Page 797 - IBC Orders us 7-CA Mukesh Mohan

Order Passed Under Sec 7
By Hon’ble NCLT New Delhi-II Bench

herein. The Corporate Debtor agreed to pay assured returns till delivery of the project. Agreements after
agreements were superseded giving rise to novation of contracts. The last contractual obligation arose
from agreement dated 26.06.2014 wherein it was agreed to settle the dispute in the sum of Rs. 30,69,000/-

, which included not only the booking amount paid by the petitioner, but also included compensation and
charges for commitment, services rendered, appreciation etc. The case of the petitioner was one for

purchase of any immovable property to be developed and for which assured returns were undertaken to be
given. The Principal Bench, in the matter of Nikhil Mehta 86 Sons and others Vs. M/ s AMR
Infrastructures Ltd. has already elucidated that the liability towards assured returns in matters of booking

commercial flats would not fall within the definition of a financial debt which essentially means a debt
disbursed against consideration for the value of money, or money borrowed against payment of interest,
while the concept of Assured Returns typically requires full payment towards the property to be

developed, and perhaps leased out for the owner by the developer on rentals, but pending that stage, the
developer pays a Return on the property from day one. As pending completion it cannot be termed as
Rent, the return is given and taxed under the Head "Interest".

The petitioner's claim herein is more encumbered and complex than a plain and simple claim against
assured returns. The present transaction is based on multiple contractual novated agreements. The initial

foundation was with one entity, the liability of which was taken over by another. The payment was made
towards development and delivery of a property changed for another. The agreement relied upon

contained the provision for appointment of a named arbitrator which though invoked, did not materialize.
Further, dispute with respect to the liability has been raised and as the return of the principal amount is
not disputed, the liability towards any interest/assured returns on the proposed property in terms of the

agreements, essentially towards for purchase of a piece of property, would not fall within the purview of
the financial debt as defined under the Code for initiating Insolvency Resolution Process. Merely because

an assured amount of return has been promised, which is termed as interest under Section 194A of the I.T.
Act, for the period till the property is developed and handed over, it would not acquire the status of a
financial debt as it is not money loaned to be recovered with interest.

6. In view of the facts of the case, this Bench is of the opinion that the aforesaid transaction between the
parties would not fall within the definition of a "financial debt" so as to invoke Insolvency Resolution
Process against the Corporate Debtor.

7. The right of the petitioner shall not be prejudiced on account of theobservations made in the order, and
it would be open to him to seek redressal of his grievance before an appropriate forum.
8. Petition Rejected. No order as to costs.

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