Inter-Corporate deposits are financial debts. In order to be construed a transaction of depsit of money or a loan to Financial debt, a relationship must exist between the parties wherein the intention of the parties are to be considered and substantiated with valid documents.

In the present case, an application has been filed by the petitioner under section 7 wherein the underlying idea is to construe an “Inter-Corporate deposit ” as a Financial Debt. The Corporate Debtor filed its reply affidavit highlighting the concerns that the petition filed by the applicant Financial creditor is barred by Limitation. Further , there was no agreement was defined between the parties to manage the deposit not any interest was disbursed by the Corporate Debtor to the Financial Creditor.The documents relied by the Financial creditor to substantiate the claim on the TDS Statement is not valid because the FC has failed to show that the TDS is towards the interest.The Ld Counsel appearing on behalf of the CD relied on the matter of “Prayag Polytech Pvt Ltd Vs. Gem Batteries Pvt Ltd” to conclude that merely TDS has been deducted on certain transaction does not define a transation to fall under the definition of financial Debt. TDS could be deducted on various other reasons.

The Adjudicating Authority while reaching on a conclusion held that it is a well settled principal that the Inter-Corporate Deposits are Financial Debts but in order to define a transaction to a financial debt, there must be a relationship between the parties and also the intebntion of the parties are to be considered and substantiated with valid documents.. The Hon’ble NCLT quoting the definition of “Financial Contract” as envisaged under the Code clearly enumerated that as per Rule 3(d) of the IBC a financial contract would encompass setting the terms of financial debt, including the tenure of the financial debt, interest payable and the date of repayment.

In the instant petition, the Financial Creditor has failed to satisfy the existence of any financial contract or agreement between the parties, including the agreed rate of interest or any amount of interest credited or is being received by the FC from the Corporate Debtor.Further there was no document which could have evidenced that there was any demand of ICD by the Corporate debtor and the same was acknowledged. Considering the aboce view, the application filed by the petitoner is under section 7 of the Code for the initiation of the CIRP was rejected by the Hon’ble Tribunal.

Branch: NCLT, Kolkataa Bench

Link: https://ibclaw.in/seaview-merchants-pvt-ltd-vs-ashish-vincom-pvt-ltd-nclt-kolkata-bench/