9. In Metamorphosis Trading LLP v. Sankalp Engineering and Services Private Limited (Company Appeal (AT) (Insolvency) No. 719 of 2024), the NCLAT held that for any debt to qualify as a financial debt, the debt along with interest, if any, should have been disbursed against the consideration for the time value of money and the component of interest is not a sine qua non for the debt to qualify as a financial debt.
The NCLAT further held that for a creditor to qualify as a financial creditor under Section 5(7) of Code, there must be a financial debt which is owed to that person and such a person can either be the principal creditor to whom the financial debt is owed or may be a legal assignee to whom such debt has been transferred.
The NCLAT also held that an assignee steps into the shoes of the assignor and the rights of the assignee are no better than that of the assignor. Hence, if the amount assigned has been termed as trade receivable in the deed of assignment, such amount cannot be viewed as a loan, particularly when there is no contract or agreement recording the advance of any loan. It was also observed that for the admission of a Section 7 application, the financial creditor needs to establish the debt in clear, precise and specific terms.
Source: Barandbench
