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Issues: Whether the amount advanced to the corporate debtor constituted a financial debt and whether admission of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was justified.
Analysis: Financial debt under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 requires disbursal against consideration for the time value of money, and the definition is inclusive. The absence of a formal loan agreement was not ative by itself, because the record contained demand notices claiming principal and interest, the corporate debtor's reply admitting the loan and disputing only the tenure, and Form 16-A showing deduction and deposit of TDS on interest under Section 194-A of the Income-tax Act, 1961. The definition of transaction under Section 3(33) of the Code is also inclusive, and Rule 3(1)(d) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 contemplates proof of financial debt from other documents as well. The plea that the creditors lacked a banking licence was rejected because Section 22 of the Banking Regulation Act, 1949 prohibits carrying on banking business, not the advancing of a loan in an isolated transaction.
Conclusion: The debt was proved to be a financial debt and the order admitting the Section 7 application was ; the appeal failed.
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