The National Company Law Appellate Tribunal, Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) and Mr. Barun Mitra (Technical Member), in an appeal filed in the case of Ashoka Hi-Tech Builders Pvt. Ltd. v Sanjay Kundra &Anr passed an order on 18th Jan, 2023, ruling that a Landowner shall not be considered as a Financial Creditor under Section 5(8) of IBC and therefore cannot become a part of Committee of Creditors.
A Development agreement for the 11.40 acres of land owned by Ashoka Hi-Tech Builders Pvt. Ltd (Landowner/Appellant) was executed on 1st April, 2009 according to which corporate debtor (contracting party) was to carry on the construction and the out of total saleable construction, 32% will be of the Appellant and the remaining 68% shall be owned by the Corporate Debtor.
As the Corporate Insolvency Resolution Process (“CIRP”) was initiated against the corporate debtor, the appellant filed its claim as a financial creditor which was admitted by Resolution Professional. Later the home-buyers objected to the same in order to remove the Landowner from the Committee of Creditors. (“CoC”).
The Adjudicating Authority on an application filed by the Home-Buyers, removed the Appellant from the Committee of Creditors. While adjudication, it has taken into consideration the terms and conditions of the development agreement to come to a conclusion that Landowner was not a financial creditor due to the reason that no amount was disbursed for the time value of money.
Reliance has been made on “Namdeo Ramchandra Patil and Ors. Vs. Vishal Ghisulal Jain” which held that disbursal against the consideration for the time value of money forms as the basic element of a financial debt under Section 5(8) of IBC.
Further, as per the development agreement, Corporate Debtor and the Landowners were entitled to share the constructed area in the ratio of 68:32. Such a transaction, as held in the case of Anuj Jain, Interim Resolution Professional for Jaypee Infratech Limited vs. Axis Bank Ltd. &Ors, which is related to allotment of flats and commercial units in lieu of their entitlement as per the Development Agreement is not a Financial Debt within the meaning of Section 5(8)(f).
The principal bench held that the Adjudicating Authority has rightly referred to the Namdeo Judgement which fully covers the issues related to the financial debt and Landowner holding that the Appellant is not a financial creditor.
Moreover, as per Annexure 6 under the terms and conditions of the development agreement, it is clear that the appellant was a collaborator in the development agreement and not a financial creditor.
Therefore, it can be rightly said that there was no disbursement for the time value of money by the appellant within the meaning of Section 5(8) of the IBC and cannot be considered as Financial Creditor. Hence the order of the adjudicating authority is upheld and the appeal is dismissed.
Company Appeal (AT) (Insolvency) No. 46 of 2023; January 18, 2023.
Company Appeal (AT) Ins. No. 821 and 930 of 2021; September 19, 2022.
(2020) 8 SCC 401.