Sugan Choudhary vs Arun Enterprises & Anr.

“19.

Apparently, there is no dispute between the parties qua returning of the amount. On the basis of record available, it is established that only part payment has been made and still a sum of Rs. 1,31,00000 is due against the corporate debtor. The said fact also stands substantiate from the balance sheet of corporate debtor, wherein the said amount has been disclosed as unsecured loan.

20.

In view of the above said discussion, this Tribunal is of affirm view that a Respondent/Corporate Debtor failed to return the amount of Rs. 1,31,00,000/- to the operational creditor and there was no genuine pre-existing dispute between the parties.”

“ORDER

(Through Virtual Mode)

15.07.2022: Learned Counsel for the Appellant submits that he is ready to deposit the amount of Rs.1,31,00,000/- which was found to be due by the Adjudicating Authority in paragraph 20 of the impugned order along with some interest components also.

2.

Issue Notice. Respondents may file Reply within one week. Rejoinder, if any, may be filed before the date fixed.

3.

List the Appeal on 12.08.2022.

Subject to deposit of Rs.1.5 Crores by the Appellant by Demand Draft drawn in the name of “The Pay and Accounts Officer, Ministry of Corporate Affairs, New Delhi” within two weeks from today, no further proceeding shall take place in pursuance of the impugned judgment dated 27.05.2022. However, IRP shall ensure that the Corporate Debtor remains a going concern.”

“WHEREAS the VENDOR aforesaid is the actual & absolute lawful owner and in possession of property No. C-3, Site C Surajpur Indl. Area Greater Noida hereinafter referred to as the Property. AND WHEREAS the VENDOR aforesaid is desirous to sell the said property in the favour of the VENDER, or his/her nominee(s) for the total sale consideration of Rs. 3,65,00,000 (Rs. Three Crore Seventy Lakh only) and the VENDEE has also agreed to purchase the same for this very amount.

NOW THIS AGREEMENT TO SELL WITNESSTH AS UNDER:

1.

That the total sale consideration of the said industrial plot has been settled to as Rs. 36500000 (Rs. Thre Crore Sixty Five Laklı only) between both the parties

2.

That the VENDOR has received a sum of Rs. 5100000.00 (Rs. Fifty One Lakh Only) vide Ch. No 008962 dt. 04.02.2016 from the VENDEE as advance money, the receipt of which the Vendor hereby acknowledges. This payment is being made in the following manner.

3.

That the VENDEE shall apply and obtain the permission for Transfer the said property from the concerned authority in favour of the above said vendee his/her nominee(s) and shall execute the transfer Deed within two month after such permission or the time given by the concerned authority.

4.

That the Vendor has assured the vendee that the above sand property is free from all sorts of gilt, exchange, dispute, litigation, attachment, pledge and decree of any court of law, and if proved otherwise the Vendor shall be liable and responsible for the same and the Vendee shall have the rights to recover the entire amount with cost and expenses from the movable and immovable properties of the Vendor.

5.

That the expenses to be incurred for the execution of the Sale Deed/Lease Deed/Transfer Deed on stamp duty, registration fees and other legal expenses will be borne by the Vendee. Vendor shall provide all the required set of papers with details of property under consideration as a working unit as required for transfer of property

6.

That the Vendee shall have the rights to get the Transfer Deed of the same property executed in his/her favour or in favour of his/her nominee(s) tor which the Vendor has got no objection.

7.

That the vendor shall be responsible for all outstanding dues and demands in respect of the said property up to the date of final transfer deed and that all future dues thereafter shall be paid by the Vendee.

8.

That the vendor shall hand over the vacant possession of the said property to the vendee at the time of execution of final Transfer Deed.

9.

That in case of breach of any clause by the VENDOR aforesaid or tail to get the plot transferred in the name of Buyer/Vendee on his nominee, the VENDEE shall have the right to get the Transfer Deed/ Sale Deed registered through Court of Law after depositing the balance amount of this Agreement to sell.

10.

That if the vendor does not execute the Transfer Deed within the given time then he/she has to return the advance money to the Vendee along with interest @2% per month.”

“Agreement for cancellation of Sale Agreement dated 08-02-2016

Sale agreement dated 08-02-2016 for sale of property No C-3, Site-C Surajpur was signed between MR J.P.S CHADHA DIRECTOR MANSFIELD CABLE CO LTD, C-23 SITE-C SURAJPUR Greater NOIDA of the One Part, hereinafter called the SELLER/VENDOR.

