Rajesh Alfred Vs Ketsaal Retail LLP (NCLAT Delhi)
NCLAT Delhi held that the capital investment under the reseller agreement lacks the essential ingredients of financial debt under Section 5(8) (f) of the Insolvency and Bankruptcy Code. Accordingly, dismissal of petition u/s. 7 for CIRP justified.
Facts- The present appeal has been filed u/s. 61 of the Insolvency and Bankruptcy Code, 2016 passed by the National Company Law Tribunal (Adjudicating Authority). The said petition under Section 7 of the Code was filed by the Appellant – Rajesh Alfred sole Proprietor of M/S Anand Enterprises, seeking initiation of Corporate Insolvency Resolution Process (CIRP) against the Respondent— M/s Ketsaal Retails LLP (Corporate Debtor) due to default in repayment of a financial debt of Rs. 2,77,00,000/-, comprising capital investment and assured returns.
However, the Adjudicating Authority dismissed the petition on the ground that the Appellant did not qualify as a ‘Financial Creditor’ and the transaction in question did not amount to a ‘Financial Debt’ as defined under Section 5(8) of the Code. Aggrieved by these findings, the Appellant has approached this Appellate Tribunal.
Conclusion- It is beyond comprehension that any commercial entity would ever borrow a sum at 144% annual interest rate. Such returns can only be possible in commercial ventures and not from financial deposits/ investments. We are therefore clear that the aforesaid profit margin under the reseller agreement lacks the essential ingredients of financial debt as claimed by the appellant under Section 5 (8) (f) of the Code.
