# In the matter of Fedders Electric & Engineering Ltd. CA No. 370 of 2019 in CP  No. (IB) 75-ALD-2019

> NCLT judgment dated 2020-10-16. Citation: TCN-2020-NCLT-00377. The case involves an application filed under Section 60(5) of the Insolvency and Bankruptcy…

- **Court:** NCLT
- **Order date:** 16 Oct 2020
- **Citation:** TCN-2020-NCLT-00377
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/fedders-electric-engineering-ltd-ca-no-370-of-2019-in-cp-no-ib-75-ald-2019-e451e5eb

## Summary

### Background

The case involves an application filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, by Jasubhai International FZCO, the Applicant, against the refusal of Ashok Kumar Gulla, the Respondent (Resolution Professional), to admit the Applicant's claim of Rs. 3,00,00,000/- as a 'financial debt'. The Applicant and Fedders Electric & Engineering Ltd., the Corporate Debtor, had entered into an agreement in 2017, with the Applicant making payments as Earnest Money Deposit (EMD). The Corporate Debtor later withdrew from the project, but failed to refund the EMD. The Respondent classified the Applicant's claim as that of 'other creditors', denying them participation in the Committee of Creditors. The Applicant argued that the EMD should be considered a

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## Facts

Jasubhai International FZCO (Applicant) entered into an agreement with Fedders Electric & Engineering Ltd. (Corporate Debtor) on February 25, 2017, related to a project in Dubai. The Applicant paid Rs. 3,00,00,000/- as Earnest Money Deposit (EMD) to the Corporate Debtor, as per a Letter of Intent (LOI) dated April 9, 2017. In April 2018, the Corporate Debtor withdrew from the project without formal intimation. The Applicant requested a refund of the EMD, but no payments were made. On August 14, 2019, the Tribunal admitted an insolvency application against the Corporate Debtor filed by the State Bank of India under Section 7 of the IBC. The Respondent (Resolution Professional) invited claims from creditors. On August 30, 2019, the Applicant filed its claim for Rs.

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## Issues and analysis

### Issue 1: Whether the Earnest Money Deposit (EMD) of Rs. 3,00,00,000/- paid by the Applicant to the Corporate …

**Ratio:** The legal principle is that a 'financial debt' under Section 5(8) of the Insolvency and

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**Reasoning:** The court reasoned that the EMD, as per the agreement and letter of intent, was

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**Interpretation:** Section 5(8) of the IBC defines financial debt, emphasizing the requirement of

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**Application:** In this case, the EMD was deemed not to be a financial debt because the

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## Parties

- **Judges:** Rajesh Daya…
- **Appellants:** Jasubhai Internati…
- **Respondents:** Fedders Electric…; Ashok Kumar…

## Timeline

- **2017-02-25 — Agreement between…**: The Applicant and the Corporate…
- **2017-04-09 — Letter of Inte…**: The Corporate Debtor issued a Letter…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 60(5) — Adjudicating Authority for corporate persons](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-60)

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