Inter Corporate Loans in Financial Debt

The National Company Law Tribunal, Kolkata Bench, held that an inter-corporate loan qualifies as a "financial debt" under Section 5(8) of the Insolvency and Bankruptcy Code, 2016. 

Rejecting the corporate debtor's contention that such loans fall outside the IBC framework, the Tribunal held that where the transaction satisfies the tests of time value of money and commercial effect of borrowing, insolvency proceedings can be initiated upon default. 

The ruling reinforces the legal status of inter-corporate lending and provides greater certainty to corporate lenders.