Case Law Details
Global Credit Capital Limited & Anr Vs Sach Marketing Pvt Ltd & Anr (Supreme Court of India)
Supreme Court held that that the amounts covered by security deposits under the agreements constitute financial debt. Accordingly, section 5(7) of IBC categorizes the person as financial creditor if a financial debt is owned to it.
Facts- The issue involved, herein, is whether the first respondent is a financial creditor within the meaning of sub-section (7) of Section 5 of the Insolvency and Bankruptcy Code, 2016. Notably, the corporate debtor, in this case, is M/s. Mount Shivalik Industries Limited. The impugned judgment and order dated 7th October 2021 holds that the first respondent is a financial creditor.
Conclusion- Since the security deposit payment had no correlation with any other clause under the agreements, as held by the NCLAT, the security deposit amounts represent debts covered by subsection (11) of Section 3 of the IBC. The reason is that the right of the first respondent to seek a refund of the security deposit with interest is a claim within the meaning of subsection (6) of Section 3 of the IBC as the first respondent is seeking a right to payment of the deposit amount with interest. Therefore, there is no manner of doubt that there is a debt in the form of a security deposit mentioned in the said two agreements.
Held that we have no hesitation in concurring with the NCLAT’s view that the amounts covered by security deposits under the agreements constitute financial debt. As it is a financial debt owed by the first respondent, sub-section (7) of Section 5 of the IBC makes the first respondent a financial creditor.
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