# In the matter of Citystar Infrastructures Limited

> NCLT judgment dated 2024-10-24. Citation: TCN-2024-NCLT-00355. The case involves an application under Section 7 of the Insolvency & Bankruptcy Code, 2016,…

- **Court:** NCLT
- **Order date:** 24 Oct 2024
- **Citation:** TCN-2024-NCLT-00355
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/citystar-infrastructures-limited-6dd808c3

## Summary

### Background

The case involves an application under Section 7 of the Insolvency & Bankruptcy Code, 2016, filed by Sumangal Dealmark Pvt. Ltd. & Ors. (Financial Creditor) against Citystar Infrastructures Limited (Corporate Debtor) seeking initiation of Corporate Insolvency Resolution Process (CIRP). The Financial Creditor claims that the Corporate Debtor defaulted on a debt of Rs. 78,73,12,958. The Corporate Debtor argues that the agreement between them is a joint development agreement and that the amount cannot be construed as 'Financial Debt'. The Corporate Debtor also claims that the Financial Creditor did not provide funds for obtaining a sanctioned plan from the Kolkata Municipal Corporation, leading to delays in the project.

## Facts

Sumangal Dealmark Pvt. Ltd. (Financial Creditor) filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, against Citystar Infrastructures Limited (Corporate Debtor) for initiating CIRP. The Financial Creditor and Corporate Debtor entered into an agreement on February 18, 2014, where the Financial Creditor agreed to provide financial assistance to the Corporate Debtor for a real estate project. The Financial Creditor disbursed Rs. 13,20,00,000 to the Corporate Debtor. The agreement stipulated that the Financial Creditor would receive a 50% share of the project's profits in lieu of interest. The Corporate Debtor was also party to a development agreement dated October 12, 2007, with Bengal Secretariat Co-operative Land Mortgage Bank and Housing

…

## Issues and analysis

### Issue 1: Whether the 'interest-free security deposit' provided by the Financial Creditor constitutes a …

**Ratio:** A 'financial debt' under Section 5(8) of the IBC includes amounts disbursed against the

…

**Reasoning:** The NCLT reasoned that the agreement provided for a 50% share of the project's profits in

…

**Interpretation:** The term 'financial debt' is interpreted broadly to include any debt disbursed

…

**Application:** The NCLT applied this principle to the facts, finding that the 'interest-free

…

## Parties

- **Judges:** BIDISHA BA…; D. Ar…
- **Appellants:** Sumangal Dealmark…
- **Respondents:** Citystar Infrastru…

## Timeline

- **2007-10-12 — Development A…**: Development agreement between Corporate Debtor and Bengal Secretariat Co-operative Land…
- **2014-02-18 — Agreement between Financial Creditor and…**: Agreement where Financial Creditor agreed to provide financial assistance to Corporate…

## Legal provisions

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

---

This is a preview. The full structured summary, issues, precedents and source judgment are available on CaseEase - Legal Intelligence Simplified: https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/citystar-infrastructures-limited-6dd808c3