Financial debt under insolvency law requires disbursement to the corporate debtor against time value of money; a mere reference is insufficient.

A claim can sustain a Section 7 insolvency application only if there is a disbursement to the corporate debtor against consideration for the time value of money. Here, the memorandum of undertaking was executed with a different entity, and the corporate debtor was not a party to it; a mere reference to setting up an IT park did not create borrowing or disbursement against the corporate debtor. The attachment order under the Haryana depositor-protection law also did not convert the claim into financial debt. The Section 7 application was therefore not maintainable, and rejection of the insolvency invocation was affirmed.

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Issues: Whether the claim arising from the memorandum of undertaking constituted a financial debt against the corporate debtor so as to sustain a Section 7 insolvency application.

Analysis: The memorandum of undertaking was executed between the appellant and a different entity, while the corporate debtor was not a party to that arrangement. A mere reference in the memorandum that the corporate debtor was to set up an IT park did not, by itself, create a borrowing or disbursement against the corporate debtor. The element of disbursement against consideration for the time value of money was found to relate to the other entity and not to the corporate debtor. The attachment order under Section 4 of the Haryana Protection of Interests of Depositors in the Financial Establishment Act, 2013 also did not convert the claim into a financial debt against the corporate debtor.

Conclusion: The claim did not amount to a financial debt against the corporate debtor, and the rejection of the Section 7 application was in law. The appeal failed.

Final Conclusion: The insolvency invocation against the corporate debtor was not maintainable on the facts proved, and the dismissal of the challenge to rejection of the Section 7 application was affirmed.

Ratio Decidendi: A claim can sustain a Section 7 application only if the disbursement is shown to have been made to the corporate debtor against the time value of money; a contractual reference to the corporate debtor in an arrangement to which it is not a party does not by itself create a financial debt.

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