# In the matter of La-fin Financial Services Pvt. Ltd. TCP No. 919-I&BC-NCLT-MB-MAH-2017

> NCLT judgment dated 2018-08-30. Citation: TCN-2018-NCLT-00854. The case involves an application filed by IL&FS Financial Services Ltd. (the Petitioner) under…

- **Court:** NCLT
- **Order date:** 30 Aug 2018
- **Citation:** TCN-2018-NCLT-00854
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-chandigarh/la-fin-financial-services-pvt-ltd-tcp-no-919-ibc-nclt-mb-mah-2017-c004e3ba

## Summary

### Background

The case involves an application filed by IL&FS Financial Services Ltd. (the Petitioner) under Section 7 of the Insolvency and Bankruptcy Code, 2016, against La-Fin Financial Services Pvt. Ltd. (the Respondent/Corporate Debtor). The Petitioner, a Non-Banking Finance Company (NBFC), sought to initiate Corporate Insolvency Resolution Process (CIRP) against the Respondent based on a 'Letter of Undertaking' (LoU) issued by the Respondent related to a share purchase agreement involving MCX-SX shares. The dispute arose from the Respondent's alleged failure to honor its obligations under the LoU to purchase shares from the Petitioner after a Scheme of Reduction was approved by the Bombay High Court. The Petitioner had previously filed a suit in the Bombay High Court

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## Facts

IL&FS Financial Services Ltd. (ILFS), a financial creditor, held approximately 5% of the equity shares of Multi Commodity Exchange of India Ltd. (MCX). As part of a negotiation, ILFS agreed to exit MCX, transferring its investment to another investor, IFCI. Part of the proceeds from this transfer was to be used by ILFS to purchase 4,42,00,000 equity shares in MCX Stock Exchange Ltd. (MCX-SX), representing 2.46% of its equity share capital. La-Fin Financial Services Pvt. Ltd. (La-Fin), the respondent, as a condition to ILFS purchasing the MCX-SX shares, issued a Letter of Undertaking (LoU) dated 20.08.2009, agreeing to purchase ILFS's MCX-SX shares at a later date. The LoU stipulated that La-Fin would offer to buy the shares after one year but no later than three

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## Issues and analysis

### Issue 1: Whether the 'Letter of Undertaking' issued by the Respondent constitutes a 'Financial Debt' as …

**Ratio:** A 'Financial Debt' under Section 5(8) of the IBC means a debt along with interest, if

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**Reasoning:** The NCLT reasoned that the 'Letter of Undertaking', coupled with the Share Purchase

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**Interpretation:** The court interpreted Section 5(8) of the IBC to include transactions that,

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**Application:** The NCLT applied this interpretation to the facts, noting that La-Fin's

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## Parties

- **Judges:** M.K. Sh…; Bhaskara Pantula…
- **Appellants:** IL & FS FINANCIAL…
- **Respondents:** La-Fin Financial…
- **Advocates:** Venkatesh…; Ashish…; +5 more

## Timeline

- **2009-08-20 — Share Purchase Agreement and Letter of…**: IL&FS purchases shares of MCX-SX, and La-Fin issues a Letter of Undertaking to repurchase…
- **2009-11-20 — EOGM Notice fr…**: IL&FS receives notice of an Extraordinary General Meeting (EOGM) from MCX-SX regarding a…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 5(8) — Definitions](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-5)

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