not in a position to "buy-back" the units of the Financial Creditors. In the above circumstances, it is apprehended that the hardearned money of the Financial Creditors has been illegally diverted to other projects or utilised for other purposes. It is stated that the Financial Creditors have frequently followed up with the Corporate Debtor with regard to the Buy-Back of the Units but to no avail. The Corporate Debtor is entering into sham agreements with no intention to repay the amounts due to the Financial Creditors.
d) Till date, the Financial Creditors have collectively paid an enormous amount of Rs. 11,09,57,715/- (Rupees Eleven Crore Nine Lakh Fifty Seven Thousand Seven Hundred and Fifteen Only) to AHPL, that is an associate Company of the Corporate Debtor on the assurances given by the Corporate Debtor of buying back the units at a premium price but to the utter shock and surprise of the Financial Creditors, the PDCs issued by the Corporate Debtor when presented to the respective bank of the Financial Creditors got dishonoured and were returned unpaid by the bank vide return memo stating "Funds Insufficient" and
"Account Blocked".
M/s. Kohinoor Apparels Pvt Ltd & Ors vs. M/s. ATS Infrastructure Ltd. (IB) – 906(ND)/2022 Date of Order : 09.06.2023
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M/s. Kohinoor Apparels Pvt Ltd & Ors vs. M/s. ATS Infrastructure Ltd. (IB) – 906(ND)/2022 Date of Order : 09.06.2023
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Rs. 1,62,880/- (Rupees One Lakh Sixty Two Thousand Eight Hundred and Eighty Only) and 8 Post dated Cheques for Rs. 3,75,000/- (Rupees Three lakh and Seventy Five Thousand Only) drawn on Kotak Mahindra Bank, Sector 18, Noida duly signed by the Chairman and Managing Director of the Corporate Debtor, Mr. Getamber Anand.
vi. Vide letter dated 01.03.2021, the Corporate Debtor extended the 'Holding Period' as defined in the MOU dated 01.09.2018 till 31.10.2021 and issued 9(nine) new post dated cheques, including 8 for Rs. 63,000/- (Rupees Sixty Three Thousand Only) and 1 Post Dated Cheque dated 31.10.2021 for Rs. 1,85,32,800/- (Rupees One Crore Eighty Five Lakh Thirty Two Thousand and Eight Hundred Only) in addition to TDS for Rs. 1,87,200/- (Rupees One Lakh Eighty Seven Thousand and Two Hundred Only) drawn on Kotak Mahindra Bank, Sector 18, Noida. These were issued for a total amount of Rs. 1,90,36,800/- (Rupees One Crore Ninety Lakh Thirty Six Thousand and Eight Hundred Only) and in lieu of the same transaction was asked to hand over the cheque dated 30.09.2020 for Rs. 1,62,88,000/- (Rupees One Crore, Sixty Two lakh and Eighty Eight Thousand Only) back to the Corporate Debtor. A copy of the letter dated 01.03.2021 issued by the Corporate Debtor to FC-1 is filed along with the application.
vii.Vide letter dated 10.03.2022, the Corporate Debtor again sought an Extension of the "Holding Period' up to 30.06.2022 and in lieu of the same, agreed to pay the Financial Creditor 1, an amount of Rs. 2,07,07,335/- (Rupees Two Crore Seven Lakh Seven Thousand Three Hundred and Thirty Five Only). Pursuant to which, they issued a fresh cheque dated 30.06.2022 for Rs. 2,07,07,335/- (Rupees Two Crore Seven lakh Seven Thousand Three Hundred and Thirty Five Only) and agreed to pay TDS at Rs. 2,09,165/- (Rupees Two lakh
M/s. Kohinoor Apparels Pvt Ltd & Ors vs. M/s. ATS Infrastructure Ltd. (IB) – 906(ND)/2022 Date of Order : 09.06.2023
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Nine Thousand One Hundred and Sixty Five Only). Further, he was asked to hand over the cheque dated 31.10.2021 for rupees 1,85,32,800/- (Rupees One Crore Eighty Five Lakh Thirty Two Thousand and Eight Hundred Only). A copy of the letter dated 10.03.2022 issued to FC- 1 is filed along with the application.
