Amount disbursed against consideration for the time value of money in the form of 50% of the share profit contemplating return of the amount after the completion of the project has the commercial effect of borrowing as defined under Section 5(8)(f) of IBC – Sumangal Dealmark Pvt. Ltd. and Ors. Vs. Citystar Infrastructures Ltd. – NCLT Kolkata Bench
In this case, the financial creditor is supposed to render financial assistance (which has been termed as interest free security deposit) which the corporate debtor is required to refund after the completion of the said project along with 50 per cent of the profit share.
Hon’ble NCLT Kolkata Bench held that the amount has been disbursed against consideration for the time value of money in the form of 50 per cent of the share profit. The disbursement contemplates return of the amount after the completion of the project. Thus, the transaction has the commercial effect of borrowing as defined under Section 5(8)(f) as well, apart from main Section 5(8) of IBC.