M/S Realpro Realty Solutions Private ... vs Sanskar Projects And Housing Limited

[Arising out of order dated 14.02.2023 passed by the Adjudicating Authority, National Company Law Tribunal, Principal Bench, New Delhi Bench in CP(IB) No.44(PB)/2022]

IN THE MATTER OF:

Realpro Realty solutions Private Limited 5th Floor, Prius Platinum, Wing A D-3, District Centre, Saket, New Delhi - 110 017 ...Appellant

Versus

Sanskar Projects and Housing Limited D-1, 1st Floor, Shopping Centre -2, Vasant Vihar, New Delhi - 110 057 ...Respondent

Present:

Appellant: Mr. Avishkar Singhvi, Mr. Vivek Kr. Singh, Mr. Shreyas Edupuganti, Ms. Pratiksha Mishra, Advocates

For Respondent: Sh. H.L. Tiku, Sr. Advocate with Ms. Bharti Kochhar and Yashmeet Kaur, Advocates

JUDGMENT

[Per: Barun Mitra, Member (Technical)]

The present appeal filed under Section 61 of Insolvency and Bankruptcy

Code, 2016 ("IBC" in short) by the Appellant arises out of the Order dated

14.02.2023 (hereinafter referred to as "Impugned Order") passed by the

Adjudicating Authority (National Company Law Tribunal, Principal Bench,

New Delhi) in CP (IB) No.44(PB)/2022. By the impugned order, the

Adjudicating Authority has dismissed the Section 7 application filed by M/s Company Appeal (AT) (Ins.) No. 374 of 2023 1 Realpro Realty Solutions Pvt. Ltd.- the Appellant seeking initiation of

Corporate Insolvency Resolution Process ("CIRP" in short) against the

Corporate Debtor-M/s Sanskar Projects and Housing Ltd.-present

Respondent. Aggrieved by the impugned order, the present appeal has been

filed by the Appellant.

2. The Learned Counsel for the Appellant submitted that a "profit-sharing

loan agreement" (hereinafter referred to as "Agreement") was entered between

the Appellant and the Respondent on 09.12.2020 by which the Appellant

disbursed a profit-sharing loan to the Respondent for the development of 2nd

floor and 3rd floor of a property bearing no. 107 in Block 172 in Jor Bagh, New

Delhi (hereinafter referred to as "subject property"). It was added that prior

to entering into the above Agreement, a tripartite MoU was signed on

20.11.2020 between Royal Insignia Premium Constructions (a sister concern

of the Corporate Debtor/Respondent) in its capacity as a Developer; Chetan

Prakash as the owner and the present Respondent as the buyer for transfer

of ownership rights of the plot of land from the owner to the Respondent on

which the subject property was to be developed.

3. Submitting that the Agreement provided that as consideration for the

profit-sharing loan disbursed by the Appellant, the profits from the project

was to be shared in the ratio of 25:75 between the Appellant and the

Respondent, it was contended that this clearly established the commercial

objective of the profit-sharing loan and time value of money. The Respondent

however defaulted in its obligation to pay the revenue share due to the

Appellant arising out of the sale proceeds of the said project following which

the Appellant filed an application against the Corporate Debtor/Respondent

Company Appeal (AT) (Ins.) No. 374 of 2023 2 under Section 7 of the IBC on 13.01.2022. It was emphatically asserted by

the Learned Counsel for the Appellant that the Adjudicating Authority wrongly

dismissed the Section 7 application on 14.02.2023 by returning an incorrect

finding that the Appellant is not a Financial Creditor qua the Respondent and

that the transaction was not a financial debt but a profit-based investment.

Aggrieved thereby, the present Appellant has come up in appeal assailing the

impugned order contending that the finding of the Adjudicating Authority is

not in consonance with the statutory provisions of the IBC.

4. The Learned Senior Counsel for the Respondent submitted rival

contentions and stated that the present case was an investment in the

development of subject property by the Appellant for the purpose of sharing

profit/loss in the ratio as mutually agreed under the Agreement. It was neither

a debt with interest which had been disbursed by the Appellant to the

Respondent. Nor was the disbursement made against consideration for time

value of money. It was strenuously contended that the amount paid by the

Appellant does not have the commercial effect of borrowing. It is also been

contended that the Appellant is not entitled to the monies claimed since they

did not pay their agreed share of investment and did not even share the

expenses incurred so far. It was also pointed out that the 2nd floor was not

even sold by the Respondent as on the date of filing of Section 7 application

and hence the question of sharing of profit/loss thereof had not arisen. It has

also been asserted that admission of a Section 7 application in the given

circumstances would militate against the object and purpose of the IBC as

the objective behind filing this application is debt recovery and not insolvency

resolution.

