Global Credit Capital Limited & Anr. vs Sach Marketing Pvt. Ltd. & Anr

Court

Supreme Court of India

Date

25 April 2024

Case No.

Civil Appeal No. 1143 of 2022

Result

Dismissed

Bench

Abhay S. Oka, Pankaj Mithal

Citation

[2024] 5 S.C.R. 215 : 2024 INSC 340

Acts & Sections

Insolvency and Bankruptcy Code, 2016

Issue for consideration

(i) Whether there can be debt within the meaning of sub-section

(11) of section 5 of the Insolvency and Bankruptcy Code, 2016;

(ii) What is the test to determine whether a debt is a financial debt within the meaning of sub-section (8) of section 5 of the 2016 Code; (iii) Is it necessary to ascertain what is the real nature of the transaction reflected in the writing, while deciding the issue whether a debt is a financial debt or an operational debt; (iv) When is the debt, an operational debt.

Headnote

Insolvency and Bankruptcy Code, 2016 – Whether there can be debt within the meaning of sub-section (11) of section 5 of the 2016 Code.

Held: There cannot be a debt within the meaning of sub-section

(11) of section 5 of the IB Code unless there is a claim within the meaning of sub-section (6) of section 5 of thereof. [Para 20 (a)] Insolvency and Bankruptcy Code, 2016 – sub-section (8) of s.

5 – What is the test to determine whether a debt is a financial debt within the meaning of sub-section (8) of section 5 of the 2016 Code.

Held: Sub-section (8) of section 5 defines “financial debt” – The definition incorporates the expression “means and includes” – The first part of the definition, which starts with the word “means”, provides that there has to be a debt along with interest, if any, which is disbursed against the consideration for the time value of money – The word “and” appears after the word “money” – Before the words “and includes”, the legislature has not incorporated a comma – After the word “includes”, the legislature has incorporated categories (a) to (i) of financial debts – Thus, the test to determine whether a debt is a financial debt within the meaning of sub-section (8) of section 5 is the existence of a debt along with interest, if any, which is disbursed against the consideration for the time value of money – The cases covered by categories (a) to (i) of sub-section (8) must satisfy the said test laid down by the earlier part of sub-section (8) of section 5. [Paras 12 and 20 (b)]

Insolvency and Bankruptcy Code, 2016 – Is it necessary to ascertain what is the real nature of the transaction reflected in the writing, while deciding the issue whether a debt is a financial debt or an operational debt.

Held: While deciding the issue of whether a debt is a financial debt or an operational debt arising out of a transaction covered by an agreement or arrangement in writing, it is necessary to ascertain what is the real nature of the transaction reflected in the writing – The written document cannot be taken for its face value. [Paras 20 (c) and 14]

Insolvency and Bankruptcy Code, 2016 – When is the debt, an operational debt:

Judgment Abhay S. Oka, J. 1. These appeals take exception to the separate impugned judgments and orders dated 7th October 2021 and 29th October 2021 passed by the National Company Law Appellate Tribunal (for short, ‘the NCLAT’). In Civil Appeal no.1143 of 2022, the issue involved is whether the first respondent is a financial creditor within the meaning of sub-section (7) of Section 5 of the Insolvency and Bankruptcy Code, 2016 (for short, ‘the IBC’). The corporate debtor, in this case, is M/s. Mount Shivalik Industries Limited. The impugned judgment and order dated 7th October 2021 holds th

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