JUDGMENT :

SUDHANSU JYOTI MUKHOPADHAYA, J.

The Appellant, claimed to be ‘Financial Creditor’ filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “I&B Code”) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 to initiate ‘Corporate Insolvency Resolution Process’ against Geometrix Insolvency Solutions Private Limited (Respondent).

The Adjudicating Authority (National Company Law Tribunal), Hyderabad Bench, Hyderabad, by impugned order dated 13th March, 2017 in Company Petition (IB)/19/7/HBD/2017 held that the Appellant do not come within the meaning of ‘Financial Creditor’ and failed to satisfy the Adjudicating Authority about requisite ingredients of Section 7 of the “I&B Code” to claim any relief and thereby rejected the application.

2. The case of the Appellant is that loans totalling Rs. 91,47,864/- were advanced by the Appellant to the Respondent in fifty-two transactions between 26th April, 2013 and 9th March, 2015 for the purpose of (a) repaying interest/instalments on bank loans taken by the Respondent so that loans are not defaulted upon or rendered NPA; and (b) ensuring payment of salaries and money due to suppliers/ vendors, so that business continues unabated.

3. Further, according to Appellant though the terms of the loan were not recorded in writing, it was agreed that money advanced would carry interest, as evidenced by the following:

(a) E-mail from the Managing Director of the Respondent directing that interest should be added for loans advanced by shareholders.

(b) The Auditor of the Respondent, in the auditor’s report dated 31st August, 2016, states that interest has been credited for loans advanced.

4. The stand of the Appellant is that the loans were repayable on demand and the Respondent has admitted its liability towards the Appellant in its books of accounts as follows: -

Financial Year Debt due Acknowledged in the Books of the Respondent

2012-13 Rs. 98,37,596 Pages 393, 355, 435 of Appeal papers

2013-14 Rs. 38,74,767 Pages 393, 351, 435, 406, 354, 439 of Appeal papers

2014-15 Rs. 89,85,792 Pages 406, 459, 95 of Appeal papers

2015-16 Rs. 85,20,548 Pages 99 & 163

5. Learned counsel for the Appellant submitted that the Respondent has not disputed the sums shown above, and the only defence raised by it, both before the Adjudicating Authority and this Appellate Tribunal, is that the amount has been set off.

6. The Appellant issued notice for repayment of the loans totalling Rs. 91,47,864/- by notice dated 7th September, 2016. The Respondents, in its reply dated 26th September, 2016 claimed that the money has been repaid thus :

“…..the balance lying to your client’s account as on 31st March, 2015 is history and it has been repaid and/or adjusted as desired by your client, and as on 3rd September 2016, your client ceased to be a creditor of my client.”

7. Learned counsel for the Appellant submitted that the Tribunal wrongly held that the Appellant is not a ‘Financial Creditor’. According to learned counsel for the Appellant, she is ‘Financial Creditor’ within the meaning of sub-section (7) of Section 5 of the “I&B Code”.

8. Learned counsel for the Appellant submitted that the debt owed by the Respondent to the Appellant is a ‘Financial Debt’ as per sub-section (8)(a) of Section 5 of the ‘I&B Code’ as the loans carried interest. It was also submitted that the transaction is a ‘Financial Debt’ under sub-section (8) (f) of Section 5 of the ‘I&B Code’, as it has the commercial effect of a borrowing.

9. According to counsel for the Appellant, the Respondent has admitted in the books of accounts that the Appellant is an ‘unsecured creditor’, and the money advanced by her were loans to the Company. The money was disbursed against the consideration of time value of money as the Appellant was a shareholder of the Respondent, and had an interest in protecting and increasing the value of her investment in the Company