Background: In the judgment delivered on July 26, 2021, the Hon’ble Supreme Court of India in Orator Marketing Pvt. Ltd. v. Samtex Desinz Pvt. Ltd. held that the definition of the term “Financial Debt” in Section 5(8) of the Insolvency and Bankruptcy code, 2016 (IBC) is not exhaustive in nature and are illustrative.
1. What were the facts of the case?
2. What was the key issue and what did the Hon’ble Supreme Court of India rule?
3. Can a loan without interest be considered as a Financial Debt?
The Hon’ble Supreme Court of India has now undisputedly held that an interest free loan can be considered as a financial debt.
It has been made it amply clear, while referring to the previous landmark judgments of the Hon’ble Supreme Court of India, that explanation or definition of such terms can be either restrictive or extensive. If the term has been defined to include something, the definition becomes prima facie extensive.
Furthermore, the term “financial debt” under section 5(8) of IB Code is not exhaustive but extensive.
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