viii. It is imperative to state now that the said cheque dated 30.06.2022 for Rs. 2,07,07,335/- (Rupees Two Crore Seven Lakh Seven Thousand Three Hundred and Thirty Five Only) was dishonoured upon presentation and was returned with the remark "Account Blocked" vide return memo dated 09.09.2022 Thus, the Principal Amount of the said amount along with interest stands due and payable by the Corporate Debtor to the Financial Creditor towards the "buy-back" of the unit bearing no. PH1. A copy of the said return memo along with the dishonoured cheque has been filed along with the application.
M/s. Kohinoor Apparels Pvt Ltd & Ors vs. M/s. ATS Infrastructure Ltd. (IB) – 906(ND)/2022 Date of Order : 09.06.2023
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to as the "MOU") qua the Buy Back of the units. It is pertinent to note that this particular transaction was merely cloaked under the sham of transfer of funds as the basis for the MOUs and Allotment letters, they were executed on the same day and funds were mainly taken from the Financial Creditors and the same money, promised to be returned at a later date by the associate organisations. A copy of one of the Memorandum of Understanding dated 14.05.2018 executed between the Financial Creditor, the Corporate Debtor and AHPL are filed along with the application.
iv. The present application has been filed by the Financial Creditors on account of the default committed by the Corporate Debtor to pay the "buy-back" amount towards the units of the Financial Creditor on expiry of the prescribed period as per the MOUs and extension letters executed thereafter. As per Clause 3 of the recital of the MOUs, the Corporate Debtor had admittedly agreed to buy-back the unit at a fixed sale consideration of Rs. 2,61,03,000/- (Rupees Two Crore Sixty One Lakh and Three Thousand Only).
v. It is crucial to state that as per Clause 3.1 of the MOUs, the Corporate Debtor unambiguously took the liability to purchase the units upon the expiry of 36 (thirty-six) months from the date of execution of the MOUs. Therefore, in pursuance of liability, the Corporate Debtor undertook to issue a post dated cheque for Rs. 2,58,41,970/- (Rupees Two Crore Fifty Eight Lakh Forty One Thousand Nine Hundred and Seventy Only) drawn on Kotak Mahindra Bank, Sector 18, Noida duly signed by the Chairman and Managing Director of the Corporate Debtor, Mr. Getamber Anand.
M/s. Kohinoor Apparels Pvt Ltd & Ors vs. M/s. ATS Infrastructure Ltd. (IB) – 906(ND)/2022 Date of Order : 09.06.2023
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Thousand Three Hundred and Forty Only) and agreed to also pay TDS at Rs. 2,93,660/- (Two lakh Ninety Three Thousand Six Hundred and Sixty Only). A copy of the letter dated 14.08.2020 is filed along with the application.
vii. It is pertinent to mention that while encashing the cheque dated 11.08.2021 for Rs. 2,90,72,340/- (Rupees Two Crore Ninety Lakh Seventy Two Thousand Three Hundred and Forty Only), it got dishonoured upon presentation and was returned vide Return memo dated 08.11.2021 stating the reason to be "Funds Insufficient". The return memo for the said dishonoured cheque is filed along with the application. viii. Further, to buy more time and to escape the liability arising out of a dishonoured cheque, vide letter dated 20.12.2021, the Corporate Debtor additionally extended the Holding Period' as defined in MOU dated 14.05.2018 up to 22.08.2022 and in order to give effect to the further extension of time, issued a new post dated cheque in favour of FC-2 for a total sum of Rs. 3,34,24,380/- (Rupees Three Crore Thirty Four Lakh Twenty Four Thousand Three Hundred and Eighty Only) drawn on Kotak Mahindra Bank, Sector 18, Noida. Additionally, the Developer AHPL, agreed to also allot additional units bearing No. 10262, with area 1800 sq ft in another project "ATS Dolce" as additional security to honour the aforementioned transaction and agreed further to not sell this particular unit until the completion of the transactions and was issued an Allotment Letter dated 11.10.2021 in lieu of the same security/collateral agreement.
ix. Further, the Financial Creditor was asked to return the erstwhile post dated cheque for Rs. 2,90,72,340/- (Rupees Two Crore Ninety Lakh Seventy Two Thousand Three Hundred and Forty Only) to the Corporate Debtor. A copy of the extension letter dated 20.12.2021 and the allotment letter dated 11.10.2021 are filed along with the application.
