Decree-holder cannot be treated as a financial creditor for the purpose of triggering insolvency proceedings against a company. The judgment passed by the NCLAT New Delhi (principle bench), in its decision in Sushil Ansal Vs. Ashok Tripathi (Company Appeal (AT) (Insolvency) No. 452 of 2020) by Hon’ble Shri Justice Bansi Lal Bhat and Justice Anant Bijay Singh.
The facts of the case was such that – Mr. Ashok Tripathi and Mr. Saurabh Tripathi/Financial Creditors, had together reserved two units under the land project at Sushant Golf City, ‘Cutting edge Township’, Sector-P, Sultanpur Road, Lucknow. Lucknow with Ansal Properties and Infrastructure Limited (APIL). In September 2014, developer purchaser arrangements had been executed and according to the arrangements, APIL was needed to finish development inside a long time from the date of beginning of development. Be that as it may, APIL had neglected to finish the activities inside the specified time span and the Financial Creditors/Respondents in like manner moved toward Real Estate Regulatory Authority (RERA). RERA for this situation gave recuperation authentications to the Financial Creditors against APIL. UP RERA at that point allowed an announcement to the Financial Creditors/Respondents for a measure of about Rupees Seventy Three Lakhs, after APIL neglected to make the instalments to the Financial Creditors/Respondents. The Respondents then as monetary loan bosses moved toward the NCLT under Section 7 of the Insolvency and Bankruptcy Code, 2016.
Rather than looking for execution of the declaration under common law, the Financial Creditors/Respondents moved toward the NCLT to start insolvency proceedings against APIL. What’s more, during the pendency of the allure at the NCLAT, APIL and the documented a joint application before the NCLAT for withdrawal of the application under Section 7 of the I&B Code based on a settlement deed hosting been executed between the gatherings on June 1, 2020, by summoning Rule 11 of the NCLAT Rules, 2016.
NCLAT wouldn’t conjure Rule 11 and held that while the council of loan bosses had not been comprised, summoning such settlement would be adverse to the interests of different inquirers including the other allottees, and would not be in consonance with the object of the I&B Code.
NCLAT investigations the extent of Section 7 of the I&B Code and expresses that unmistakably an application for inception of CIRP by allottees under a land project is needed to be recorded together by at the very least 100 of such allottees or at the very least 10% of the absolute number of allottees there under. Accordingly, unmistakably an application at the occasion of a solitary allottee or by a gathering of allottees missing the mark concerning the recommended edge breaking point would not be maintainable.
NCLAT at that point considers the inquiry on whether a decree-holder however covered by the meaning of ‘creditor’ would fall inside the meaning of a ‘Financial Creditor’ under the I&B Code.
“NCLAT held that the answer to the question as to whether a decree-holder would fall within the definition of ‘financial creditor’ has to be an empathetic ‘No’ as the amount claimed under the decree is an adjudicated amount and not a debt disbursed against the consideration for the time value and does not fall within the ambit of any of the clauses enumerated under the definition of ‘financial debt’ under Section 5(8) of the I&B Code”.
In the present case, ‘decree-holder’ although included in the definition of ‘creditor’ would not fall within the definition of ‘financial creditor’ and thus the Financial Creditors/Respondents could not seek initiation of CIRP on that basis. Accordingly, the NCLAT set aside all orders passed by the NCLT on March 17, 2020 in relation to the insolvency proceedings initiated against APIL.