Meehika Buildcon Llp vs City Star Infrastructure Limited

1

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI Comp. App. (AT) (Ins) No. 47 of 2024 IN THE MATTER OF: Meehika Buildcon LLP ...Appellants

Versus

City Star Infrastructure Ltd. ...Respondent Present: For Appellants : Mr. Sujoy Datta, NPS Chawla, Vibhor Kapoor, Jasjeet Singh, Adv. For Respondent : Mr. Swarnendu Chatterjee, Niloy Sengupta, Sujit Banerjee, Deepak Shi Garg, Mugdha Malik, Adv.

JUDGMENT

Per: Justice Rakesh Kumar Jain:

This appeal is directed against the order dated 20.10.2023,

passed by the Adjudicating Authority (National Company Law

Tribunal, Kolkata Bench) in CP (IB) No. 1239 of 2020 by which an

application filed under Section 7 of the Insolvency and Bankruptcy

Code, 2016 (in short 'Code') by the Appellant against the

Respondent for the resolution of an amount of Rs. 2,77,98,630/-,

has been dismissed.

2. The brief facts of this case are that a term sheet was executed

by the parties on 05.05.2024. Since, the term sheet is bedrock of

the litigation between the parties, therefore, the same is

reproduced as under:-

2 3 4 5 6 7 8 9 10 11

3. The case set up by the Appellant is that a sum of Rs. 2.77 Cr.

was disbursed to the Respondent in terms of the term sheet and

since the term sheet has been cancelled, therefore, the Appellant

is entitled to the refund of the entire amount of advance alongwith

interest @ 18%. It is submitted that the amount in question given

to the Respondent was loan, therefore, the Tribunal has committed

a patent error in treating the said amount as investment on the

part of the Appellant while dismissing the application. In this

regard, he has drawn our attention to the finding recorded by the

Tribunal which read as under:-

"44. We refer to clause 6.96 of the Term Sheet headed as 'Allocation ' which is reproduced hereinbelow:

"The First Party shall be allotted 30% of the total sanction area and the Second Party shall be allotted 70% of the total sanction area. The Parties shall mutually demarcate their allotted areas after obtaining the plan sanctioned. Each party shall be entitled to deal with their respective allocations"

45. Having considered the respective arguments of both the parties, we seek to refer to the judgment passed by the Hon'ble NCLAT in Mukesh N. Desai Shree Darshan Society v. Piyush Patel and Others7 in which it was held: -

"16. The MoU entered into is an Agreement of reciprocal rights and obligations. We are of the earnest view that both parties being 'Joint Development Partners' who entered into a consortium of sorts for developing the subject land and for any breach of terms of the contract, Section 7 Application filed under the Code would not be maintainable as the amount cannot be construed as 'Financial Debt' as there is no sum(s) i.e., owed, assigned 12

or transferred to in compliance of the provisions of Section 5(8) of the Code. To reiterate, being a profit share owner, who in the event of the success of the Project would receive the residual gain, the amount invested in the land cannot be said to be a 'Financial Debt' as defined under Section 5(8) of the Code. Hence, the ratio of the Judgements relied upon by the Learned Counsel for the Appellant are not applicable to the facts of this case." (emphasis applied)

46. In view of the foregoing paragraphs being para 44 and 45 as mentioned above, we find that the money advanced by the Financial Creditor to the Corporate Debtor does not amount to financial debt as envisaged under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 as upon the successful completion of the obligations contained in the said Term Sheet, the same would lead to execution of a Joint Development Agreement. On this ground alone, we find that the present petition is not maintainable and hence C.P. (I.B.) No.1239/KB/2020 stands rejected. Needless to say, the Financial Creditor is free to pursue its remedies under any other law, and the dismissal of the present petition shall not stand in the way of such pursuit of remedies."

4. Counsel for the Appellant has relied upon a decision of this

Court in the case of SAJ Housing Pvt. Ltd. Vs. Ms. Priyanka

Chouhan, CA (AT) (Ins) No. 1093 of 2022 and the Hon'ble Supreme

Court in the case of Global Credit Capital Limited Vs. SACH

Marketing Pvt. Ltd. & Anr. Civil Appeal No. 1143 of 2022.

5. On the other hand, Counsel for the Respondent has

submitted that the transaction between the parties was not of the

advancement of loan but an investment. It is alleged that at the

time when the money was advanced, mentioned in the term sheet, 13

no rate of interest was fixed nor any time lines was ascertained for

the service of interest, therefore, it does not fall within the

definition of financial debt as defined under Section 5(8) of the

Code. It is also submitted that Respondent was having the land

but there were bragadars sitting over it who had barga rights in

terms of West Bengal Land Reforms Act, 1955. In simple language,

bargadars are called the sharecropper. It is submitted that as far

back as on 08.11.2016, the Respondent even took the legal advice

from the Solicitor in this regard and it was opined by the Solicitor

that as per Section 15(2) of the Act the transfer of barga right by

the bargadars is prohibited. It is further submitted that the

Tribunal has rightly dismissed the application while referring to

clause 6.9 of the term sheet as per which, after the clearance of

the title of the Respondent, 30% land was to go to the Respondent

and 70% was to go to the Appellant, therefore, it is submitted that

it was not a case of advancement of the loan but it was a case of

investment in the land as an investor. It is further submitted that

none of the judgments relied upon by the Appellant are appliable

to the facts of this case. It is further submitted that the sum and

substance of the term sheet is that the Respondent had the land

but having no clear title over it whereas the Appellant had the

money for the purpose of investment with the Respondent to clear 14

the title of the land by evicting the bargadars. At the time when the

money was paid/disbursed, there was no question of any interest

to be paid by the Respondent rather it was decided that in case the

Respondent fail to clear the title of its land then whatever money

has been invested by the Appellant shall be returned with 18%

interest which is not the terms and conditions of the advancement

of the money to bring it within the provisions of the financial debt.

6. We have heard Counsel for the parties and after perusal of

record, are of the considered opinion that the Appellant has not

advanced the money as loan rather the money has been given to

the Respondent for the purpose of clearing their title over the land

in question which was to be shared by both of them in the ratio of

30% / 70%. It is pertinent to mention that the Appellant has not

filed any financial statement on record in order to show that the

money which has been given as per term sheet has been shown as

a loan advanced to the Respondent.

7. In such circumstances, we do not find any reason to interfere

with the well-considered findings of the Tribunal whereby the

application filed by the Appellant has been rejected. In so far as

the judgments relied upon by the Appellant are concerned, there

are on different facts and are not applicable to the present case.

8. No other point has been raised.

15

9. In view thereof, we do not find any merit in the present appeal

and the same is hereby dismissed. No costs.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Indevar Pandey] Member (Technical)

New Delhi 09th September, 2024 Sheetal