# In the matter of Kolla Koteswara Rao Vs. Dr. S.K. Srihari Raju and Anr. CA (AT) (Ins) No. 717 of 2020

> NCLAT judgment dated 2021-03-26. Citation: TCN-2021-NCLAT-00298. The case involves an appeal against an order dated 28th January 2020, passed by the National…

- **Court:** NCLAT
- **Order date:** 26 Mar 2021
- **Citation:** TCN-2021-NCLAT-00298
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclat-new-delhi/kolla-koteswara-rao-vs-dr-sk-srihari-raju-and-anr-ca-a29c846a

## Summary

### Background

The case involves an appeal against an order dated 28th January 2020, passed by the National Company Law Tribunal (NCLT), Hyderabad Bench, admitting a Company Petition (IB) No. 744/7/HDB/2018 under Section 7 of the Insolvency and Bankruptcy Code (IBC). The appellant, the Suspended Director of the Corporate Debtor, challenged the admission order. The Corporate Debtor had availed a financial loan from SBI for setting up a manufacturing unit but defaulted, leading to NPA classification. Subsequently, a One-Time Settlement (OTS) was entered into, and an Agreement of Sale was executed with the first respondent, involving land allotted by TSIIC. Disputes arose regarding NOC procurement and repayment, leading to the Section 7 application.

## Facts

The Corporate Debtor was allotted industrial land by TSIIC to set up a bulk drug unit. They availed a loan of Rs. 21.50 Crores from SBI but defaulted, leading to NPA classification on 2012-11-30. A One-Time Settlement (OTS) agreement was entered into on 2017-11-30 for Rs. 11,73,22,501, stipulating a 20% deposit by 2017-12-12 and the balance within six months from 2017-11-13. The Corporate Debtor and the first Respondent entered into an Agreement of Sale on 2017-12-10, where the Corporate Debtor agreed to sell the land to the first Respondent, with the first Respondent paying the OTS amount. The first Respondent paid Rs. 2,34,65,000 on behalf of the Corporate Debtor to the Lender. The Corporate Debtor was to obtain necessary permissions, including an NOC from TSIIC.

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## Issues and analysis

### Issue 1: Whether the amounts paid by the first Respondent on behalf of the 'Corporate Debtor' to the Lender …

**Ratio:** Section 5(8)(f) of the IBC defines 'financial debt' to include any amount raised under

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**Reasoning:** The court reasoned that the Agreement of Sale emanated from the One Time Settlement

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**Interpretation:** The court interpreted Section 5(8)(f) broadly, considering the 'commercial

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**Application:** The court applied the ratio to the facts, finding that the amounts paid by the

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## Parties

- **Judges:** Anant Bijay…; Shreesha…
- **Appellants:** Kolla Koteswara…
- **Respondents:** S.K. Srihar…

## Timeline

- **2012-11-30 — NPA Classif…**: The loan account of the Corporate Debtor was…
- **2017-11-30 — One-Time Settlement…**: A One-Time Settlement (OTS) Agreement was entered into between the Lender and the…

## 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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