For any debt to qualify as a Financial Debt, the disbursement of debt should be against consideration for the time value of money irrespective of whether the debt is interest bearing or not is material – Metamorphosis Trading LLP Vs. Sankalp Engineering and Services Pvt. Ltd. – NCLAT New Delhi

Hon’ble NCLAT held that a plain reading of Sections 5(7) and 5(8) of the IBC shows that for any creditor to become financial creditor under Section 5(7) of IBC, there must be a financial debt and for any debt to qualify as a financial debt, that debt along with interest, if any, should have been disbursed against the consideration for the time value of money. Use of expression ‘if any’ as suffixed to the word ‘interest’ leaves no shadow of doubt that the component of interest is not a sine qua non for bringing the debt within the fold of financial debt. What is material however is that the disbursement of debt should be against consideration for the time value of money irrespective of whether the debt is interest bearing or not.

For any debt to qualify as a Financial Debt, the disbursement of debt should be against consideration for the time value of money irrespective of whether the debt is interest bearing or not is material – Metamorphosis Trading LLP Vs. Sankalp Engineering and Services Pvt. Ltd. – NCLAT New Delhi Read Post »