AND

MR. ARUN DHIR Partner M/s Arun Enterprises, B 48, Site 4 Sahibabad of the other Part, hereinafter called the PURCHASER/VENDEE.

is hereby cancelled on dated 25-03-2017 as the vendor has failed to transfer the above referred property in the name of the Purchaser within the stipulated period as per the above referred sale agreement. As per the above referred sale agreement the Seller shall pay an Interest of 2% per month on the payment paid by the purchaser.

Sh. J.P. Chadha, Director, Mansfield Cable Co Ltd, has agreed to return the payment along with interest of 2% Per Month as per the following details:

S.No.	Date	Amount
1	15-04-2017	Rs 37,94,292.00
2	15-05-2017	Rs 78,11,506.00
3	15-06-2017	Rs 1,1728317.00

In case of any delay in the payment as per above mentioned dates, interest of 2% per month shall be added and in case of early payment the interest part shall be reduced accordingly.”

“The Petitioner had transferred various amounts in the account of corporate debtor against which corporate debtor had to transfer its land & building situated at SurajPur, Greater Noida, owned by the Corporate Debtor.

The corporate debtor also agreed that the amount transferred by the Petitioner would be returned along with an interest of 2% per month if the land was not transferred in the name of Petitioner.”

“45.1.

As noticed, in Pioneer Urban, a suggestion made on behalf of the respondents with reference to the decision in Krishi Utapadan Mandi Samiti, that when the words “means and includes” are used in a definition, they are to be given a wider meaning and are not exhaustive or restricted to the items contained therein, was not accepted by this Court; and the statement of law in Krishi Utapadan Mandi Samiti was held to be not that of good law for it ignored the earlier precedents of larger and coordinate Benches and was also out of sync with the later decisions on the same point. However, the other extreme of interpretation, as canvassed by the petitioners, that a financial debt could only be a debt which is disbursed against the consideration for the time value of money, and such requirement pervades all clauses (a) to (i), was also not accepted as a matter of statutory interpretation by this Court while observing that the expression “and includes” speaks of subject-matters which may not necessarily be reflected in the main part of the definition. Thus, it is evident that this Court did not accept either of the extremities suggested by the parties in Pioneer Urban for interpretation and implication of the expressions “means and includes” in a definition clause of the statute. Significantly, in Pioneer Urban, none of the extremities had any bearing on the conclusion because, eventually, the amendment in question was held to be only clarificatory in nature; and this Court held that the Explanation added to Section 5(8)(f) of the Code by the Amendment Act did not enlarge the scope of the original section.”

“11.

The question as noticed above, which need to be answered, is the nature of transaction, which culminated into Agreement dated 27.11.1990. Whether the Agreement dated 27.11.1990 is an Agreement for sale of the assets, belonging to GPPL on which Financial Institutions have pari pasu charge, which were taken possession by GSFC, in the year 1986 or the transaction can be treated to be a loan transaction extended by Financial Institutions in favour of the Corporate Debtor, as contended by learned Counsel for the Respondent? The ‘financial debt’ as defined in Section 5, sub-section (8) of the IBC, provides 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 raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;

(d)

the amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital lease under the Indian Accounting Standards or such other accounting standards as may be prescribed;

(e)

receivables sold or discounted other than any receivables sold on non-recourse basis;

(f)

any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing;

Explanation. -For the purposes of this sub-clause, -

(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);]

(g)

any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price and for calculating the value of any derivative transaction, only the market value of such transaction shall be taken into account;

(h)

any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution;

(i)

the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clause (a) to (h) of this clause;”

12.

It is well settled position of law that ‘financial debt’ means a debt disbursed against consideration for time value and money and includes the transactions as enumerated in sub-clause (8) of Section 5. The ‘financial debt’, came for consideration before the Hon’ble Supreme Court in large number of cases. We may first notice judgment of the Hon’ble Supreme Court in Pioneer Urban and Infrastructure Ltd. vs. Union of India and ors. –2019) 8 SCC 416. The Hon’ble Supreme Court in the above judgment held that definition of ‘financial debt’ goes on to state that a “debt” must be “disbursed” against the consideration of time value of money. It was further held that the expression “disbursed” refers to money, which has been paid against the consideration for the “time value of money”. In paragraphs 70 and 71 of the judgment, the Hon’ble Supreme Court laid down following:

“70.

