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Introduction In accordance with the Insolvency and Bankruptcy Code (IBC), the definition of "financial debt" has been subjected to a comprehensive review by the judicial system. As a result, courts and tribunals have provided in-depth insights into the many types of financial transactions. During a recent case, the National Company Law Appellate Tribunal (NCLAT) discussed the question of whether or not an advance payment made in accordance with an oral agreement for the acquisition of shares is considered to be "financial debt" in accordance with the Insolvency and Bankruptcy Code (IBC) (citation: (2024) ibclaw.in 63 NCLAT). A Comprehensive Understanding of the Concept of "Financial Debt" The International Business Code (IBC) gives a thorough definition of the term "financial debt" in its section 5(8). This definition encompasses not only a debt but also any interest that is given in exchange for the worth of money over their lifetime. Section 5(7) states that the term "financial creditor" refers to any person or organisation that is owed a financial debt. This definition includes any people or entity. In spite of the fact that the definition is so broad, the judicial system continues to have the authority to determine what constitutes "financial debt." The Meaning of 'Financial Debt' in the International Business Code has been shaped by a number of significant precedents. It is significant that the Supreme Court has decided that loans that do not incur interest are included in the definition of the phrase "financial debt." In addition to the fact that it is vital to place an emphasis on the understanding of the time value of money, transactions that indicate the economic impact of borrowing may also be characterised as "financial debt." The verdict of NCLAT: It has been decided by the Supreme Court that loans that are not subject to interest and are given to a corporation in order to sustain its commercial operations are regarded to be "financial debt." The IBC is guaranteed to include a wide variety of financial agreements as a result of this verdict, which shows the enormous range of the term. The National Company Law Tribunal (NCLAT) overturned a verdict by the National Company Law Tribunal (NCLT) and declared that a security deposit, which includes interest, given by a corporate debtor is regarded to be "financial debt." When establishing the parameters of a financial transaction, it is essential to take into account the time value of money, as this highlights the relevance of this component. Through the Corporate Insolvency Resolution Process (CIRP), the National Company Law Appellate Tribunal (NCLAT) has confirmed that when a corporate debtor gives a guarantee, the entity in question becomes a financial creditor. This pertains to a loan for a group entity. The understanding of financial transacti

Introduction In a landmark judgment delivered on 02.04.2024, the NCLAT provided crucial insights into the interpretation of financial debt under the Insolvency and Bankruptcy Code (IBC), 2016, particularly emphasizing the broad spectrum covered by the concept of the time value of money. This judgment, *Arunkumar Jayantilal Muchhala Vs. Awaita Properties Pvt. Ltd. and Anr.*, marks a pivotal step in understanding the nuances of financial transactions within the insolvency framework. Understanding the Context: Time Value of Money's Significance Background of the Case The case revolved around a dispute regarding the initiation of the insolvency resolution process against the corporate debtor, highlighting the intricate nature of financial debts and the encompassing scope of the time value of money. The Core Issue: Exploring Time Value of Money At the heart of the dispute was whether various forms of benefits or value accruing to the creditor, other than regular interest, can be considered under the ambit of the time value of money, thus constituting a financial debt. Key Provisions and Legal Interpretations The Concept of Financial Debt under IBC The IBC defines financial debt as a debt along with interest, if any, which is disbursed against the consideration for the time value of money. NCLAT's Interpretation on Time Value of Money The tribunal elaborated that the time value of money is not confined to regular or timely returns received for the duration for which the amount is disbursed but also encompasses any other form of benefit or value accruing to the creditor as a return for providing money for a long duration. "The concept of time value of money has nowhere been defined in the IBC. Time value of money is not only a regular or timely return received for the duration for which the amount is disbursed as an amount in addition to the principal, but also covers any other form of benefit or value accruing to the creditor as a return for providing money for a long duration." The Decision to Admit the Section 7 Application The tribunal underscored that once the Adjudicating Authority is subjectively satisfied that there is a debt and a default has been committed by the Corporate Debtor, and the Section 7 application is complete in all respects, it must admit the application. Implications of the Judgment For Financial Creditors This judgment broadens the scope of what can be considered as financial debt, allowing creditors to include various forms of economic benefits received over the duration of the loan as part of their claims. For Resolution Professionals Resolution professionals must now take a holistic view of the benefits accruing to creditors, beyond traditional interest payments, when evaluating claims and formulating resolution plans. Impact on Insolvency Proceedings This judgment s

