Amounts Shown As 'Other Advances' In Company's Balance Sheet Not Financial Debt Under IBC: NCLAT
The National Company Law Appellate Tribunal (NCLAT) at Delhi has recently held that amounts shown in a company's balance sheet as “other advances”, including sums advanced years earlier without any repayment demand, do not qualify as borrowings and cannot therefore give rise to a financial debt under the Insolvency and Bankruptcy Code A coram of Chairperson Justice Ashok Bhushan...
The National Company Law Appellate Tribunal (NCLAT) at Delhi has recently held that amounts shown in a company's balance sheet as “other advances”, including sums advanced years earlier without any repayment demand, do not qualify as borrowings and cannot therefore give rise to a financial debt under the Insolvency and Bankruptcy Code
A coram of Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra delivered the ruling on December 10, 2025, while dismissing appeals filed by Surender Modi and Primex Estates Pvt. Ltd who allegedly advanced money to Vibrant Buildwell Pvt. Ltd in 2007 but never sought repayment until the company entered insolvency proceedings in 2022.
The tribunal found that the amounts were “provided as an advance and were treated as a liability and not a borrowing” and therefore “do not partake the character of financial debt”
It also noted that the “inordinate and unexplained delay” of nearly fifteen years in seeking repayment “does cast doubts on the legitimacy and bonafide of the alleged transaction”
Vibrant Buildwell entered CIRP on February 22, 2022, and the Resolution Professional invited claims on February 24. Modi claimed Rs 1.09 crore based on an alleged 2007 loan agreement. Primex Estates claimed Rs 9.43 crore which included Rs 30.95 lakh advanced in 2007 and more than Rs 9 crore as interest.
The RP rejected both claims after noting that the amounts were recorded in the FY 2016 to 2017 balance sheet under “Other Advances” rather than under borrowings.
Modi argued that the Supreme Court's COVID related extension of limitation protected their filings. They also argued that the entries under “Other Long-Term Liabilities” established that the transactions were financial debt.
The RP and the Successful Resolution Applicant submitted that the loan agreements were inconsistent, not supported by board resolutions or proper stamp paper, and had been executed between two brothers who were erstwhile directors. They also pointed out the complete absence of any repayment demand for fifteen years.
The tribunal agreed that the claims were not time-barred. However, it ruled that the merits of the claims failed because the sums were never treated as loans in the company's accounts.
It observed that “had the amount of Rs 5.10 lakh appeared under the heading of “Long Term Borrowings”, there would have been no doubt that the same was a transaction in the nature of financial debt. However, we find that the sum appears under the sub-category of “Other Advances” under the category of “Other Long Term Liabilities”. It is clear from the above categorisation that the sum was provided as an advance and was treated as a liability and not a borrowing in the balance sheet and therefore does not partake the character of financial debt."
Finding that no genuine borrowing had taken place and that the claims lacked credibility, the NCLAT dismissed both appeals and upheld the NCLT's rejection of the claims.
Case Title: Surender Modi v. Ashish Singh with Primex Estate Private Limited v. Ashish Singh & Ors.
Case Number: Company Appeal (AT) (Insolvency) No. 1734 of 2025 with Company Appeal (AT) (Insolvency) No. 1735 of 2025
For Appellant: Advocates Anirban Bhattacharya and Rajeev Choudhary
For Respondent: Senior Advocate Abhijeet Sinha with Advocates Sumant Batra, Abhishek Parmar, Sarthak Bhandari, and Riya Kaur Arora for RP; Senior Advocate Krishnendu Dutta with Advocates Saurabh Kalia, Ateendra Saumya Singh, and Anand Mishra for SRA.