FA, 2020 amendment increasing...
The Corporate debtor was allotted a plot of land by TSIIC for purpose of setting up a unit for manufacturing bulk drugs, formulations etc. To set up the said unit, the corporate debtor availed loan from the bank. Since the corporate debtor defaulted on repaying loan to lender, the account was classified as distressed assets. Later, the corporate debtor could settle outstanding amounts by paying some amount under OTS.
The corporate debtor was not able to pay agreed amount, it entered into a sale agreement with the financial creditor/petitioner to sell land allotted to corporate debtor by TSIIC. Under agreement it was agreed that the petitioner would pay OTS directly to the lender as part of the sale consideration for land. Accordingly, petitioner made payment of certain amount to lender. However, TSIIC denied permission to hand over land to petitioners.
Therefore, Petitioner demanded refunds of interest payments to lender and applied under section 7 to initiate CIRP against the corporate debtor. The Corporate debtor argued that impugned amount was paid under "agreement of sale" and, as a buyer, could not claim to be a financial creditor.
Since the amounts were paid by the complainant to lender of the corporate debtor on behalf of the company debtor and in accordance with such payments only an agreement of sale was implemented between parties and moreover, as per agreement corporate debtor had to return amount paid on its behalf by petitioner with interest, petitioner would fall within definition of 'financial creditor' under section 5(7) of the Code.Thus, instant petition was to be accepted.
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