Disbursal Against Time Value Of Money Constitutes Financial Debt: NCLT Kolkata

The National Company Law Tribunal, Kolkata bench, consisting of Smt. Bidisha Banerjee (Member - Judicial) and Cmde Siddharth Mishra (Member - Technical), has allowed an application filed under Section 7 of the IBC seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor. The bench held that the financial debt exists where money is disbursed against the consideration for time value of money. The bench also observed that once the “debt” and “default” are admitted or established, the petition must be admitted. Background The financial creditor (Horizon Commtrade Limited) provided a loan to the corporate debtor (Jasmine Commodities Pvt. Ltd.) in terms of the intercompany loan agreement. As per the loan agreement, the repayment tenure was 55 months from the date of disbursal, with the principal and interest due within 7 days of the tenure's completion, i.e., by April 17, 2024. On April 20, 2024, the financial creditor issued notice to the corporate debtor. However, the corporate debtor did not make the payment. Aggrieved by this, the financial creditor filed the present application under Section 7 of the IBC seeking direction to initiate CIRP against the corporate debtor. Contention of the Parties The financial creditor submitted that it made payment to the borrower as per the requirement raised by them in terms of the loan agreement, and the corporate debtor defaulted on repayment of the loan. Per contra, the corporate debtor submitted that the Adjudicating Authority is not a substitute for a recovery forum/trial court, and for the same, it relied on the Hon'ble Supreme Court's ruling in the case of M/s. S.S Engineers v. Hindustan Petroleum. It claimed that no cause of action has ever arisen in favor of the petitioner, and therefore the petition is liable to be dismissed due to the absence of a valid cause of action. Observations of the Adjudicating Authority The Adjudicating Authority found clear evidence of disbursal of funds under the loan agreement. The tribunal observed that the corporate debtor has not denied its failure to pay the debt. Hence, “default” is admitted. They held that once the “debt' and “default” are admitted or established, the petition must be admitted. To define the “Financial Debt,” the tribunal discussed the Hon'ble Supreme Court's rulings in the cases of Pioneer Urban Land and Infrastructure Ltd. v. Union of India (2019) 8 SCC 416 and Anuj Jain, Interim Resolution Professional for Jaypee Infratech Ltd. v. Axis Bank Limited (2020) 8 SCC 401 and held that the essential condition of financial debt is disbursement against the consideration for time value of money. The tribunal further discussed the Apex Court's rulings in the cases of Indus Biotech Private Limited v. Kotak India Venture (Offshore) Fund (2021) 6 SCC 436 and Innoventive Industries Ltd. v. ICICI Bank (2018) 1 SCC 407 and reiterated that once the debt and default have been established, the adjudicating authority must admit the application under Section 7 of the IBC. Case Title: Horizon Commtrade Limited v. Jasmine Commodities Private Limited Case Number: Company Petition (IB) No. 271/KB/2024 For Applicant: Mr. Mukesh Singh Bhaduria, PCMA For Respondent: Mr. Neeraj Kant Singh, Adv. Bench: Smt. Bidisha Banerjee (Member - Judicial) and Cmde Siddharth Mishra (Member - Technical) Order Date: 08/04/2025 Click here to download Order/Judgement

Disbursal Against Time Value Of Money Constitutes Financial Debt: NCLT Kolkata

Mohd.Rehan Ali

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