For an amount to qualify as a 'financial debt' under the IBC, there must be a disbursal of money against consideration for the time value of money; equity investments or business contributions lacking this commercial element of borrowing do not satisfy the criteria for initiating CIRP.

ORDER

1. The present application under section 7 is filed by the Karne Ramesh Babu (herein after referred to as ‘Petitioner’ or ‘Financial Creditor’) Under section 7 of Insolvency and Bankruptcy Code, 2016 (“IBC”) read with Rule 4 of Insolvency and Bankruptcy (Application to the Adjudicating Authority) Rules, 2016 against Kalzen Contech Private Limited (herein after referred to as ‘Respondent’ or ‘Corporate Debtor’), inter alia seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) for default of Rs.5,98,79,184/- (Five Crores Ninety-eight Lakhs Seventy-nine thousand and one hundred and eighty-four rupees only).

Petition:

1. It is submitted that, Corporate Debtor is a company engaged in the business of construction activities, and approached the Petitioner seeking financial assistance for its business operations. Pursuant to such request, the Financial Creditor extended financial assistance (with equity as security), from time to time through various modes, including transfers from his personal account, his firm’s account, and cash payments, aggregating to a total sum of Rs. 1,98,61,990/- in the following manner:

2. According to the Petitioner, the aforesaid amounts were duly acknowledged by the Corporate Debtor as financial debt, inter alia, vide email dated 10.01.2023¹Annexure-7 of the petition at page 74, wherein the Corporate Debtor undertook to repay the same within a period of 60–90 days. However, despite such acknowledgment and assurance, the Corporate Debtor failed to adhere to the agreed repayment terms.

3. Further, it is contended that, although certain part payments aggregating to Rs. 19,00,000/- were made by the Corporate Debtor, the substantial outstanding amount remained unpaid. In continuation thereof, the Corporate Debtor is stated to have issued a cheque for Rs. 30,00,000/- towards part repayment; however, the said cheque was dishonoured²Annexure 9 of the petition at page 79 to 80 upon presentation, thereby evidencing the continued default.

4. It is further contended that, a Memorandum of Agreement dated 20.06.2022³Annexure 8 of the petition at page 76 to 78 (“MoA”) was executed between the parties, whereby the Corporate Debtor agreed to pay a premium amount of Rs. 3,00,00,000/- within a period of two years, i.e., on or before 20.06.2024, towards the investments, loans, and other value additions made by the Financial Creditor. The Corporate Debtor has failed to honour the obligations arising under the said agreement as well.

5. In these circumstances, as per the Petitioner, the Corporate Debtor committed default in repayment of the loan, the date of default being 14.03.2023. Despite repeated reminders and follow-ups, the Corporate Debtor has failed to discharge its liability. As per the computation placed on record, the total amount in default, including interest calculated at 24% per annum, stands at Rs. 5,98,79,184/- in the following manner: