Abni Ranjan Kumar Sinha, J
1. The present application is filed under Section 7 of the IBC, 2016 (""Code"") read with Rule 4 of the Insolvency and Bankruptcy (Application to
Adjudicating Authority) Rules, 2016 against the default committed towards the Financial Creditors by the Corporate Debtor.
2. As per the averments, the Corporate Debtor had floated two 'investment schemes' under the plans entitled the 'Recurring Investment Plan' and the
'Lump-sum Investment Plan' to collect investments from individuals investors hailing from small town and villages in India. These schemes were
floated by the Corporate Debtor soon after its incorporation in the year 2011. The schemes were floated carrying term periods of 3 years to 10 years
under the 'Recurring Investment Plan' scheme as well as under the 'Lump-sum Investment Plan' Scheme. Under the Lump-Sum Investment Plan, the
Corporate Debtor has promised to provide return on the investment amount along with principal amount payable at the time of maturity of the term.
Consequently, under the Recurring Investment Plan, the Corporate Debtor has assured to provide the investors interest on their investment amounts at
the time of expiry of the term along with the investment amount. Some plans under both the schemes even offer for yearly returns.
3. The present application pertains to the aforesaid 'Lump-sum Investment Plan' and 'Recurring Investment Plan' of the Corporate Debtor, where the
Corporate Debtor had assured the Financial Creditors that on the maturity of the particular scheme, the Financial Creditors will either be allotted plots
of land or be paid multi-fold returns on their investments. The Corporate Debtor also committed to pay the Financial Creditors a return on investments
for time value of money, based on the amounts of investment made by the Financial Creditors. The monies were collected in the year 2012-2013 and
the plans opted by the Financial Creditors matured in the year 2017-2018. The Corporate Debtor has not only failed to allot the plots of land in favour
of the Financial Creditors but has also failed to pay the amount payable on maturity along with interest and assured return. Thus, the Corporate Debtor
has committed a default. The total amount of financial debt as regard the Financial Creditor is Rs. 16,28,300/- which includes a sum of Rs. 13,70,000/-
towards the amount payable by the Corporate Debtor to the Financial Creditors at the time of expiry of the various schemes floated by the Corporate
Debtor along with Rs. 2, 58, 300/- towards the interest at the rate of 12 per cent per annum payable by the Corporate Debtor to the Financial
Creditors which has been calculated from the date of registration/date of investment by the Financial Creditors in the schemes of Corporate Debtor till
October, 2019.
4. We have gone through the averments made in the application filed by the Financial Creditors. Therefore, at this juncture, in the light of the aforesaid
facts, when we shall consider the case in hand then we find, the claim of the Financial Creditors is that they have deposited the amount shown in the
certificate issued by the Corporate Debtor, which the Financial Creditors enclosed from page 84 to 98 of the application and in lieu of that, the
Corporate Debtor promised to pay the interest and the said deposit is for five years. Further, the claim of the Financial Creditors is that the Corporate
Debtor also promised to allot land in lieu of that amount and in support of that, the Financial Creditors have enclosed the Original/photocopy of the
certificate issued by the Corporate Debtor as well as brochure and the sample copy of the agreement. We have gone through the deposit certificate
filed by the Financial Creditors, which are from Page No. 84 to 98 of the application and we find that it is a deposit scheme for five years and the
matured amount is also shown in the certificate, which includes the interest. So far the sample copy of the agreement is concerned, that is not duly
signed by the persons, therefore, we are unable to take cognizance of the documents on the basis of which certificate was issued by the Corporate
Debtor in respect of the amount deposited by the Financial Creditors along with advance.
