Corporate insolvency proceedings cannot be initiated once debt is converted into capital i.e. once the Debt is converted into Capital it cannot be termed as Financial Debt – Mrs. Rita Kapur Vs. Invest Care Real Estate LLP – NCLAT New Delhi
NCLAT held that the Corporate Debtor has failed to provide audited profit loss account for the years 2013-14 till date to the Appellant, it seems that the Corporate Debtor is suffering from several irregularities. However, the provisions of Section 7 of the I&B Code, 2016 provides for initiation of the CIRP by ‘Financial Creditor; only and that too, if there is a ‘Debt’ and ‘Default’. So, the first question is the Appellant must be a ‘Financial Creditor’. Section 5(7) of I& B Code, 2016 defines ‘Financial Creditor’ and Section 5(8) I&B Code, 2016 defines ‘Financial Debt’.
