Status as on- 27/01/2023
The National Company Law Appellate Tribunal, Principal Bench, New Delhi (hereinafter referred to as “NCLAT”) while adjudicating an appeal in the matter of Ashok Hi Tech Builders vs Sanjay Kundra & Anr. held that Landowner in a development agreement cannot be considered as a Financial Creditor.
BACKGROUND FACTS:
Ashok Hi Tech Builders (Landowners/Appellant), owner of agricultural land on which a development project was proposed to be constructed by the Corporate Debtor. The Development Agreement was executed between the Appellant and the landowner on 01.04.2009, in which the Corporate Debtor would carry on construction and out of total saleable construction 32% will be of landowner and remaining 68% will be of the Corporate Debtor.
The Corporate Debtor was admitted into the process of Corporate Insolvency Resolution Process (CIRP) and consequently, the Appellant had filed their claim as Financial Creditor within the meaning of Section 5(8) of the Insolvency and Bankruptcy Code, 2016. That the claim filed by the Appellant was admitted by the Resolution Professional of the Corporate Debtor. Accordingly, the Appellant was inducted in the Committee of Creditors. Thereafter, the Homebuyers had filed an application the Adjudicating Authority for the removal of the Appellant from the Committee of Creditors since he is not a financial Creditor.
The Adjudicating Authority rightly removed the Appellant from the Committee of Creditor vide order dated 03.11.2022, while observing that since no amount was disbursed against the time value of money, therefore, the land owner cannot be considered as financial creditor within the meaning of Section 5(8) of the IBC, 2016. The Appellant had a filed an appeal against the said order dated 03.11.2022.
ISSUE:
Whether the Land Owners come under the ambit of financial creditor within the meaning of Section 5(8) of the Insolvency and Bankruptcy Code, 2016?
DECISION HELD:
The NCLAT Bench observed that the judgment of Namdeo Ramchandra Patil & Ors fully covers the issue and the Adjudicating Authority has rightly held that the landowner is not a financial creditor within the meaning of Section 5(8) of the Insolvency and Bankruptcy Code, 2016. The Development Agreement clearly states that the landowner was a collaborator in the development agreement and not a financial creditor. There was no disbursement for the time value of money by the Landowenr, hence the appeal is dismissed.
Disclaimer: The above article is based on the personal interpretation of the related orders and laws. The readers are expected to take expert opinions before relying upon the article. For more information, please contact us at ibc@centrik.in.
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