Financial debt under IBC need not follow Section 8 notice, and continuing acknowledgment kept the insolvency claim within limitation.

An inter-corporate deposit with agreed interest and treatment in the accounts as borrowing was characterised as financial debt because it involved disbursal against consideration for the time value of money. On that basis, a Section 7 insolvency application by a financial creditor did not require a Section 8 demand notice, which applies to operational debt. Limitation was also rejected because account extracts and admitted payments showed continuing acknowledgment and part-payment within the relevant period, and the pleaded default date brought the claim within time. The insolvency application therefore survived both objections.

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Issues: (i) whether the amount advanced as inter-corporate deposit constituted a financial debt under the Insolvency and Bankruptcy Code, 2016 so that no demand notice under Section 8 was required for an application under Section 7; (ii) whether the application under Section 7 was barred by limitation.

Issue (i): whether the amount advanced as inter-corporate deposit constituted a financial debt under the Insolvency and Bankruptcy Code, 2016 so that no demand notice under Section 8 was required for an application under Section 7.

Analysis: The amount was advanced as an inter-corporate deposit with agreed interest and was treated in the records as a borrowing. Such a transaction fell within the concept of a debt disbursed against consideration for the time value of money and therefore answered the description of financial debt. An application by a financial creditor under Section 7 does not require a demand notice under Section 8, which is a requirement associated with operational debt proceedings.

Conclusion: The objection based on absence of a Section 8 demand notice was rejected, and the claim was treated as one under Section 7 based on financial debt.

Issue (ii): whether the application under Section 7 was barred by limitation.

Analysis: The limitation plea was tested against the account extracts and the admitted payments made up to 2017. The records showed continuing acknowledgment and part-payment within the relevant period, and the date of default pleaded in the application brought the claim within the applicable limitation period. Limitation under the Limitation Act applies to insolvency proceedings, but on the facts proved here the claim was not stale.

Conclusion: The plea of limitation was rejected and the application was held to be within time.

Final Conclusion: The insolvency application was not defeated either by the alleged absence of a statutory demand notice or by limitation, and the corporate debtor's challenge failed.

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