Company Appeal (AT) (Ins.) No. 374 of 2023 3

5. We have duly considered the arguments advanced by the Learned

Counsel for the parties and perused the records carefully.

6. The brief point that falls for our consideration is whether in the facts of

the present case, the profit-sharing loan given by the Appellant to the

Respondent can be construed as a financial debt in terms of IBC basis which

the Appellant could claim the status of a Financial Creditor for the purposes

of filing Section 7 application.

7. Before we proceed to answer the question as outlined above, we may go

through some of the relevant definition clauses which finds place in Section

3 and 5 under Part II Chapter I Preliminary of the IBC would be constructive:

3(11) "debt" means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt.

5(7) "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.

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 de-materialised 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;

Company Appeal (AT) (Ins.) No. 374 of 2023 4

(e) receivables sold or discounted other than any receivables sold on nonrecourse 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-clauses (a) to (h) of this clause.

8. We feel that at this stage it would also be useful to go through the

relevant terms of the Agreement entered between the Respondent (described

as the First Party) and the Appellant (described as the Second Party) as

extracted below: -

"WHEREAS, the First Party and Second Party has decided to make joint investment/ acquisition of Entire Second Floor and also the Exclusive ownership and usage rights of the Entire Terrace over and above the Entire Second Floor of the property bearing No. 107, in Block 172, situated at New Capital of Delhi, (commonly known

Company Appeal (AT) (Ins.) No. 374 of 2023 5 as 107, jor Bagh, New Delhi) (the "SAID PROPERTY"), upto the limits of sky, with right to construct, own and to have and to hold any areas/floors on the Third Floor and subsequent Terraces thereupon and thereabove, as and when permitted by the authorities concerned of the SAID PROPERTY bearing No. 107, in Block 172, situated at New Capital of Delhi, (commonly known as 107, Jor Bagh, New Delhi), for common objective to earn and share profits or gain on its use or subsequent sale in near future.

........Construction Cost, Statutory fees, Electricity and Water Charges, Property Tax, MCD Fees, maintenance, up keeping, Provident Fund, Employee State Insurance, labour license charges, Labour Cess, fees, insurance charges, etc or any other statutory taxes and duties levied by Central and/or State Government and/or local bodies during the execution of the work and all other incidental expenses etc in relation to Entire Second Floor and also the Exclusive ownership and usage rights of the Entire Terrace over and above the Entire Second Floor of the SAID PROPERTY and thereabove shall be incurred/shared by the First Party and Second Party in the agreed ratio of 75:25 respectively. Further cost of 15% of the working profit shall be borne by Second Party towards Administration expenses/ statutory Charges/fees and other indirect expenses.

AND WHEREAS in terms of mutual understandings, the First Party is entitled to receive sale consideration or advance from the intended customers in respect of above said property and on receipt of such consideration or advance, the First Party shall refund proportionate share to Second Party, within 7 days of receipt, along with profits computed thereon, provided the Second Party has in principal invested its respective share in full at the stage or if contribution short received in principal, then the proportionate to principal amount and proportionate profit shall be refunded to Second Party. Interest at the rate of 15% per annum will be paid in case of delay in payment beyond 7 days by First Party. NOW THIS AGREEMENT WITNESSETH and the Parties hereto agree, record and confirm as follows:

1. Understanding

(a) The Second Party is willing to provide to the First Party with certain funds (25% share) in the form of a profit sharing loan, such funds to be invested by the First Party according to this agreement.

(b) ....

(c) ....

(d) ....

Company Appeal (AT) (Ins.) No. 374 of 2023 6

(e) That in case any of the parties hereto infringes any of the terms and conditions of this Agreement, then the other party shall be entitled to get this transaction enforced through the Court of law by Specific Performance of the Contract, at the cost and expenses of the defaulting party

2. Capital Contribution & Share of Profit.

(a) It is mutually agreed that the capital contribution for the SAID PROPERTY would be in the ratio of 75:25 (Seventy Five: Twenty Five) percent between Sanskar Projects and Housing Limited and Realpro Realty Solutions Private Limited.

