Whether disbursement of property (instead of disbursement of money) is covered by Financial Debt | Whether Section 7 application can be filed on default in balance payment of sale consideration | Whether conversion of sale consideration into loan can be treated as Financial Debt under Section 5(8) of IBC – Sandeep Mittal Vs. ASREC (India) Ltd. and Ors. – NCLAT New Delhi
In this important judgment, Hon’ble NCLAT held that:
(i) The guarantee by the Corporate Debtor for payment of purchase price, cannot in any manner be read as any financial debt owned by the Corporate Debtor.
(ii) The letter, Agreement and Guarantee Deed documents clearly indicate and prove that transaction was sale and purchase transaction and in no manner can be said to be a financial transaction under which financial debt was undertaken to be paid by the Corporate Debtor to the Financial Creditor.
(iii) Disbursal of property cannot be accepted to be covered by definition of ‘financial debt’ under Section 5(8) of IBC.
(iv) Nature of transaction is to be determined from the documents reflecting the transaction and any subsequent letter or subsequent pleadings of the parties cannot be considered in the facts of the present case.
