Back
K. M. JOSEPH, HRISHIKESH ROY
New Okhla Industrial Development Authority – Appellant
Versus
Anand Sonbhadra – Respondent
How to determine whether a lease of land can be treated as a financial lease under IBC Section 5(8)? What is the meaning of "disbursement" and its requirement under Section 5(8) for financial debt? What are the criteria under IAS/IAS 116 rules to classify a lease as a finance lease vs operating lease in the context of IBC?
Key Points: - The judgment holds that the lease of land in Noida does not qualify as a financial lease under Section 5(8)(d) or (f) due to lack of transfer of all rewards/incidental ownership and absence of disbursement from lessor to lessee (!) (!) (!) . - It discusses the essential elements of financial debt under IBC, including the requirement of a debt with time value of money and disbursement, with the "disbursed" money typically flowing from creditor to debtor, and the homebuyer example in Pioneer Urban guiding the interpretation of Section 5(8)(f) as a catch-all provision (!) (!) (!) (!) (!) (!) . - The court relies on IAS/IFRS criteria (IAS 17/IFRS 16 rules) to evaluate whether a lease transfers substantially all risks and rewards incidental to ownership, concluding the subject lease does not transfer such risks/rewards for land, and thus is not a finance lease; it also analyzes specific lease terms such as transferability, sub-leasing, and ownership rights (!) (!) (!) (!) (!) (!) (!) (!) (!) - (!) . - The decision confirms NCLAT/NCLT findings that NOIDA is not a financial creditor in this case; the lease is an ordinary lease with regulatory controls and ownership rights retained by the lessor, affecting CIRP classification (!) (!) . - It emphasizes the role of "substantially all" and "rewards incidental to ownership" and cautions against treating regulatory exclusivity and cancellation rights as ownership transfer to lessee (!) (!) (!) . - The judgment ultimately dismisses the appeals, holding the appellant not a financial creditor under IBC and not an operator creditor for this specific lease transaction; costs borne by parties (!) .
| Table of Content |
|---|
| 1. challenge to classification of creditor. (Para 1 , 2 , 3 , 4 , 5) |
| 2. lease terms set out appellant's role. (Para 6 , 7 , 11) |
| 3. court analysis on financial lease definition. (Para 13 , 15 , 21 , 22) |
| 4. appellant argues for broad interpretation of financial creditor. (Para 39 , 44 , 46 , 142) |
| 5. arguments for financial creditor status advanced. (Para 40 , 41) |
| 6. examination of terms in lease agreement. (Para 50 , 52 , 61 , 62 , 72) |
| 7. conclusion on financial creditor status under ibc. (Para 127 , 128 , 129 , 130 , 131) |
| 8. final ruling dismissing appeals. (Para 145) |
JUDGMENT
Hardly six years old, the Insolvency and Bankruptcy Code (hereinafter referred to as the ") continues to be a fertile ground to spawn litigation. Born in the year 2016, the IBC this time around has given rise to the question as to whether the appellant would be a financial creditor and entitled to be so treated in the Corporate Insolvency Resolution Process (CIRP, in short) commenced against the corporate debtor under the 'IBC '.
CIVIL APPEAL NO. 2222/2021
CIVIL APPEAL NOS. 2367-2369 OF 2021
4. Since a common question arises namely whether the appellant is entitled to be treated as a financial creditor wit
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