(b) Both the parties shall contribute to the construction and development of the work in the same ratio as aforesaid.

(c) All profits from the work/project shall be shared in the ratio of 75:25 (Seventy Five: Twenty Five) between Sanskar Projects and Housing Limited and Realpro Realty Solutions Private Limited, which is also the percentages of ownership of each of the party in this Agreement. Subject to the aforesaid, at all times, distribution of profit shall be subject to cost of 15% of the working profit towards Administration expenses/ statutory Charges/fees and other indirect expenses to be borne by Second Party.

(d) Second Party is obliged to pay capital contribution in respect to cost incurred within 7 days of intimation by First Party. Interest at the rate of 15% per annum will be charged in case of delay in payment beyond 7 days by Second Party. Similarly, First Party is obliged to pay/refund capital contributed by Second Party with proportionate share in profit within 7 days of receipt of any sale consideration or advance from any intended buyer/customer. Interest at the rate of 15% is payable by First Party to Second Party in case of delay in payment beyond 7 days.

8. Miscellaneous.

(h) No partnership agency: That nothing in this Agreement shall be construed as creating a partnership or joint venture between the Parties. Neither party will be deemed to be an agent of the other party as a result of any act under or related to this Agreement, and will not in any way pledge the other Party's credit or incur any obligation on behalf of the other Party.

Company Appeal (AT) (Ins.) No. 374 of 2023 7

9. Coming to the impugned order, we notice that the Adjudicating

Authority has taken due cognizance of the relevant provisions of the IBC as

well as the salient terms of the Agreement dated 09.12.2020 while recording

its findings. The relevant findings contained in the impugned order are as

extracted below:

"23. The scheme of IBC is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the insolvency resolution process begins. "Default" as defined in Section 3 (12) means non payment of a debt once it becomes due and payable, which includes non payment of even part thereof or an installment amount. It was held in the case of Swiss Ribbons Private Limited and Anr. Versus Union of India and Ors. (2019) 4 SCC 17:

"23. A perusal of the definition of "financial creditor" and "financial debt" makes it clear that a financial debt is a debt together with interest, if any, which is disbursed against the consideration for time value of money. It may further be money that is borrowed or raised in any of the manners prescribed in Section 5(8) or otherwise, as Section 5(8) is an inclusive definition. On the other hand, an "operational debt" would include a claim in respect of the provision of goods or services, including employment, or a debt in respect of payment of dues arising under any law and payable to the Government or any local authority.

24. A financial creditor may trigger the Code either by itself or jointly with other financial creditors or such persons as may be notified by the Central Government when a "default" occurs. The Explanation to Section 7(1) also makes it clear that the Code may be triggered by such persons in respect of a default made to any other financial creditor of the corporate debtor, making it clear that once triggered, the resolution process under the Code Company Appeal (AT) (Ins.) No. 374 of 2023 8 is a collective proceeding in rem which seeks, in the first instance, to rehabilitate the corporate debtor. Under Section 7(4), the adjudicating authority shall, within the prescribed period, ascertain the existence of a default on the basis of evidence furnished by the financial creditor; and under Section 7(5), the adjudicating authority has to be satisfied that a default has occurred, when it may, by order, admit the application, or dismiss the application if such default has not occurred. On the other hand, under Sections 8 and 9, an operational creditor may, on the occurrence of a default, deliver a demand notice which must then be replied to within the specified period. What is important is that at this stage, if an application is filed before the adjudicating authority for initiating the corporate insolvency resolution process, the corporate debtor can prove that the debt is disputed. When the debt is so disputed, such application would be rejected."