M/s. Kohinoor Apparels Pvt Ltd & Ors vs. M/s. ATS Infrastructure Ltd. (IB) – 906(ND)/2022 Date of Order : 09.06.2023
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M/s. Kohinoor Apparels Pvt Ltd & Ors vs. M/s. ATS Infrastructure Ltd. (IB) – 906(ND)/2022 Date of Order : 09.06.2023
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MOUs were signed by Mr. Getamber Anand in the capacity of the authorised representative of both AHPL and the Corporate Debtor. It is also pertinent to note that this particular transaction was merely cloaked under the sham of transfer of funds as the basis for the MOUs and Allotment letters, they were executed on the same day and funds were mainly taken from the Financial Creditors and the same money, promised to be returned at a later date by the associate organisations. A copy of one of the Memorandum of Understanding dated 16.04.2018 executed between the Financial Creditor, the Corporate Debtor and AHPL are filed along with the application.
iv. The present application has been filed by the Financial Creditor on account of the default committed by the Corporate Debtor to pay the "buy-back" amount towards the units of the Financial Creditor on expiry of the prescribed period as per the MOUs. As per Clause 2 of the recital of the MOUs, the Corporate Debtor had admittedly agreed to buyback the unit at a fixed sale consideration of Rs. 5,01,55,000/- (Rupees Five Crore One Lakh and Fifty Five Thousand Only).
v. It is crucial to state that as per Clause 7.1 of the MOU, the Corporate Debtor unambiguously took the liability and envisaged completing the transaction by 16.07.2020. Therefore, in pursuance of liability, the Corporate Debtor undertook to issue 10 (Ten) post-dated cheques for a total amount of Rs. 5,01,55,000/- (Rupees Five Crore One Lakh and Fifty Five Thousand Only) including 9 (Nine) post-dated cheques for Rs. 9,00,000/- (Rupees Nine Lakh Only) and 1(One) post-dated cheque for Rs. 4,20,55,000/- (Rupees Four Crore Twenty Lakh and Fifty Five Thousand Only) drawn on Kotak Mahindra Bank, Sector 18, Noida duly
M/s. Kohinoor Apparels Pvt Ltd & Ors vs. M/s. ATS Infrastructure Ltd. (IB) – 906(ND)/2022 Date of Order : 09.06.2023
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signed by the Chairman and Managing Director of the Corporate Debtor, Mr. Getamber Anand.
vii. It is imperative to state now that the said cheque dated 31.08.2022 for Rs. 1,51,91,550/- (Rupees One Crore Fifty One Lakh Ninety One Thousand Five Hundred and Fifty Only) and Ch. No. 032784 dated 31.08.2022 for Rs. 4,16,34,450/- (Rupees Four Crore Sixteen Lakh Thirty Four Thousand Four Hundred and Fifty Only), drawn on Kotak Mahindra Bank, Noida was dishonored upon presentation and was returned with the remark "Account Blocked" vide Return Memo dated 30.09.2022.
M/s. Kohinoor Apparels Pvt Ltd & Ors vs. M/s. ATS Infrastructure Ltd. (IB) – 906(ND)/2022 Date of Order : 09.06.2023
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the Corporate Debtor is in gross and utter violation of the terms contained in the MOU and the subsequent extension letters sent thereafter by not fulfilling their owed payment obligations. i) It is hereby crucial to mention that the total amount due and payable by the Corporate Debtor to the Financial Creditors is inclusive of compound interest @25% per annum to be compounded monthly calculated from the date of dishonour of each of the post-dated cheques till the date such amount is actually received. The compound interest is being backed by Clause 6.3(c) of the MOUs whereby it has been clearly stated that the Corporate Debtor, in the event of default due to dishonour of cheques, shall pay an additional sale consideration amount @25% per annum which shall be compounded monthly from the date of dishonour of the cheques till the date such amount is actually received by the Financial Creditors.
