2018 (7) TMI 1841 - AT - Insolvency and Bankruptcy

Corporate insolvency process - eligibility as Financial Creditor as defined under Section 5(7) & (8) of the Insolvency and Bankruptcy Code, 2016 - Held that - We find that though the Appellants by its resolution dated 16th May, 2013 decided to grant unsecured loan to Saroj Realtors and Developers Private Limited with 24% interest payable annually and for return of the principal amount along with interest on or before 31st March, 2016, but the Board of Directors of the Corporate Debtor in their meeting held on 29th March, 2014 decided to accept the amount as interest free unsecured loan . From the aforesaid decision of the Corporate Debtor , we find that the Corporate Debtor never accepted to take loan with 24% interest and given no undertaking to repay the amount with interest within specific period. On the basis of such evidence, the Appellants cannot claim to owe financial debt from the Corporate Debtor and thereby cannot be claimed to be a Financial Creditor as defined under Section 5(7) & (8) of the Insolvency and Bankruptcy Code, 2016.

Summary

The National Company Law Appellate Tribunal dismissed the appeal as the Corporate Debtor did not accept a loan with interest, making the Appellants ineligible to be considered a Financial Creditor under the Insolvency and Bankruptcy Code, 2016. The decision was based on the Corporate Debtor's acceptance of an interest-free loan, not a loan with 24% interest as initially proposed by the Appellants.