Budget 2024-Technology-IBC-Debt Recovery-Law Practice The 2024 budget aims to modernize the legal and judicial framework through technology. The budget shows the commitment to enhancing the efficacy of the Insolvency and Bankruptcy Code (IBC) and aims to establish an Integrated Technology Platform with the following objectives: 1. Achieving better results in insolvency proceedings. 2. Standardizing processes across cases. 3. Providing clear and transparent procedures for all stakeholders. 4. Accelerating the resolution of insolvency cases. 5. Offering improved monitoring and control mechanisms. Additionally, the Centre for Processing Accelerated Corporate Exit (C-PACE) services will be extended to include the voluntary closure of Limited Liability Partnerships (LLPs). This measure aims to streamline the process for efficiently winding up LLPs and reduce closure time. The budget has recognized the instrumental role of the National Company Law Tribunals (NCLT) in resolving insolvency cases under the IBC, noting: 1. Over 1,000 companies have been resolved, with a direct recovery of more than ₹3.3 lakh crore for creditors. 2. Approximately 28,000 cases involving over ₹10 lakh crore have been disposed of prior to admission. 3. Changes to the IBC, along with reforms and enhancements to both tribunal and appellate tribunal operations, will be undertaken. 4. New tribunals will be established, with some designated exclusively for cases under the Companies Act. The budget emphasizes Debt Recovery Tribunal reforms to expedite debt recovery processes, aiming to enhance the efficiency and effectiveness of these tribunals. It also proposes setting up more tribunals to speed up the debt recovery process. For advocates practicing in bankruptcy and debt recovery, this is promising news. However, it remains to be seen to what extent these measures will be realized on the ground, as appointments to the tribunals have never been a priority, getting tech-friendly judges is also a big challenge, and poor net connectivity many a time resulting in tarikh pe tarikh, frustrates clients' interests and advocates are the worst sufferers of this process.

NCLT Dismisses JC Flowers ARC's Claim Against HDIL: A Critical Analysis In a significant ruling, the National Company Law Tribunal (NCLT) has rejected JC Flowers ARC's claim against HDIL under the Insolvency and Bankruptcy Code (IBC). This decision has far-reaching implications for lenders, debtors, and the insolvency landscape. Key Takeaways 1.⁠ ⁠Financial Debt Classification: The NCLT clarified that providing collateral does not constitute financial debt under IBC. 2.⁠ ⁠Third-Party Collateral: Mere mortgaging of assets for a loan taken by another party does not create financial debt. Tribunal's Reasoning •⁠ ⁠Financial debt requires actual disbursed funds to the corporate debtor. •⁠ ⁠HDIL's assets were mortgaged as security for Carnival Films' loan, but HDIL did not receive any funds directly. •⁠ ⁠Yes Bank's claim for loan recovery from Carnival Films is separate from HDIL's insolvency proceedings. Broader Implications 1.⁠ ⁠Lender Protection and Clarity: Lenders relying on third-party collateral cannot claim creditor status without direct financial debt. 2.⁠ ⁠Debtor Protection: Companies providing collateral for loans extended to third parties are safeguarded from insolvency proceedings. Conclusion The NCLT's decision reinforces the strict interpretation of financial debt under IBC, distinguishing between financial debt and collateral-backed arrangements. This ruling will impact secured lenders' recovery strategies in insolvency cases involving third-party collateral, providing clarity for lenders and debtors. Insights •⁠ ⁠Lenders must establish direct contractual relationships with borrowers. •⁠ ⁠Collateral arrangements alone do not establish financial creditor status under IBC. •⁠ ⁠Debtors are protected from insolvency proceedings when providing collateral for third-party loans. Incorp Restructuring Services LLP (IPE)

Several legal avenues are available under various laws and regulations to recover business debt quickly in India. Here’s a structured overview of the most effective methods: Legal Framework for Debt Recovery 1. Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002:   - This act allows banks and financial institutions to recover outstanding loans without court intervention. Secured creditors can take possession of collateral and sell it to recover debts.    - The process involves issuing a notice to the debtor, allowing them a specified period to repay before the creditor can auction the collateral. 2. Recovery of Debts Due to Banks and Financial Institutions (RDDBFI) Act, 1993:   - This act established Debt Recovery Tribunals (DRTs) to expedite the recovery process for debts owed to banks.    - Creditors can file cases in DRTs for quicker resolution than traditional courts, which can be burdened with lengthy procedures. 3. Insolvency and Bankruptcy Code (IBC), 2016:   - If a debtor defaults on significant debts, creditors can initiate insolvency proceedings under the IBC. This process includes appointing insolvency professionals and forming a committee of creditors to oversee debt resolution.  Steps for Quick Debt Recovery - Negotiation: Start by negotiating directly with the debtor to reach a settlement. This is often the quickest method if both parties are willing. - Demand Notice: If negotiations fail, issue a formal demand notice stating the amount owed and requesting payment within a specific timeframe.  - Legal Notice: If the demand notice does not yield results, send a legal notice through a lawyer, outlining the legal basis for your claim and potential consequences for non-payment. - Summary Suit: For fixed amounts, file a summary suit under Order 37 of the Civil Procedure Code (CPC). This fast-tracks recovery by assuming the creditor's claims are true unless contested by the debtor. - Debt Recovery Tribunal (DRT): If other methods fail, approach the DRT for recovery. The tribunal can issue orders for payment or seizure of assets more swiftly than regular courts - Cheque Bounce Proceedings: If payment was made via cheque that bounced, initiate proceedings under Section 138 of the Negotiable Instruments Act, which has specific timelines for recovery actions. Additional Considerations Arbitration: If your contract contains an arbitration clause, consider resolving disputes through arbitration, which can be quicker than court proceedings. - Execution of Decree: Once you obtain a court decree in your favor, you can execute it through court processes to recover your dues effectively. By leveraging these legal frameworks and strategies, businesses in India can enhance their chances of recovering debts efficiently and within a shorter timeframe.

