Financial debt under the Insolvency and Bankruptcy Code upheld where disbursal, interest, and acknowledgements showed time value of money.

Repeated opportunities to file a reply were granted to the corporate debtor, including adjournments and time after the pandemic disruption, but no reply was filed within the time allowed; the forfeiture of that right was therefore upheld and no procedural illegality was found. The document also states that a disbursal of Rs. 1 crore, supported by subsequent acknowledgements and a dishonoured cheque, carried 18% interest and reflected consideration for the time value of money. On that basis, the transaction was treated as a financial debt under the Insolvency and Bankruptcy Code, with the promissory note regarded only as evidence of acknowledgement. The insolvency admission order was sustained.

---

---

Issues: (i) whether the appellant was denied a fair opportunity to file a reply before the insolvency application was admitted; and (ii) whether the amount of Rs. 1 crore constituted a financial debt within the meaning of the Insolvency and Bankruptcy Code, 2016.

Issue (i): whether the appellant was denied a fair opportunity to file a reply before the insolvency application was admitted

Analysis: The record showed repeated appearances for the corporate debtor, multiple adjournments, and specific time granted to file a reply. Even after the matter resumed following the pandemic disruption, further opportunity was afforded, but the reply was still not filed within the time granted. The forfeiture of the right to file a reply was therefore based on the conduct of the corporate debtor and the sequence of opportunities already granted.

Conclusion: The forfeiture of the right to file reply was upheld and no illegality was found in the procedure adopted by the Adjudicating Authority.

Issue (ii): whether the amount of Rs. 1 crore constituted a financial debt within the meaning of the Insolvency and Bankruptcy Code, 2016

Analysis: The disbursal of Rs. 1 crore was found to be established by the record, including subsequent acknowledgements and a dishonoured cheque. The transaction carried interest at 18% per annum, indicating consideration for time value of money. The promissory note was treated only as evidence of acknowledgement of debt and not as the basis of enforcement. On that basis, the statutory ingredients of a financial debt were held to be satisfied.

Conclusion: The amount was held to be a financial debt under Section 5(8) of the Insolvency and Bankruptcy Code, 2016.

Final Conclusion: The insolvency admission order was sustained, and the appeal failed on both the procedural challenge and the challenge to the character of the debt.

Ratio Decidendi: A transaction carrying disbursal with interest and evidenced acknowledgements of liability may constitute a financial debt where it exhibits the essential element of consideration for the time value of money.

---