Inter Corporate Deposit in a Joint Venture Cannot be Financial Debt under IBC: NCLAT
The NCLAT held that the inter-corporate deposit in a joint venture cannot be a financial debt under IBC.
inter Corporate Deposit – Corporate Deposit – Joint Venture – NCLAT – Financial Debt – ibc – TAXSCAN
inter Corporate Deposit – Corporate Deposit – Joint Venture – NCLAT – Financial Debt – ibc – TAXSCAN
The National Company Law Appellate Tribunal ('NCLAT'), has held that financial assistance given by one party to another in a Joint Venture Agreement ('JVA') by way of an Inter Corporate deposit cannot be Financial Debt under the Insolvency Bankruptcy Code (IBC), 2016.
Ansal Housing Limited, the appellant filed the appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) by the Appellant arises out of the Order dated (“Impugned Order”) passed by the Adjudicating Authority (National Company Law Tribunal, New Delhi) in CP (IB) No.1043(PB)/2018.
The Adjudicating Authority has dismissed the Section 7 application filed by Ansal Housing Limited Financial Creditor/present Appellant seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor M/s Samyak Projects Private Limited-the present Respondent. Aggrieved by the impugned order, the present appeal has been filed by Ansal Housing Limited, the Financial Creditor.
It was stated that the Appellant and the Respondent were jointly developing four real estate projects for which separate Joint Venture Agreements (“JVA”) were executed between them for each such project. In terms of the collaboration envisaged under the JVA, the Appellant was to be the Developer of the real estate project while the Respondent was to provide the land for the project and they were to enjoy a sharing ratio of 67.5% and 32.5% respectively from the sales receivable.
Towards the purchase of land for one of these real estate projects- Ansal Hub 83-II, the Respondent had sought financial assistance of Rs.25 crore from the Appellant. The Appellant extended an inter-corporate loan of Rs.25 crore which transaction has been documented in an Inter-Corporate Deposit Agreement (“ICD”).
In terms of the ICD, the loan facility carried an interest of 24% p.a., compounded monthly and returnable within 24 months. The ICD also provided that the Appellant would have the right to recover the liability of Rs.25 crore from the sales receivable of the Respondent in case the latter failed to liquidate the debt.
It was submitted that as of 31.07.2018 an amount of Rs. 35,64,03,784/- had become due and payable, the default having occurred on 15.05.2015. The Respondent having failed to make the payments towards its liability qua the ICD, the Appellant filed a Section 7 application against the Respondent. The Adjudicating Authority however dismissed the application on the ground that the Appellant was not a Financial Creditor and that the liability of the Respondent qua the ICD was not a financial debt. Aggrieved by the dismissal of their Section 7 application, the present appeal has been preferred.
The two-member New Delhi Bench, comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) observed that the Appellant is not a Financial Creditor in terms of Section 5(7) of IBC and the application under Section 7 at the instance of the Appellant was not maintainable and hence the same has been rightly rejected by the Adjudicating Authority.
The authority dismissed the appeal.
To Read the full text of the Order CLICK HERE
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