Details about Section 5(8) of IBC :- Section 5(8) of the Insolvency and Bankruptcy Code (IBC), 2016 defines the term "financial debt", which is central to insolvency proceedings in India. The section specifies what qualifies as a financial debt and provides clarity on claims that can be considered for initiating the Corporate Insolvency Resolution Process (CIRP). Key Aspects of Section 5(8): Definition: Financial debt refers to a debt that is disbursed against the consideration for the time value of money. It includes, among other things: Money borrowed against interest. Any amount raised through financial instruments like bonds, debentures, or other similar securities. Amounts raised under any credit facility or loan. Lease or hire-purchase agreements if such arrangements are classified as a financial lease. Receivables sold or discounted other than on a non-recourse basis. Derivatives and other financial transactions. Specific Inclusions: Section 5(8) explicitly includes certain types of debt, such as: Liability arising from a guarantee or indemnity for any financial debt. The unpaid dues of any forward sale or purchase agreement (if such dues are intended to be adjusted over time). Time Value of Money: A distinguishing factor of financial debt is the consideration of "time value of money," making it different from operational debt under the IBC. This aspect emphasizes the long-term benefit to the lender, typically seen in loans or similar financial arrangements. Purpose in IBC: Establishes the eligibility of creditors (financial creditors) to initiate CIRP. Grants financial creditors voting rights in the Committee of Creditors (CoC) based on the proportion of the financial debt owed to them. Importance of Section 5(8): It ensures clear differentiation between financial debt and operational debt, which is crucial for priority and repayment hierarchy in insolvency resolution. It facilitates the efficient resolution of insolvency by allowing financial creditors to have a more significant role in decision-making processes.

This photo reflects my irritation with the ongoing actions of minority shareholders that I've been facing since Sep-21 and have lately transformed into legal battles , intensified by recent decisions taken by the Court Kanton Obwalden. They approved Kaltroco's request to arrest our assets according to Articles 271 & 272 of the Swiss Debt Enforcement and Bankruptcy Act. Kaltroco claims that The Rainforest Company owes them €15 million for the shares they acquired in Nov-22. In short: Kaltroco invested,TRC transferred shares in return. Deal closed. No debt nor claim remains. My objection was rejected due to unmet procedural obligations, which requires duplicates of each evidence file. How refreshing. The court being so strict on legal terms? I submitted the evidence on a USB due to its volume and to save paper. But sure, I can print 2,000 pages. Despite the judge's (sudden) strict adherence to legal terms, clarification is needed regarding the 'Reasons for Arrest' that are required to be met before authorising an Arrest of Assets under Articles 271&272 of the SchKG, which are: 1. the debtor has no residency in Switzerland, 2. intent to hide or flee the country, 3. the creditor can present a title/proof of debt. Non of these reasonings are met, to justify the courts arrest authorisation. Facts: 1. The company is located in Obwalden, CH, 2. The Chairwoman, CEO, and major shareholder reside in Zurich, 3. No, I have no intention of fleeing. I find this reasoning quite amusing. Where the hell would I flee? And why? Shouldn’t the court consult the defendant before destroying a company by taking irresponsible decisions? Why can't I be an entrepreneur in this country when a power-obsessed billionaire hunts me for not obeying his wishes? Shouldn’t the government remain objective? None of the arrest conditions are met, and yet, I have to pay our company's bills from my private account to prevent the worst-case scenario, despite having millions in our company accounts. Kaltroco's intent is to push the company into bankruptcy, seize the substantial cash reserves, and acquire it then during the insolvency process (the signature dish of S.K.). What Kaltroco is doing couldn’t be more illegal, and yet, it is being executed under the watch of Kanton ObwaldenThis should not be happening in a country like Switzerland. Now, I am aware that I provoke the egos of our legislators and influential businessmen, leading to further retaliatory actions against me. They wish to "teach me a lesson" and show me "where my place is." Do you know where my place is? Right where I decide it to be. If it's at the top of the business world, then that’s where you will find me. Kaltroco & Co. will not prevent this. I would suggest you simply become man enough to congratulate a woman if she outsmarts you in certain aspects while you outsmart her in others. This is the lesson I intend and hope to impart. #CorporateEthics, #LeadershipChallenges, #WomenInLeadership, #StandWithTRC

NCLAT: OVERTURNS NCLT'S INSOLVENCY ORDER, "REAL NATURE OF TRANSACTION" NOT BEING 'FINANCIAL DEBT' NCLAT admits appeal filed by Sushil Kumar Bajaj (Appellant) of Kanika Buildcon Pvt. Ltd. (Corporate Debtor), against NCLT order approving Sec 7 application filed by Mandyati Dealcomm Pvt. Ltd. (Financial Creditor) to initiate insolvency proceedings against the Corporate Debtor, opines that, "...Adjudicating Authority committed an error in admitting Section 7 Application without adverting to the real nature of the transaction between the Parties..."; NCLAT notes that - (i) the Corporate Debtor and Financial Creditor were family-run businesses and due to family disputes a Memorandum of Understanding (MoU) was signed between Appellant and his younger brother, Ajay Kumar Bajaj, pursuant to which Corporate Debtor came into the appellant's share, whereas Financial Creditor came into the younger brother's share, (ii) prior to the family partition, the Corporate Debtor took financial assistance from the Financial Creditor, and initially repaid the amount from time to time, (iii) however, subsequently, it defaulted in repaying the principal amount due and hence, the Financial creditor filed an insolvency application before NCLT, which was admitted; NCLAT relies on SC rulings in Anuj Jain (JIL’s IRP), and Global Credit Capital Ltd. wherein the Apex Court has inter alia dealt with Sec. 5(8) of IBC [definition of Financial Debt], and remarks that "The element of disbursal for time value of money is one essential condition which need to be proved for proving the debt as a Financial Debt."; NCLAT exclaims that the fact that at no point of time any demand of interest was made from Corporate Debtor by the Financial Creditor fully supports the case of the Corporate Debtor that the transaction between the two Companies was out to help each other, which were family Companies and amounts were given as help to one Family Company by other Family Companies which amount was repaid from time to time; Therefore, asserting that the transaction in question was never a Financial Debt, inasmuch as the essential element i.e., disbursal for time value of money was not proved, Appellate Tribunal quashes the NCLT order, but in conclusion, clarifies that "...in the ends of justice, where the amount by Draft has been handed over to the Financial Creditor by the Corporate Debtor the amount is allowed to be retained by Financial Creditor...The Corporate Debtor having admitted the debt, even though it was not Financial Debt, to give a quietus to the issue we are directing the amount to be retained by the Respondent." :NCLAT NDEL The judgement was delivered by Justice Ashok Bhushan (Chairperson) and Shri. Barun Mitra (Member – Technical).

Practical Guide to Bankruptcy and Suspension of Debt Payment Obligations (PKPU) in Indonesia 1. Definition and Legal Basis Bankruptcy is a condition where a debtor is unable to pay debts that are due and collectible. It is governed by Law No. 37 of 2004 on Bankruptcy and Suspension of Debt Payment Obligations (PKPU). 2. Bankruptcy Filing Process Only creditors with debts that are due and payable can file for bankruptcy at the Commercial Court. Disputes over the amount of debt must be resolved before a bankruptcy ruling through the Renvoi Process. 3. Time Limits for PKPU Suspension of debt payment obligations (PKPU) has a maximum time limit of 270 days. No extensions are allowed after this period ends. 4. Rights of Creditors and Debtors Creditors have the right to file claims if the debtor defaults. Debtors are entitled to request debt restructuring during the PKPU process. Taxes are prioritized in the distribution of bankrupt assets. 5. Role of Curators in Bankruptcy Curators are responsible for managing and liquidating the bankrupt assets. Curators can act without court approval to seize bankrupt assets. Curator appointments should consider the complexity of the case and the number of creditors involved. 6. Industrial Relations Disputes and Bankruptcy If a debtor is involved in an industrial relations dispute at the Industrial Relations Court (PHI), the process at PHI may be deemed void if the debtor is declared bankrupt. 7. Sale of Bankrupt Assets The sale of assets via auction does not require a judge's approval, except for sales conducted privately. 8. Bankruptcy of Legal Entities in Liquidation Legal entities undergoing liquidation can still be declared bankrupt as long as the process of asset liquidation has not been complet

When you approach insolvency, you are basically seeking to negotiate with your creditors to relieve or eliminate your debt, and our job is to help our clients understand this process and make the best decisions possible within a stressful, complex system. Canada’s existing insolvency regime purports to view the negotiating parties as equals. But let’s take a moment here to look at who “sits across the table” from our clients during an insolvency proceeding https://lnkd.in/gWFC8fdr