Whether dues to Land owners under collaboration agreements in nature of joint development of project with sharing of profit can be treated as Operational Debt within the provisions of the IBC? – Mrs. Jesleen Kaur Papneja Vs. Raheja Developers Ltd. – NCLT Principal Bench

The Adjudicating Authority dismissed CIRP application u/s 9 of IBC and held that (i) it is clear that the definition is comprehensive in nature and has to be understood within the four corners of this code. It means a ‘claim in respect of the provision of goods and services’. Latter part of the definition is not relevant in the facts and circumstances of the case. (ii) Joint Development agreement are not within the ambit of Financial debt as defined in the code. (iii) There may be variety of real estate development contracts under different names which can be entered upon which may have a component in the nature of a loan. For example Collaboration Agreement, Joint Development Agreement, the purpose of which is the mutual binding legal relationship in exchange of consideration. These type of agreements cannot come under the purview of operational debt as understood under the Code. What has to be seen is the real intention between the parties. (iv) The agreements cannot be read in isolation alone rather are to be seen collectively as a whole. (v) The said contract is in nature of joint development of project with sharing of profit in an agreed ratio amongst them. rather than a claim in respect of the provision of goods or services.

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