24. A perusal of the agreement dated 09.12.2020 reveals that the

Applicant had no direct engagement in the functioning of the

Respondent. However, the nature of agreement is in the form of an

investment in the ratio of 75% & 25% and sharing of profit / losses

in the same proportion after completion of the project. They had to

invest Rs. 35,00,00,000/- (Rupees Thirty Five Crore Only) together

in the proportion of their profit sharing entitlement. It was the first

party i.e. the Respondent who had absolute right and authority to

construct and develop / sell etc. the property to the purchasers in

whole or in part. As per the agreement, the Applicant besides

investing 25% i.e. Rs. 8,75,00,000/- (Rupees Eight Crore and

Seventy Five Lakh Only) towards purchase of rights from the owner

had to incur expenses in the construction, taxes etc. in the agreed

Company Appeal (AT) (Ins.) No. 374 of 2023 9 ratio of 75:25 respectively. Further cost of 15% of the working profit

was to be borne by the Applicant towards the administration

expenses / statutory charges / fee and other indirect expenses.

25. From the plain reading of the agreement, it is clear that it was

an agreement for joint investment entered into by the Applicant with

the Respondent with an understanding to share the profit / losses

in the same proportion together with sharing other charges.

30. It is true that the said investment was made by the Applicant

keeping a commercial objective in its mind specifically considering

the prime location and commercial value of the property and with

the commercial object to earn profit in the sale proceeds in exchange

of the investment made by it towards development, reconstruction

and further sale. The agreement also provides for sharing of losses

in the same ratio. The said investment is no term can be said to be

a loan to the Respondent against consideration for time value of

money. In the case of Mack Soft Tech Pvt Ltd (supra), the amount

was disbursed by the financial creditor for construction and

development of a real estate project. It was held that this amount

would fall under the definition of time value of money but in the

present case, it was an investment made by the Applicant on profit

/ loss sharing basis. There is no default as there is no question of

non-payment of debt in whole or in part. As per the agreement,

there was sharing of both profit or loss after completion of the

project. In the case of Anuj Jain (supra)¸ the financial creditor from

the very beginning was involved in assessing the viability of the

corporate debtor. There was process of restructuring of the loan and

Company Appeal (AT) (Ins.) No. 374 of 2023 10 reorganization of corporate debtors but in the present case, the

investment was made by the Applicant for profit and loss sharing

basis. In the case of Orator Marketing Pvt. Ltd. (supra), interest

free loan was given but the present case relates to investment made

by the Applicant in the project on profit / loss sharing basis and

therefore, the said investment does not fall under the definition of

"financial debt".

34. Thus, in our clear opinion, the Applicant cannot claim status

and benefits as financial creditor as defined under section 5(7) of

IBC. No cause of action has accrued in favour of the Applicant to

initiate this action as the Applicant neither falls in the category of

the "financial creditor" as defined under Section 5 (7) of IBC nor the

alleged transaction can be said to be covered within the ambit of

"financial debt" as defined under Section 5 (8) of IBC. The

application therefore is not maintainable and is required to be

dismissed."

10. We find that the Adjudicating Authority has returned the finding that

the Section 7 application filed by the Appellant was not maintainable since

the Appellant neither fell in the category of a "financial creditor" nor the

alleged transaction fell within the ambit of "financial debt" in terms of the

statutory provisions enshrined in the IBC. The above findings of the

Adjudicating Authority have been predicated on the terms of Agreement

entered between the Appellant and the Respondent. It has been held by the

Adjudicating Authority that both parties being involved in the joint

development of the subject property for which purpose they have entered into

a collaborative agreement and hence the amount paid by the Appellant in Company Appeal (AT) (Ins.) No. 374 of 2023 11 terms of the financial arrangements outlined therein, is an investment for

making profits which cannot be treated as a financial debt qua the

Respondent.

11. It is however the case of the Appellant that the conditions laid down in

Section 5(8) of the IBC to be accorded the status of a Financial Creditor stood

fulfilled in respect of the Appellant in terms of the stipulations contained in

the Agreement. It has been submitted that in terms of the Agreement, the

Appellant was to provide profit sharing loan so as to fund the development of

the subject property. Elaborating further, it was stated that clauses 1(a) and

2(c) of the Agreement provided that profit-sharing loan was to be disbursed

by the Appellant with the commercial objective of earning 25% profit which

amounted to disbursal with consideration for the time value of money.

Further Clause 2(d) of the Agreement made a provision of interest payment at

the rate of 15% per annum in case of delay in making payment of capital

contribution or delay in receipt of share of profit apropos sale consideration

received from buyer/customer of the subject property. It was emphatically

asserted that Clause 8(h) of the Agreement clearly provided that nothing in

the Agreement shall be construed as creating a partnership or joint venture

between the parties and that neither party will be deemed to an agent of the

other party as a result of any act under or related to this Agreement.

