Case Overview
This proceeding involved an application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016, by Genius Township Pvt. Ltd. (Financial Creditor) against DYS Royals Pvt. Ltd. (Corporate Debtor). The dispute arose from a Share Purchase Agreement (SPA) dated 31.03.2023, wherein Genius Township agreed to purchase 51,69,734 shares of Standard Capital Markets Limited from DYS Royals for a total consideration of ₹31,01,84,040 (₹60 per share).
The Financial Creditor's principal allegation was that it had disbursed ₹7,60,00,000 to the Corporate Debtor between June and July 2023 based on assurances that the shares would be transferred. Despite this payment and subsequent assurances that the transfer would be completed by August 2024, DYS Royals failed to transfer the shares and instead alienated the entire shareholding to a third party by October 2024. Genius Township contended this failure constituted a default on a financial debt, as the payment was made for the 'time value of money', and issued a formal Notice of Default on 03.01.2025, demanding repayment.
The Corporate Debtor denied the allegations, arguing the transaction was a commercial share purchase and not a financial debt under the IBC. DYS Royals admitted to the SPA but claimed Genius Township had itself breached the contract by failing to pay the agreed-upon upfront amount of ₹15 crore on the execution date (31.03.2023), instead paying only ₹7.6 crore later. The Corporate Debtor also asserted it had repaid ₹3,88,55,000 to the Applicant between 05.01.2024 and 11.10.2024, leaving a net balance of ₹3,71,45,000. It further claimed it was forced to sell the shares to other buyers at a significant loss (₹2.71 to ₹3.14 per share) due to the Applicant's breach.
Final Outcome
After reviewing submissions and material on record, the NCLT bench found that the dispute fundamentally concerned alleged breaches of contractual obligations from the Share Purchase Agreement. The tribunal concluded that the nature of the transaction and the subsequent dispute did not establish a 'financial debt' as defined under Section 5(8) of the Insolvency and Bankruptcy Code, 2016. Consequently, the application under Section 7 was held to be non-maintainable.
The petition, registered as IB-154(ND)/2025, was dismissed without costs. The parties were left at liberty to pursue other legal remedies available to them under law for the contractual dispute.
Topics: Insolvency, Contractual Dispute