Case Law Details
Jagbasera Infratech Private Ltd. Vs Rawal Variety Construction Ltd. (NCLAT Delhi)
Clause 15 of the Memorandum of Understanding specifies that ‘promoter’ shall be entitled to raise loans in its own name from banks/financial institutions for the project. There shall be no liability on the Developer for repayment of the loans or interest.” A careful perusal of the Memorandum of Understanding and also the Joint Venture Agreement entered into between the parties on 28.09.2011 and 27.02.2012 respectively shows that the relationship between the Appellant and Respondent is that of land owner and developer and furthermore viewed from any angle the amount invested by the Appellant towards the completion of the Project cannot be termed to be a ‘Financial Debt’ as defined under Section 5(8) of the Code. Having regard to the nature of the transactions between the Appellant and the Respondent this Tribunal is of the earnest view that the Appellant does not fall within the definition of term ‘Allottee’. This Tribunal in Company Appeal (AT)(Ins) No.780/2020 while dealing with a similar issue has observed as follows:-
“15. The MoU entered into is an Agreement of reciprocal rights and obligations. We are of the earnest view that both parties being ‘Joint Development Partners’ who entered into a consortium of sorts for developing the subject land and for any breach of terms of the contract, Section 7 Application filed under the Code would not be maintainable as the amount cannot be construed as ‘Financial Debt’ as there is no sum(s) i.e., owed, assigned or transferred to in compliance of the provisions of Section 5(8) of the Code. To reiterate, being a profit share owner, who in the event of the success of the Project would receive the residual gain, the amount invested in the land cannot be said to be a ‘Financial Debt’ as defined under Section 5(8) of the Code. Hence, the ratio of the Judgements relied upon by the Learned Counsel for the Appellant are not applicable to the facts of this case.”
Keeping in view the ratio of the aforenoted Judgement and having regard to the terms and conditions of the Memorandum of Understanding and the Joint Venture Agreement entered into between the parties, this Tribunal is of the considered view that the amount invested in the ‘Joint Venture Project’ by the Appellant herein in his capacity as a ‘Promotor’ and ‘Investor’ does not fall within the ambit of the definition of ‘Financial Debt’ as defined under Section 5(8) of the Code.
FULL TEXT OF THE NCLAT JUDGMENT/ORDER
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