5. Submissions of the Corporate Debtor:
M/s. Kohinoor Apparels Pvt Ltd & Ors vs. M/s. ATS Infrastructure Ltd. (IB) – 906(ND)/2022 Date of Order : 09.06.2023
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obligation to purchase the residential villa bearing No. PH1, 3PH2, and RH07 ("Unit") in one of its Projects namely, 'ATS Pristine' situated at Plot No. SC-l/A-l, situated in Sector 150, Noida, Uttar Pradesh ("Project") from the alleged Financial Creditors by paying the alleged amount of Rs. 11,09,57,715/-.
M/s. Kohinoor Apparels Pvt Ltd & Ors vs. M/s. ATS Infrastructure Ltd. (IB) – 906(ND)/2022 Date of Order : 09.06.2023
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under a real estate project shall be deemed to be an amount having the commercial effect of borrowing. In this regard, even if for the sake of argument, the alleged Financial Creditors are considered as an 'allottee' for the purpose of Section 5(8) of the Code, the alleged Financial Creditor has neither placed on record nor alleged so as to substantiate that the alleged debt of Rs. 11,09,57,715/- and interest of Rs. 32,76,596/- accrued thereon was remitted by the alleged Financial Creditors to the Answering Respondent. It is also denied that there is any admitted debt due to the alleged Financial Creditors either under the MOUs or otherwise. On the contrary, the alleged Financial Creditors have failed to act in accordance with the MOUs and is evidently seeking to sidestep their defaults by wrongly alleging criminal offenses and other defaults against the Answering Respondent.
M/s. Kohinoor Apparels Pvt Ltd & Ors vs. M/s. ATS Infrastructure Ltd. (IB) – 906(ND)/2022 Date of Order : 09.06.2023
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invested their hard-earned money in the project of the Answering Respondent.
6. Analysis and Findings
The relevant clauses of the MoU are extracted below for the better understanding of the case: -
M/s. Kohinoor Apparels Pvt Ltd & Ors vs. M/s. ATS Infrastructure Ltd. (IB) – 906(ND)/2022 Date of Order : 09.06.2023
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“Project"), along with all the rights, interests, liberties, easements, privileges, appurtenances whatsoever and free from all encumbrances (as hereinafter defined) to the seller (hereinafter referred to as “Apartment"), in terms of the respective Application Form, Allotment Letter and their respective Terms & Conditions all dated 23.08.2018 (hereinafter referred to as the "Allotment Letter").
M/s. Kohinoor Apparels Pvt Ltd & Ors vs. M/s. ATS Infrastructure Ltd. (IB) – 906(ND)/2022 Date of Order : 09.06.2023
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M/s. ATS Infrastructure Private Limited has been described as a “purchaser”.
The relevant clauses of the MoU are extracted below for the better understanding of the case: -
a. “The Developer had allotted a residential apartment bearing no. 3PH2 having total sale price of Rs. 4,500/- per square feet admeasuring 4,200 square feet Plus 920 square feet of Terrace Area of the super area on the Top floor of Tower/Building no. 3 and the right to exclusively use 2 parking spaces with each apartment in its group housing residential scheme located at the admeasuring 93,072 sq. meter situated at Plot No. SC-1/A-1, Sector-150, Noida, Uttar Pradesh (hereinafter referred to as the “Land”) in the name ‘ATS Pristine' (hereinafter referred to as “Project"), along with all the rights, interests, liberties, easements, privileges, appurtenances whatsoever and free from all encumbrances (as hereinafter defined) to the seller (hereinafter referred to as “Apartment"), in terms of the respective Application Form, Allotment Letter and their respective Terms & Conditions all dated 14.05.2018 (hereinafter referred to as the "Allotment Letter").
