LI Network
Published on: February 4, 2024 at 11:32 IST
In a recent decision, the National Company Law Appellate Tribunal (NCLAT) has clarified that under the Insolvency and Bankruptcy Code (IBC), delving into the nature of a contract is crucial only to ascertain if it qualifies as a financial or operational debt.
The NCLAT emphasized that further examination into the contract’s written or unwritten nature is unnecessary. The case in question involved a transaction from December 2014 related to the purchase of a specific property.
The Appellant, in this instance, was required to assert its rights within the stipulated three-year period, and attempting to enforce the contract through the IBC was deemed legally inappropriate. The NCLAT bench, comprising Justice M. Venugopal and Dr. Alok Srivastava, highlighted the IBC’s definition of ‘debt’ and ‘default,’ emphasizing that financial debt must manifest as a liability, and non-payment within the stipulated time constitutes default. In the absence of a clear default date and the absence of features resembling financial debt or borrowing in commercial effect, the tribunal found no grounds for default in the matter.
