Amount deposited with corporate debtor under investment scheme would come under definition of ‘financial debt’

Case Details: Mohanlal Dhakad v. BNG Global India Ltd. - [2021] 131 taxmann.com 44 (NCLAT- New Delhi)

Judiciary and Counsel Details

• • Venugopal M., Judicial Member and Kanthi Narahari, Technical Member
  • Ms. Ranjana Roy Gawai and Avinash Bhati, Advs. for the Appellant.

Facts of the Case

The Respondent/corporate debtor had accepted certain amounts from appellants/financial creditors under two investment schemes. Under investment plan, the corporate debtor had assured financial creditors that on the maturity of a particular scheme, financial creditors would either be allotted plots of land or be paid multi-fold returns on their investment.

However, on maturity, the corporate debtor failed to allot plots of land in favour of financial creditors and also failed to pay the amount payable on maturity along with the assured return.

Financial creditors, on the other hand, filed an application under section 7 for initiation of CIRP but the same was rejected by NCLT holding that amount which they had deposited with corporate debtor did not come within the purview of the definition of ‘financial debt’.

NCLAT Held

The essence of any debt to be mentioned as ‘financial debt’ is ‘time value of money, as borrowing money is for monetary transaction. Since ‘corporate debtor’ under ‘Investment Plan’ had assured to provide appellants/Investors interest on their investment sum along with investment amount, for ‘time value of money and it failed in its commitment to offer allotment/possession of ‘Plot of Land’ as promised by it or repay sums collected by it along with interest on the maturity of schemes, etc.,.

As a result, the ‘appellant’s position was that of a ‘financial creditor’ as per section 5(7) read with section 5(8) there being default in payment of accepted amounts by ‘respondent’/’corporate debtor’ and, therefore, CIRP application filed against the corporate debtor was to be admitted.

Case Review

• • Mohan Lal Dhakad v. BNG Global India Ltd. [2021] 131 taxmann.com 43 (NCLT – NEW Delhi) (Para 35) reversed

List of Cases Referred to

• • Innoventive Industries Ltd. v. ICICI Bank Ltd. [2017] 84 taxmann.com 320/143 SCL 625 (SC) (para 13)
  • Nikhil Mehta & Sons v. AMR Infrastructure Ltd. [2017] 84 taxmann.com 163/143 SCL 278 (NCL – AT) (para 14)
  • Ms. Anju Agarwal v. Bombay Stock Exchange [Company Appeal (AT) (Insolvency) No. 734 of 2018, dated 23-4-2019] (para 15)
  • Bohar Singh Dhillon v. Rohit Sehgal [2019] 107 taxmann.com 32/154 SCL 394 (NCL – AT) (para 16)
  • Encore Asset Reconstruction Co. (P.) Ltd. v. Ms. Charu Sandeep Desai [2019] 107 taxmann.com 100/154 SCL 382 (NCL – AT) (para 17)
  • Embassy Property Developments (P.) Ltd. v. State of Karnataka [2019] 112 taxmann.com 56/[2020] 157 SCL 445 (SC) (para 18).