The definition of “financial debt” in Section 5(8) then goes on to state that a “debt” must be “disbursed” against the consideration for time value of money. “Disbursement” is defined in Black's Law Dictionary (10th Edn.) to mean:

“1.

The act of paying out money, commonly from a fund or in settlement of a debt or account payable. 2. The money so paid; an amount of money given for a particular purpose.”

71.

In the present context, it is clear that the expression “disburse” would refer to the payment of instalments by the allottee to the real estate developer for the particular purpose of funding the real estate project in which the allottee is to be allotted a flat/apartment. The expression “disbursed” refers to money which has been paid against consideration for the “time value of money”. In short, the “disbursal” must be money and must be against consideration for the “time value of money”, meaning thereby, the fact that such money is now no longer with the lender, but is with the borrower, who then utilises the money. Thus far, it is clear that an allottee “disburses” money in the form of advance payments made towards construction of the real estate project. We were shown the Dictionary of Banking Terms (2nd Edn.) by Thomas P. Fitch in which “time value for money” was defined thus:

“present value: today's value of a payment or a stream of payment amount due and payable at some specified future date, discounted by a compound interest rate of discount rate. Also called the time value of money. Today's value of a stream of cash flows is worth less than the sum of the cash flows to be received or saved over time. Present value accounting is widely used in discounted cash flow analysis.” (emphasis supplied) That this is against consideration for the time value of money is also clear as the money that is “disbursed” is no longer with the allottee, but, as has just been stated, is with the real estate developer who is legally obliged to give money's equivalent back to the allottee, having used it in the construction of the project, and being at a discounted value so far as the allottee is concerned (in the sense of the allottee having to pay less by way of instalments than he would if he were to pay for the ultimate price of the flat/apartment).”

13.

In subsequent judgment of the Hon’ble Supreme Court in Global Credit Capital Limited and Anr. vs. Sach Marketing Pvt. Ltd. & Anr. – (2024) SCC OnLine SC 649, the Hon’ble Supreme Court has again dealt with the definition of ‘financial debt’ as occurring in Section 5, sub-section (8) of IBC and after noticing the judgments, the law was summarized in paragraph 20, which is as follows:

“SUMMARY

20.

Subject to what is held above, we summarize our legal conclusions:

a. There cannot be a debt within the meaning of subsection (11) of section 5 of the IB Code unless there is a claim within the meaning of sub-section (6) of section 5 of thereof;

b. The test to determine whether a debt is a financial debt within the meaning of sub-section (8) of section 5 is the existence of a debt along with interest, if any, which is disbursed against the consideration for the time value of money. The cases covered by categories (a) to (i) of sub-section (8) must satisfy the said test laid down by the earlier part of sub-section (8) of section 5;

c. While deciding the issue of whether a debt is a financial debt or an operational debt arising out of a transaction covered by an agreement or arrangement in writing, it is necessary to ascertain what is the real nature of the transaction reflected in the writing; and

d. Where one party owes a debt to another and when the creditor is claiming under a written agreement/arrangement providing for rendering ‘service’, the debt is an operational debt only if the claim subject matter of the debt has some connection or correlation with the ‘service’ subject matter of the transaction.”

14.

The Hon’ble Supreme Court in the above case has clearly laid down that for deciding as to whether the debt is a ‘financial debt’ the real nature of the transaction reflected in the writing has to be dealt with. It needs no emphasis that real nature of transaction need to be found out by the Court, when the issue is raised before the Court that transaction is not a ‘financial debt’.”

“27.3.

While deciding the issue of whether a debt is a financial debt or an operational debt arising out of a transaction covered by an agreement or arrangement in writing, it is necessary to ascertain what is the real nature of the transaction reflected in the writing; and”

“3.

That instead of raising its legitimate demand from the suspended director of the Corporate Debtor, the Respondent has unnecessarily dragged the corporate debtor into dispute. It is now pertinent to note herein that the demand drafts amounting to Rs. 1.5 crore which has been deposited with this Hon'ble Tribunal have also been issued from the personal account of Mr. Jatinder Pal Singh Chadha.”