The document is a detailed judgment from the Supreme Court of India concerning civil appeals related to the classification of certain creditors under the Insolvency and Bankruptcy Code (IBC), 2016. The appeals stem from previous decisions by the National Company Law Appellate Tribunal (NCLAT) and involve multiple parties, primarily Global Credit Capital Limited and others as appellants, and Sach Marketing Pvt. Ltd. and others as respondents.

The core issue across these appeals is whether the respondents in various contracts qualify as financial creditors or operational creditors under the IBC. The distinction hinges on whether the money involved was a security deposit (which would generally align with a financial debt) or payment for services (typically considered an operational debt).

In the primary case (Civil Appeal no. 1143 of 2022), it was questioned whether the first respondent, who had agreements with a corporate debtor (Mount Shivalik Industries Limited) involving substantial security deposits with high interest, should be regarded as a financial creditor. The security deposits were meant to carry interest at 21% per annum, a fact emphasized by the Tribunal to classify the deposit as a financial debt.

The Supreme Court reviewed the nature of these transactions, noting that the corporate debtor treated these deposits as borrowings in its financial statements, supporting the classification of the amounts as financial debts. The Court agreed with the NCLAT’s conclusion that the respondents were financial creditors as the transactions had the commercial effect of borrowing and the arrangements involved a disbursal against the time value of money.

Thus, the Supreme Court upheld the NCLAT’s rulings, dismissing the appeals and affirming the classification of the creditors in question as financial creditors, directing that the corporate insolvency resolution process (CIRP) proceed accordingly.

GLOBAL CREDIT CAPITAL LIMITED
& ANR. … APPELLANTS
versus
SACH MARKETING PVT. LTD. & ANR.
… RESPONDENTS…decided by the Supreme Court of iNDIA ON aPRIL 25, 2024.

By aor.sanjivnarang@gmail.com

Sanjiv Narang Adv. is an Advocate on Record in the Supreme Court of India. His qualifications include an LLB from University of Delhi and a Masters degree in Personnel Management from Panjab University,Chandigarh.In his more than 3 decades of experience, he has practiced law at the District, High Court and Supreme Court levels.He also has more than a decade of experience in the field of Management. He is the author of two books namely Laws for Women in India and Innovation, Why What and How.