NBFC's Non-Compliance With RBI Directions Cannot Defeat Classification Of Loan As Financial Debt: NCLAT New Delhi

Brief Background

The appeal was filed challenging the impugned order passed by the NCLT Kolkata. In the impugned order, the adjudicating authority observed that the appellant failed to establish the nature of the transaction as financial debt due to non-compliance with the statutory RBI guidelines.

The appellant disbursed an amount of Rs. 1.6 Cr. to the corporate debtor with an interest rate of 8% per annum. The post-dated checks given by the corporate debtor were dishonored. The financial creditor issued the demand notice asking for the payment along with the interest, and due to the non-payment, the financial creditor filed the Section 7 petition.

The adjudicating authority accepted the fact that the disbursement was made; however, it rejected the application while observing that the financial creditor didn't issue the document. Being an NBFC, the financial creditor was supposed to issue a document stating the amount, terms and conditions, and the rate of interest.

Contention of the Parties

The appellant argued that the written agreement is not a pre-condition for constituting financial debt u/s 5(8) of the IBC. It highlighted that the corporate debtor has itself admitted debt along with interest.

The appellant relied on the ruling of Agarwal Polysacks Ltd. vs. K. K. Agro Foods & Storage Ltd. CA(AT)(Ins) No. 1126 of 2022, and submitted that a written contract is not a pre-condition for accepting an amount as financial debt.

Per contra, the respondent submitted that the appellant failed to comply with the RBI circular directing the NBFC to convey in writing to the borrower a sanction letter. The absence of such a written agreement hinders the classification of the transaction as the financial debt under section 5(8).

Observations of the Tribunal

The bench observed that it is a settled law that the commercial borrowing and the time value of money constitute financial debt, which has been satisfied in the case at hand.

Further, it observed that merely because the breach of RBI guidelines has happened, the same cannot lead to the conclusion that the financial debt u/s 5(8) needs to be looked into with reference to the guidelines.

The bench discussed the ruling of Global Credit Capital Ltd. vs. Sach Marketing (P) Ltd. (2024) 9 SCC 482, where the Hon'ble apex court ruled that the nature of the transaction has to be found out to take a decision as to whether debt is a financial debt or not. Therefore, even in the absence of a financial contract between the parties, the court is not precluded from looking into the real nature of the transaction. Here, sufficient material has been produced to prove that the transaction was a financial debt.

With the above observations, the NCLAT allowed the appeal by setting aside the impugned order. The bench also directed the corporate debtor to discharge the debt within 3 months. It clarified that in case of failure to pay the amount, the NCLT is at liberty to pass an order admitting the Section 7 application.

Case Name: Sinki Commodities Pvt. Ltd v. ABC Floors Pvt. Ltd.

Case No.: Company Appeal (AT) (Insolvency) No. 783 of 2022

Coram: Justice Ashok Bhushan (Chairperson) and Barun Mitra (Member-Technical)

Judgment Date: 14.10.2025

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