12. It is also asserted that Section 5(8) of the IBC which defines a financial

debt is an inclusive definition. Not only does it include a debt which is

disbursed even if it is not interest bearing, it also does not bar any disbursal

made under a profit-sharing loan agreement from being treated as a financial

debt. The Appellant has further submitted that the Adjudicating Authority

Company Appeal (AT) (Ins.) No. 374 of 2023 12 has failed to apply the ratio of the decision of this Tribunal in the matter of

Mack Soft Tech Private Limited v. Quinn Logistics India Limited in CA

(AT) (Ins.) No. 175 of 2017 ("Mack Tech" in short) where it has been held

that amount disbursed towards development of a real estate project amounts

to a financial debt. The Learned Counsel for the Appellant therefore argued

that the Adjudicating Authority has taken a skewed view that since the

Agreement involves sharing of profit, the same cannot constitute a financial

debt.

13. The Learned Senior Counsel for the Respondent has rebutted the

contention of the Appellant by stating that the Appellant have placed

misplaced emphasis on the words "profit-sharing loan" appearing in the

Agreement to show that they had disbursed a loan. It has been submitted

that the Agreement was for profit/loss sharing in the ratio of 25% for the

Appellant subject to the Appellant having invested 25% for development of the

subject property. Thus, it has been asserted that the entire transaction was

purely for investment in the project on profit/loss sharing basis and was not

in the nature of disbursal of loan and did not have the commercial effect of

borrowing. The present is a case of joint investment for purchasing second

floor and terrace floor of the subject property and then either selling it as it is

or after reconstructing. It was also contended that the Agreement has to be

read as a whole and if so done it becomes amply clear that disbursal of loan

was neither the intent of the Agreement nor the intent of the parties executing

the Agreement. The Agreement was neither for borrowing money from the

Appellant nor was any loan disbursed.

Company Appeal (AT) (Ins.) No. 374 of 2023 13

14. Further it was asserted by the Appellant that the ground cited by the

Adjudicating Authority that the Appellant cannot claim the status of a

Financial Creditor since full disbursement of the entire loan amount by the

Appellant in terms of the Agreement had not taken place is erroneous and

lacks basis. Submission was pressed that subsequent to the passing of the

impugned order, the Respondent deposited a sum of Rs.2.26 crore into the

account of the Appellant which amounts to implicit admission of default on

the part of the Respondent. This amounts to admission of debt and default by

the Respondent qua the Appellant. This has been refuted by the Respondent

and explanation proffered that this payment was done not towards debt

repayment but towards full and final settlement of the entire account between

the two parties upon actual determination of expenses incurred jointly and

profits earned in terms of the provisions of the Agreement executed between

themselves.

15. To our minds, a plain understanding of a joint venture is a combination

of two or more parties/entities that seeks the development of any enterprise

or project for profit and entails sharing the risks associated with its

development. Applying the above to the facts of the present case, from a

perusal of the terms and conditions of the Agreement, when read in a

composite and holistic manner, it can well be said that the Appellant and

Respondent had entered into a particular business arrangement of

accomplishing development of the subject property in which they had agreed

to pool their resources proportionately in an agreed upon ratio of 25:75 and

in the process share the profits, losses and costs associated with it. We find

that construction cost, statutory fees, provident fund, employees state

insurance etc were to be incurred and shared jointly between the two parties

Company Appeal (AT) (Ins.) No. 374 of 2023 14 and that 15% of the working profit was to be borne by the Appellant towards

administrative expenses/statutory charges/fees and other indirect expenses

which show that the investment was in the nature of joint venture

partnership. There are unmistakable signs of reciprocal rights and obligations

contained therein besides evidence of common participation as well as sharing

of profits and losses in the construction and development of the subject

property. This spirit of being profit-sharing partners is well engrained in the

Agreement and therefore we are of the considered opinion that the

Adjudicating Authority has committed no error in holding that the Appellant

by virtue of the funds invested by them in terms of the Agreement cannot

claim the status and benefits of a Financial Creditor as defined under Section

5(7) of the IBC. On the applicability of the ratio in the Mach Soft case which

has been relied upon by the Appellant, we notice that the facts therein are

clearly distinguishable in that in the Mach Soft matter, the financial creditor

had acquired the majority shareholding of the Corporate Debtor and in that

context the disbursement was held to be against the consideration for the

time value of money. Thus, this judgment cannot come to the aid of the

Appellant.

