NCLAT held that the transaction between parties constituted a ...

Financial Transaction Deemed Loan Under IBC Section 5(8) Based on Interest Rate, Repayment Terms, and Explicit Documentation

May 28, 2025

Case Laws IBC AT

NCLAT held that the transaction between parties constituted a "financial debt" under IBC Section 5(8). The tribunal determined the transaction was a loan, not a sale/purchase, based on multiple critical factors: (1) interest rate of 18% on monthly compounding, (2) fixed repayment date of 31.03.2021, (3) explicit acknowledgment of loan in financial statements, and (4) clauses indicating property could be mortgaged for loan repayment. The agreements demonstrated clear intention of financial assistance with time value of money. Consequently, the NCLT's previous order was set aside, and the Section 7 petition was admitted, recognizing the appellant as a financial creditor under the Insolvency and Bankruptcy Code.

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NCLAT held that the transaction between parties constituted a ...

Financial Transaction Deemed Loan Under IBC Section 5(8) Based on Interest Rate, Repayment Terms, and Explicit Documentation

May 28, 2025

Case Laws IBC AT

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