LexGLOBAL CREDIT CAPITAL LIMITED & ANR. versus SACH MARKETING PVT. LTD. & ANR
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* Author [2024] 5 S.C.R. 215 : 2024 INSC 340 Global Credit Capital Limited & Anr. v. Sach Marketing Pvt. Ltd. & Anr (Civil Appeal No. 1143 of 2022) 25 April 2024 [Abhay S. Oka* and Pankaj Mithal, JJ.] Issue for Consideration (i) Whether there can be debt within the meaning of sub-section (11) of section 5 of the Insolvency and Bankruptcy Code, 2016; (ii) What is the test to determine whether a debt is a financial debt within the meaning of sub-section (8) of section 5 of the 2016 Code; (iii) Is it necessary to ascertain what is the real nature of the transaction reflected in the writing, while deciding the issue whether a debt is a financial debt or an operational debt; (iv) When is the debt, an operational debt. Headnotes Insolvency and Bankruptcy Code, 2016 – Whether there can be debt within the meaning of sub-section (11) of section 5 of the 2016 Code. Held: There cannot be a debt within the meaning of sub-section (11) of section 5 of the IB Code unless there is a claim within the meaning of sub-section (6) of section 5 of thereof. [Para 20 (a)] Insolvency and Bankruptcy Code, 2016 – sub-section (8) of s. 5 – What is the test to determine whether a debt is a financial debt within the meaning of sub-section (8) of section 5 of the 2016 Code. Held: Sub-section (8) of section 5 defines “financial debt” – The definition incorporates the expression “means and includes” – The first part of the definition, which starts with the word “means”, provides that there has to be a debt along with interest, if any, which is disbursed against the consideration for the time value of money – The word “and” appears after the word “money” – Before the words “and includes”, the legislature has not incorporated a comma – After the word “includes”, the legislature has incorporated categories (a) to (i) of financial debts – Thus, the test to determine whether a debt is a financial debt within 216 [2024] 5 S.C.R. Digital Supreme Court Reports the meaning of sub-section (8) of section 5 is the existence of a debt along with interest, if any, which is disbursed against the consideration for the time value of money – The cases covered by categories (a) to (i) of sub-section (8) must satisfy the said test laid down by the earlier part of sub-section (8) of section 5. [Paras 12 and 20 (b)] Insolvency and Bankruptcy Code, 2016 – Is it necessary to ascertain what is the real nature of the transaction reflected in the writing, while deciding the issue whether a debt is a financial debt or an operational debt. Held: While deciding the issue of whether a debt is a financial debt or an operational debt arising out of a transaction covered by an agreement or arrangement in writing, it is necessary to ascertain what is the real nature of the transaction reflected in the writing – The written document cannot be taken for its face value. [Paras 20 (c) and 14] Insolvency and Bankruptcy Code, 2016 – When is the debt, an operational debt: Held: Where one party owes a debt to another and when the creditor is claiming under a written agreement/ arrangement providing for rendering ‘service’, the debt is an operational debt only if the claim subject matter of the debt has some connection or co-relation with the ‘service’ subject matter of the transaction. [Para 20 (d)] Case Law Cited Anuj Jain, Interim Resolution Professional for Jaypee Infratech Limited v. Axis Bank Limited & Ors. [2020] 8 SCR 291 : (2020) 8 SCC 401; Phoenix ARC Private Limited v. Spade Financial Services Limited & Ors. [2021] 15 SCR 1079 : (2021) 3 SCC 475; Pioneer Urban Land and Infrastructure Ltd. & Anr. v. Union of India & Ors. [2019] 10 SCR 381 : (2019) 8 SCC 416 – relied on. Swiss Ribbons Private Limited and Anr. v. Union of India & Ors [2019] 3 SCR 535 : (2019) 4 SCC 17; Tuticorin Alkali Chemicals & Fertilisers Ltd., Madras v. Commissioner of Income Tax, Madras [1997] Supp. 1 SCR 528 : (1997) 6 SCC 117; Consolidated Construction Consortium Limited v. Hitro Energy Solutions Private [2024] 5 S.C.R. 217 Global Credit Capital Limited & Anr. v. Sach Marketing Pvt. Ltd. & Anr Limited [2022] 2 SCR 212 : (2022) 7 SCC 164; New Okhla Industrial Development Authority v. Anand Sonbhadra [2022] 5 SCR 319 : (2023) 1 SCC 724; V.E.A. Annamalai Chettiar & Ors. v. S.V.V.S. Veerappa Chettiar & Ors. AIR 1956 SC 12 – referred to. List of Acts Insolvency and Bankruptcy Code, 2016. List of Keywords sub-section (11) of section 5 of Insolvency and
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