16. Undisputedly both parties being partners in developing the subject

property together, hence any sum provided by the Appellant tantamount to

financing the operations of the joint venture and not a disbursal of loan for

the purposes of exclusive utilization by the Respondent for his own

requirement. When shared liability for profit is so clearly manifested in the

Agreement, it stares in our eyes that both parties are development partners

and co-sharers in the development of the subject property. The terms of the

Agreement laid the foundations of a legal and binding relationship with

Company Appeal (AT) (Ins.) No. 374 of 2023 15 mutual financial obligations towards each other. We have no hesitation in

coming to the conclusion that revenue sharing concept is deeply embedded in

the Agreement and plays a determinant role in the transactions entered into

by both the parties in respect of both the division of costs incurred in the

development of the subject property and sharing of profit/loss generated

therefrom.

17. In the matter of Anuj Jain, Interim Resolution Professional for

Jaypee Infratech Ltd. v. Axis Bank Limited & Ors. (2020) 8 SCC 401, the

Hon'ble Supreme Court has held that the essential condition of financial debt

is disbursement against the consideration for time value of money. Further in

the judgment of Hon'ble Supreme Court in Orator Marketing (P) Ltd. v.

Samtex Desinz (P) Ltd. (2023) 3 SCC 753, it has been clearly held that

financial debt also includes an interest free loan. It is therefore settled law

that for any debt to be treated as financial debt, the pre-requisite is disbursal

of money to the borrower for utilization by the borrower and that the disbursal

must be against consideration for time value of money even if it is not interest

bearing. That being the case, there is no infirmity on the part of the

Adjudicating Authority to apply the ratio of the above two judgments to the

facts of the present case.

18. Clearly therefore, the present transaction is in the nature of investment

for profit and not disbursement for time value of money and hence does not

fall within the canvas of financial debt as defined under Section 5(8) of the

IBC. The essential elements of financial debt in the context of IBC consists of

disbursal accompanied by consideration for time value of money. The terms

and conditions of the Agreement between the Appellant and the Respondent Company Appeal (AT) (Ins.) No. 374 of 2023 16 makes it clear that the Appellant was a collaborator and not a financial

creditor. There was no disbursement for time value of money by the Appellant

within meaning of Section 5(8) of IBC. The Adjudicating Authority has

correctly adverted to the real nature of the transaction between the parties to

hold that the same cannot become the basis of filing a Section 7 application.

19. Given this backdrop, we would also like to add that for any alleged

breach of terms of contract, Section 7 application is not maintainable

particularly since the amount claimed in the present facts of the case cannot

be construed as a financial debt as defined under Section 5(8) of the IBC. We

see no necessity either to enter into any question of breach of agreement as

any such enquiry falls beyond the remit and domain of the

Adjudicatory/Appellate forum keeping in view the summary nature of

proceedings contemplated under IBC. The Appellant can always take recourse

in law including suit for specific performance of contract as provided for in

Clause 6 of the Agreement which is to the effect: "That in case any of the

parties hereto infringes any of the terms and conditions of this Agreement, then

the other party shall be entitled to get this transaction enforced through the

Court of law by Specific Performance of the Contract, at the cost and expenses

of the defaulting party."

20. We concur in the findings of the Adjudicating Authority that the

Appellant is not a Financial Creditor in terms of Section 5(7) of IBC and that

there was no financial debt in terms of Section 5(8) of IBC and hence the

application under Section 7 of the IBC could not be entertained. We see no

error in the impugned order. Hence the appeal fails and is dismissed

accordingly. We, however, are of the view that the Appellant will have the

Company Appeal (AT) (Ins.) No. 374 of 2023 17 liberty to exhaust other remedies available in law before any other appropriate

forum and raise all pleas as permissible in law to protect their interests. No

order as to costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

[Arun Baroka] Member (Technical)

Place: New Delhi Date: 13.12.2023

PKM

Company Appeal (AT) (Ins.) No. 374 of 2023 18