M/s. Kohinoor Apparels Pvt Ltd & Ors vs. M/s. ATS Infrastructure Ltd. (IB) – 906(ND)/2022 Date of Order : 09.06.2023
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Rs. 2,61,03,000/ - (Rupees Two Crore Sixty One Lakh and Three Thousand Only) (hereinafter referred to as "Sale Consideration").
The relevant clauses of the MoU are extracted below for the better understanding of the case: -
a. “The Developer had allotted a residential villa bearing no. RH-07 having the super area of 8500 sq. ft. plus 1032 sq. ft. Lawn Area along with the right to exclusively use of 2 parking spaces in its group housing residential scheme located at the land admeasuring 93,072 sq. meter situated at Plot No. SC-1/A-1, Sector-150, Noida, Uttar Pradesh (hereinafter referred to as the “Land”) in the name ‘ATS Pristine' (hereinafter referred to as “Project"), along with all the rights, interests, liberties, easements, privileges, appurtenances whatsoever and free from all encumbrances (as hereinafter defined) to the seller (hereinafter referred to as “villa"), in terms of the respective Application Form, Allotment Letter and their respective Terms & Conditions all dated 16.04.2018 (hereinafter referred to as the "Allotment Letter").
M/s. Kohinoor Apparels Pvt Ltd & Ors vs. M/s. ATS Infrastructure Ltd. (IB) – 906(ND)/2022 Date of Order : 09.06.2023
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16/04/2018 drawn on HDFC Bank Limited for Rs. 1,23,75,000/- (Rupees One Crore Twenty Three Lakh and Seventy Five Thousand Only), the receipt of which is acknowledged by the Developer, and the Seller has agreed to deposit by way of tax deducted at source a sum of Rs. 1,25,000/(Rupees One Lakh and Twenty Five Thousand Only) (all collectively hereinafter referred to as "Purchase Consideration") for purchase of the villa.
M/s. Kohinoor Apparels Pvt Ltd & Ors vs. M/s. ATS Infrastructure Ltd. (IB) – 906(ND)/2022 Date of Order : 09.06.2023
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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 garb of a lender comes into the project as a speculative investor and for mere recovery of monies files exorbitant claims. Therefore, the benefit of section 5(8)(f) of IBC 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.
viii. 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;” ix. From the perusal of the recitals of the Allotment Letters executed between the Developer and the seller as well as the MoU, we do not find any clause which would show that any “Financial Debt” is owed to the present Applicant and therefore by no means the present Applicants can be called as a “Financial Creditor”.
x. 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.
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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—
(f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing;
xii. 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 5 of the Code. We are also of the opinion that the Applicants are not Financial Creditors holding any financial debt which is in default of payment by the Corporate Debtor.
xiii. It is submitted that as it is a settled law, the pre-requisites for an application under Section 7 of the Code are the existence of 'financial debt' and a 'default', and as evident from the facts in the preceding paragraphs, it cannot be said that there is any financial debt, much less any default and therefore the present application is not maintainable.
Hence, we are inclined to dismiss this application.
M/s. Kohinoor Apparels Pvt Ltd & Ors vs. M/s. ATS Infrastructure Ltd. (IB) – 906(ND)/2022 Date of Order : 09.06.2023
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7. 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)
M/s. Kohinoor Apparels Pvt Ltd & Ors vs. M/s. ATS Infrastructure Ltd. (IB) – 906(ND)/2022 Date of Order : 09.06.2023
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2 issues framed by the court
Whether the applicants qualify as financial creditors under Section 5(7) of the IBC.
Whether the claimed amount constitutes a financial debt under Section 5(8)(f) of the IBC.
Colour shows how this judgement treated each authority
Sudha Sharma vs Mansi Brar and Anr.Referred¶192
Sudha Sharma vs Mansi Brar and Anr. [Company Appeal (AT) (INS) No. 83 of 2020]
4 provisions across 2 enactments
M/s. Kohinoor Apparels Pvt Ltd & Ors.
M/s. ATS Infrastructure Ltd.
Bachu Venkat Balaram Das
Atul Chaturvedi
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
