H.E. Captain Ameet K Agarwal vs Gannon Dunkerley & Co. Ltd & Anr CA 719 of 2021
Facts:
1) Respondent No.1 filed C.P. No. 3073/2019 (Gannon Dunkerley & Co. Ltd. vs. Sangeeta Aviation Services Private Limited) under Section 7 of the Code in July 2019 (“Section 7 Application”) Respondent No.1’s claim is based solely on a decree dated January 9, 2019, by the Hon’ble Bombay High Court in Commercial Summary Suit o. 714 of 2018, awarding interest at the rate of 12% per annum as compensation, which is standard in such Recovery Civil Suits.
2) Application filed under section 7 of the Code was allowed by the Adjudicating Authority vide order dated 10th August, 2021. Appeal is filed challenging the admission of application.
Issue: Whether the appeal can be allowed ?
Arguments:
Respondent:
1) Counsel submitted that total debt amount claimed includes an interest of Rs. 27,05,753/- based on the order from the Bombay High Court. However, a money suit decree does not necessarily qualify as a financial debt under Sections 5(7) and 5(8) of the Code. Respondent No.1 does not qualify as a Financial Creditor under Section 5(7), and the claimed amount does not constitute a financial debt as defined under Section 5(8) of the Code. 2
2) Counsel submitted that Applicant did not produce any agreement for the claimed amount, which is essential to qualify as a financial debt under Section 5(8) of the Code.
3) Counsel submitted that the Impugned Order passed by the Adjudicating Authority on August 10, 2021, is legally unsustainable. The Application under Section 7 of the Code should not have been admitted as the Respondent No.1 is not a Financial Creditor, and the amount claimed is not a financial debt under the Code.
Decision: NCLAT dismissed the appeal.
Rationale:
1) NCLAT noted the definition of FC and held that IBC defines financial debt as a debt along with interest, if any, with disbursement against consideration for the time value of money. It held that the arguments of the Appellant that the Respondent has not produced any agreement for the amount claimed by it, which is a sine qua non for falling under Section 5(8) of the IBC, 2016 as the amount paid by the Applicant was not borrowed against the payment of interest nor the claim of the Applicant comes within the meaning of Section 5(8)(d) of the said IBC, 2016, cannot stand the scrutiny of the definition of debt and also the legal precedents
2) It held that The Appellant has also raised concerns about procedural defects, including incorrect forms and disclosures by the IRP. However, such procedural issues do not fundamentally alter the nature of the debt or the status of the creditor.
Order:
