State Bank of India Vs. Mr. Rajendra Bhuta

Clause (f) of the section 5(8) is of particular relevance in the present context. As is apparent the definition is essentially an inclusive definition and not an exhaustive one. A ‘debt’ in order to qualify as a ‘financial debt’ first needs to have been disbursed against ‘the consideration for the time value of money’. In addition, the amount inter alia raised under a forward purchase agreement would only become a ‘financial debt’ when it has the ‘commercial effect of a borrowing’. The amount raised under a FPA would not come within the definition of a financial debt unless it bears the dual attributes of having been i) disbursed against the consideration for time value of money and ii) has the commercial effect of a borrowing. Once the amount raised under such an agreement is classified as a financial debt, any liability in respect of the guarantee for transactions referred to in clause (f) would there upon be a financial debt in terms of clause (i) of the section. For the purpose of ascertaining the above parameters, the recitals of the documents, in this case the FPAs, would assume significance. The effect of an agreement can only be derived from the contents thereof. It would therefore be appropriate to refer to the terms of the agreements.