# In the matter of Chintan Jhunjhunwala vs. Avani Towers Private Limited & Ors.

> NCLAT judgment dated 2024-05-30. Citation: TCN-2024-NCLAT-00392. This appeal was filed by a suspended Director of Energy Properties Pvt. Ltd. against an order…

- **Court:** NCLAT
- **Order date:** 30 May 2024
- **Citation:** TCN-2024-NCLAT-00392
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclat-new-delhi/chintan-jhunjhunwala-vs-avani-towers-private-limited-ors-7517a160

## Summary

### Background

This appeal was filed by a suspended Director of Energy Properties Pvt. Ltd. against an order dated 20.03.2024 passed by the National Company Law Tribunal (NCLT), Kolkata Bench, which admitted a Section 7 application filed by Avani Towers Pvt. Ltd. Avani Towers claimed a financial debt of Rs. 10,90,72,565/-. The appellant contested the admission of the Section 7 application, arguing that the debt was not a financial debt under Section 5(8) of the Insolvency and Bankruptcy Code (IBC), 2016, and that no default had occurred. The core dispute revolves around a Development Agreement between Energy Properties and Avani Towers, where Avani Towers was to provide a refundable security deposit, part of which carried interest. The appellant argued that the respondent was

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## Facts

Energy Properties Pvt. Ltd. (Corporate Debtor) owned land in Howrah. In 2008, it purchased assets from a sale conducted by UCO Bank under the SARFAESI Act. On 16.06.2008, Energy Properties entered into a Development Agreement with Avani Towers Pvt. Ltd. Avani Towers was required to provide a refundable Security Deposit of Rs. 12 Crores, with an option to add an extra Rs. 3 Crores. The initial Rs. 12 Crores would not accrue interest, but any additional deposit up to Rs. 3 Crores would bear interest at 18% compounded and payable quarterly. The repayment of the refundable Security Deposit was provided for in the Development Agreement. Two Memorandums of Agreement were executed in 2010, handing over possession to Avani Towers. Development could not be carried out. Avani

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## Issues and analysis

### Issue 1: Whether the debt claimed by Avani Towers Pvt. Ltd. constitutes a 'financial debt' under Section …

**Ratio:** Section 5(8) of the IBC defines 'financial debt' as a debt along with interest, if any,

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**Reasoning:** The NCLAT considered the Development Agreement, particularly Clause 8.1, which stipulated

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**Interpretation:** The interpretation of Section 5(8) hinges on whether the transaction has the

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**Application:** In this case, the additional deposit of Rs. 3.5 Crores, which carried interest

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## Parties

- **Judges:** Ashok Bh…; Barun M…; +1 more
- **Appellants:** Chintan Jhunjhunwa…
- **Respondents:** Energy Properties…; Avani Towers…

## Timeline

- **2008-01-01 — Corporate Debtor…**: Energy Properties Pvt. Ltd. purchased assets from a sale conducted by UCO Bank under the…
- **2008-06-16 — Development A…**: Energy Properties Pvt. Ltd. entered into a Development Agreement with Avani Towers Pvt.…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 7 — Initiation of corporate insolvency resolution…](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-7)

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