Whether advance paid on the basis of oral agreement for Share Purchase is Financial Debt as per the provisions of IBC – Jushya Realty Pvt. Ltd. Vs. Ninety Properties Pvt. Ltd. – NCLAT New Delhi
Hon’ble NCLAT holds that:
(i) The definition of “financial debt” as enumerated in section 5(8) of the IBC is quite exhaustive and covers ‘debts which were made along with interest disbursed against the consideration for the time value of money’. Clauses (a) to (i) under section 5(8) of the IBC do not state oral purchase agreement explicitly, but clause (f) states that any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing could be considered as a financial debt.
(ii) In the present case, neither section 7 petition nor any pleadings or documents submitted by the Appellant, have any document to show that there was a Share Purchase Agreement to be signed nor any covered fact of the borrowing have been evidenced. In such a situation, it is difficult to accept the contention of the Appellant that the transaction of Rs.1.25 cores was in fact repayment of a ‘financial debt’.
(iii) It is necessary under the IBC to go into the nature of contract to see if it is a financial and operational debt. We do not consider it necessary to go any further into the nature of the contract, whether written or otherwise between the two parties suffice to say that if transaction was made in December, 2014 against the purchase of a specific property, the Appellant should have asserted its right within the stipulated period of three years being the specific purchase of the contract to try to enforce such contract through IBC does not appear to be correct legal course of action.
(iv) The ratio laid down in the matter of Sanjay D. Kakade vs. HDFC Ventures Trustee Company Ltd. and Others (supra) does not apply in the facts and circumstances of the present case.