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TMI Blog2022 (1) TMI 1178X X X X Extracts X X X X X X X X Extracts X X X X ..... unt to meet the working capital requirements of the Corporate Debtor. But the amount has not been paid back by the Corporate Debtor to the applicant. Therefore, in terms of the decision referred, the defaulted amount comes under the definition of Financial Debt and the applicant is a Financial Creditor. Application allowed - List the matter on 14/02/2022. - IB No. 749/ND/2021 - - - Dated:- 19-1-2022 - Abni Ranjan Kumar Sinha, Member (J) And L.N. Gupta, Member (T) For the Appellant : Avdhesh Bairwa, Advocate For the Respondents : Pervinder, Advocate ORDER Abni Ranjan Kumar Sinha, Member (J) 1. The present application is filed under Section 7 of the IBC, 2016 for initiation of CIRP against Corporate Debtor on the ground of non-payment of short-term loan. 2. We have heard the Learned Counsel appearing for the applicant, on the point of issuance of notice and the order was reserved on 17th December, 2021. 3. The Learned Counsel appearing for the applicant submitted that the applicant is a Financial Creditor in terms of Section 5(8) of the IBC, 2016. He further contended that the Corporate Debtor by its Board Resolution dated 25th July, 2020 requested ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been quoted above. Section 5(8) defines 'financial debt' to mean a debt along with interest if any which is disbursed against the consideration of the time value of money and includes money borrowed against the payment of interest, as per Section 5(8)(a) of the IBC. The definition of 'financial debt' in Section 5(8) includes the components of sub-clauses (a) to (i) of the said Section. 22. The NCLT and NCLAT have overlooked the words if any which could not have been intended to be otiose. 'Financial debt' means outstanding principal due in respect of a loan and would also include interest thereon, if, any interest were payable thereon. If there is no interest payable on the loan, only the outstanding principal would qualify as a financial debt. Both NCLAT and NCLT have failed to notice clause (f) of Section 5(8), in terms whereof 'financial debt' includes any amount raised under any other transaction, having the commercial effect of borrowing. 23. Furthermore, sub-clauses (a) to (i) of Sub-section 8 of Section 5 of the IBC are apparently illustrative and not exhaustive. Legislature has the power to define a word in a statute. Such def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts in the principal clause. In yet other words, the essential element of disbursal, and that too against the consideration for time value of money, needs to be found in the genesis of any debt before it may be treated as financial debt within the meaning of Section 5(8) of the Code. This debt may be of any nature but a part of it is always required to be carrying, or corresponding to, or at least having some traces of disbursal against consideration for the time value of money. 47. As noticed, the root requirement for a creditor to become financial creditor for the purpose of Part II of the Code, there must be a financial debt which is owed to that person. He may be the principal creditor to whom the financial debt is owed or he may be an assignee in terms of extended meaning of this definition but, and nevertheless, the requirement of existence of a debt being owed is not forsaken. 48. It is also evident that what is being dealt with and described in Section 5(7) and in Section 5(8) is the transaction vis-a-vis the corporate debtor. Therefore, for a person to be designated as a financial creditor of the corporate debtor, it has to be shown that the corporate debtor owe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nancial creditor , having their specific and distinct connotations and roles in insolvency and liquidation process of corporate persons, have only been defined in Part II whereas the expressions secured creditor and security interest are defined in Part I. 50. A conjoint reading of the statutory provisions with the enunciation of this Court in Swiss Ribbons [Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17], leaves nothing to doubt that in the scheme of the IBC, what is intended by the expression financial creditor is a person who has direct engagement in the functioning of the corporate debtor; who is involved right from the beginning while assessing the viability of the corporate debtor; who would engage in restructuring of the loan as well as in reorganisation of the corporate debtor's business when there is financial stress. In other words, the financial creditor, by its own direct involvement in a functional existence of corporate debtor, acquires unique position, who could be entrusted with the task of ensuring the sustenance and growth of the corporate debtor, akin to that of a guardian. In the context of insolvency resolution process, this class of s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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