Advance payments for goods are not financial debt where the transaction lacks loan features and time value of money.

Advance payments made under purchase orders for supply of goods did not constitute a financial debt under the Insolvency and Bankruptcy Code, 2016, because the transaction was a commercial procurement arrangement and not a disbursement by way of loan or against the time value of money. The existence of a commercial court decree did not change the underlying character of the claim. In the absence of any term showing repayment as a debt repayable over time with interest, the amount did not satisfy the requirements of financial debt under section 5(8). The Resolution Professional's treatment of the claim as otherwise was therefore found to be unsustainable.

---

---

Issues: Whether the amount advanced under purchase orders for supply of goods, which formed the basis of a commercial court decree, constituted a financial debt under the Insolvency and Bankruptcy Code, 2016.

Analysis: The claim arose from advance payments made against purchase orders for supply of goods and not from any disbursement made as a loan or against consideration for the time value of money. The transaction was a commercial transaction for procurement of goods, falling within the scope of a commercial dispute under the Commercial Courts Act, 2015. The existence of a money decree did not alter the underlying nature of the transaction. In the absence of any term showing repayment of the amount as a debt repayable over time with interest, the claim did not satisfy the requirements of financial debt under section 5(8) of the Insolvency and Bankruptcy Code, 2016.

Conclusion: The claim was not a financial debt and the Resolution Professional's decision to treat it otherwise suffered from no infirmity.

---