5. At this juncture, we would like to refer the definition of Financial Debt and Financial Creditor as referred in Section 5(7) and 5(8) and the same,
respectively, are quoted below: -
Section 5(7)
financial creditor"" means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or
transferred to;
Section 5(8)
(8) ""financial debt"" means a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money and includes--
(a) money borrowed against the payment of interest;
(b) any amount raised by acceptance under any acceptance credit facility or its de-materialised equivalent;
(c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;
(d) the amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital lease under the Indian
Accounting Standards or such other accounting standards as may be prescribed;
(e) receivables sold or discounted other than any receivables sold on non-recourse basis;
(f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing;
(g) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price and for calculating the
value of any derivative transaction, only the market value of such transaction shall be taken into account;
(h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank
or financial institution;
(i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause;
For the reasons, which we discussed in the aforementioned para, we are of the considered view that the claim of the applicants does not come within
the purview of Section 5(8) of the Code or any of the clause (a) to (i) of section 5(8) of the Code because the case of all the applicants is that they
deposited the amount under the scheme and they have not given debt to the Corporate Debtor.
6. At this juncture, we would like to refer Companies (Acceptance of Deposits) Rule, 2014, which has come into force on 1st April, 2014, alongwith
Section 73, 74 and 76 of the Companies Act, 2013 and the same is quoted below: -
73. Prohibition on acceptance of deposits from public.--
(1) On and after the commencement of this Act, no company shall invite, accept or renew deposits under this Act from the public except in a manner
provided under this Chapter: Provided that nothing in this sub-section shall apply to a banking company and non-banking financial company as defined
in the Reserve Bank of India Act, 1934 (2 of 1934) and to such other company as the Central Government may, after consultation with the Reserve
Bank of India, specify in this behalf.
(2) A company may, subject to the passing of a resolution in general meeting and subject to such rules as may be prescribed in consultation with the
Reserve Bank of India, accept deposits from its members on such terms and conditions, including the provision of security, if any, or for the repayment
of such deposits with interest, as may be agreed upon between the company and its members, subject to the fulfilment of the following conditions,
namely:--
(a) issuance of a circular to its members including therein a statement showing the financial position of the company, the credit rating obtained, the
total number of depositors and the amount due towards deposits in respect of any previous deposits accepted by the company and such other
particulars in such form and in such manner as may be prescribed;
(b) filing a copy of the circular along with such statement with the Registrar within thirty days before the date of issue of the circular;
(c) depositing such sum which shall not be less than fifteen per cent, of the amount of its deposits maturing during a financial year and the financial
year next following, and kept in a scheduled bank in a separate bank account to be called as deposit repayment reserve account;
(d) providing such deposit insurance in such manner and to such extent as may be prescribed;
(e) certifying that the company has not committed any default in the repayment of deposits accepted either before or after the commencement of this
Act or payment of interest on such deposits; and
(f) providing security, if any for the due repayment of the amount of deposit or the interest thereon including the creation of such charge on the
property or assets of the company:
Provided that in case where a company does not secure the deposits or secures such deposits partially, then, the deposits shall be termed as unsecured
deposits"" and shall be so quoted in every circular, form, advertisement or in any document related to invitation or acceptance of deposits.
(3) Every deposit accepted by a company under sub-section (2) shall be repaid with interest in accordance with the terms and conditions of the
agreement referred to in that sub-section.
(4) Where a company fails to repay the deposit or part thereof or any interest thereon under subsection (3), the depositor concerned may apply to the
Tribunal for an order directing the company to pay the sum due or for any loss or damage incurred by him as a result of such non-payment and for
such other orders as the Tribunal may deem fit.
(5) The deposit repayment reserve account referred to in clause (c) of sub-section (2) shall not be used by the company for any purpose other than
repayment of deposits.
74. Repayment of deposits, etc., accepted before commencement of this Act.--
(1) Where in respect of any deposit accepted by a company before the commencement of this Act, the amount of such deposit or part thereof or any
interest due thereon remains unpaid on such commencement or becomes due at any time thereafter, the company shall--
(a) file, within a period of three months from such commencement or from the date on which such payments, are due, with the Registrar a statement
of all the deposits accepted by the company and sums remaining unpaid on such amount with the interest payable thereon along with the arrangements
made for such repayment, notwithstanding anything contained in any other law for the time being in force or under the terms and conditions subject to
which the deposit was accepted or any scheme framed under any law; and
(b) repay within one year from such commencement or from the date on which such payments are due, whichever is earlier.
(2) The Tribunal may on an application made by the company, after considering the financial condition of the company, the amount of deposit or part
thereof and the interest payable thereon and such other matters, allow further time as considered reasonable to the company to repay the deposit.
