NCLAT: Sale Consideration Not A Financial Debt Under IBC

On September 9, 2024, the National Company Law Appellate Tribunal, Principal Bench, New Delhi ("NCLAT") in the case of, Sandeep Mittal v. M/s ASREC (India) Limited, Company Appeal (AT) (Insolvency) Nos. 37 & 573 of 2024, has held that sale consideration payable towards purchase of assets does not qualify as a 'financial debt' within the meaning of Section 5(8) of the Insolvency and Bankruptcy Code, 2016 ("Code").

Brief Facts

In the instant case, Gujarat State Financial Corporation ("GSFC"), Gujarat Industrial Investment Corporation ("GIIC"), Bank of Baroda and Dena Bank (collectively, "GPPL Lenders") had extended certain term loans to Ganpati Pulp and Paper Limited ("GPPL"), which were secured by a charge created by GPPL over certain immovable assets. On default by GPPL, GSFC took possession of the secured assets and issued a sale notice pursuant to Section 29 of the State Financial Corporations Act, 1951. In response to the sale notice, an offer was submitted