Skip to main content
← back
Informative

Conversion Of Partner's Dues Into Loan Does Not Qualify As Financial Debt U/S 5(8) Of IBC: NCLAT

Update / Judgement Date

11 Apr 2025

Source

Live Law

Author

Team — WCP Legal Desk

Reading Time

1 min read

Insolvency & Bankruptcy Code

The NCLAT (National Company Law Appellate Tribunal) held that the conversion of partners' dues into a loan does not qualify as "financial debt" under Section 5(8) of the IBC (Insolvency and Bankruptcy Code). The tribunal reasoned that such a conversion lacks the essential element of a debt disbursed against consideration for the time value of money, which is a prerequisite for a debt to be classified as financial debt under the IBC.