Share purchase with exit option/Annual Put Option cannot be considered as a debt which is disbursed against consideration of time value for money – GVFL Trustee Company Pvt. Ltd. Vs. Hubtown Ltd. – NCLT Mumbai Bench
December 24, 2021
The Adjudicating Authority held that a shareholder is different from a lender. Equity is not a debt and as such any contract for acquisition of shareholding in a body corporate can never result in the formation of a debt. Share purchase in HBT Mehsana by GVFL with exit option of inter alia “Annual Put Option” cannot be considered as a debt which is disbursed against consideration of time value for money. The Bench also held that Internal Rate of Return (IRR) cannot be equated with interest payments.