(3) If a company fails to repay the deposit or part thereof or any interest thereon within the time specified in sub-section (1) or such further time as
may be allowed by the Tribunal under sub-section (2), the company shall, in addition to the payment of the amount of deposit or part thereof and the
interest due, be punishable with fine which shall not be less than one crore rupees but which may extend to ten crore rupees and every officer of the
company who is in default shall be punishable with imprisonment which may extend to seven years or with fine which shall not be less than twenty-
five lakh rupees but which may extend to two crore rupees, or with both.
76. Acceptance of deposits from public by certain companies.--
(1) Notwithstanding anything contained in section 73, a public company, having such net worth or turnover as may be prescribed, may accept deposits
from persons other than its members subject to compliance with the requirements provided in sub-section (2) of section 73 and subject to such rules as
the Central Government may, in consultation with the Reserve Bank of India, prescribe:
Provided that such a company shall be required to obtain the rating (including its networth, liquidity and ability to pay its deposits on due date) from a
recognised credit rating agency for informing the public the rating given to the company at the time of invitation of deposits from the public which
ensures adequate safety and the rating shall be obtained for every year during the tenure of deposits:
Provided further that every company accepting secured deposits from the public shall within thirty days of such acceptance, create a charge on its
assets of an amount not less than the amount of deposits accepted in favour of the deposit holders in accordance with such rules as may be
prescribed.
(2) The provisions of this Chapter shall, mutatis mutandis, apply to the acceptance of deposits from public under this section.
This provision came into force with effect from 01st April, 2014. If we shall read the provisions contained under Section 73, 74 and 76 of the
Companies Act along with (Acceptance of Deposits) Rule, 2014, then it can be said that all these provisions have come into force with effect from
01st April, 2014 and in view of the aforesaid provisions after commencement of this Act, no company can invite, accept or renew deposit in this Act
from the public except in the manner provided in this Chapter and a special provision is made regarding the repayment of the deposited amount which
was deposited prior to the enforcement of this Section and as per Section 74(1)(b), the company is liable to repay the amount within 3 years from such
commencement on or before expiry of the period from which the deposit is accepted, whichever is earlier and if the company fails to repay the
amount then there is a penal provision U/S 74(3) of the Companies Act, 2013. Here, in the case as we have already held that the Financial Creditors
everywhere mentioned the word 'deposit', therefore, the amount which he has deposited with the Corporate Debtor does not come within the purview
of the definition of Financial Debt rather the Financial Creditors, admittedly, deposited the amount with the Corporate Debtor and in lieu of that he was
getting interest from the Corporate Debtor, therefore, he can claim the refund under Chapter V of the Companies Act, read with Company
(Acceptance of Deposits) Rule, 2014.
7. So far, the initiation of proceeding under Section 7 of the Code is concerned, in our view, is not liable to be accepted. At this juncture, we would
also like to refer the arguments of the applicants that there is a default in payment of debt, therefore, Section 7 application is maintainable. At this
juncture, we would like to refer the definition of default as defined in Section 3(12) of the Code:-
Section 3(12)
(12) ""default"" means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not l[paid]
by the debtor or the corporate debtor, as the case may be;
8. Mere plain reading of the provisions shows that default means nonpayment of debt, whereas in the aforementioned para, we held that the amount
which the applicants deposited does not come under the definition of the debt. Therefore, we are unable to accept the contention of the applicants that
there is a default in payment of debt.
9. As we have already held in the matter of Satish Chand Gupta vs. Servel India Private Limited (IB) 1886 (ND)/2019 and the present case is also
covered with this decision, therefore, we are of the considered view that though the applicants have some other remedy under the law to recover the
amount which they have deposited with the Corporate Debtor but so far initiation of the Section 7 of the IBC is concerned for the reasons discussed
above, the present application is not maintainable, accordingly, we hereby, reject the prayer of the applicants to initiate the proceedings under Section 7
of the Code. Hence the present application is dismissed. However, the applicants are at liberty to file an appropriate application under Chapter V of
the Companies Act, 2013.
