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TMI BlogFinancial debtX X X X Extracts X X X X X X X X Extracts X X X X ..... l lease under the Indian Accounting Standards or such other accounting standards as may be prescribed; (e) receivables sold or discounted other than any receivables sold on non-recourse basis; (f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing; Explanation. -For the purposes of this sub-clause,- (i) any amount raised from an allottee under a real estate project shall be deemed to be an amount having the commercial effect of a borrowing; and (ii) the expressions, allottee and real estate project shall have the meanings respectively assigned to them in clauses (d) and (zn) of section 2 of the Real Estate (Regulation and Development) Act, 2016; (g) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid; an amount of money given for a particular purpose. 71. In the present context, it is clear that the expression disburse would refer to the payment of instalments by the allottee to the real estate developer for the particular purpose of funding the real estate project in which the allottee is to be allotted a flat/apartment. The expression disbursed refers to money which has been paid against consideration for the time value of money . In short, the disbursal must be money and must be against consideration for the time value of money , meaning thereby, the fact that such money is now no longer with the lender, but is with the borrower, who then utilises the money. Thus far, it is clear that an allottee disburses money in the form of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a financial debt if they had the commercial effect of a borrowing. 77. A perusal of these definitions would show that even though the petitioners may be right in stating that a borrowing is a loan of money for temporary use, they are not necessarily right in stating that the transaction must culminate in money being given back to the lender. The expression borrow is wide enough to include an advance given by the homebuyers to a real estate developer for temporary use i.e. for use in the construction project so long as it is intended by the agreement to give something equivalent to money back to the homebuyers. The something equivalent in these matters is obviously the flat/apartment. Also of importance is the expression commercial effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) IBC. The definition of financial debt in Section 5(8) includes the components of sub-clauses (a) to (i) of the said Section. 22. 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 S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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