Scorpion Nirman Private Limited's application for Corporate Insolvency Resolution Process accepted; Inter-corporate loan recognized as financial debt.
In a significant ruling, the Kolkata Bench of the National Company Law Tribunal (NCLT) has admitted an application filed by Scorpion Nirman Private Limited for initiating a Corporate Insolvency Resolution Process (CIRP) against Swal Limited. The decision was delivered by the tribunal members, Smt. Bidisha Banerjee (Judicial) and CMDE Siddharth Mishra (Technical), on June 8, 2026.
The petition by Scorpion Nirman Private Limited, a financial creditor, was submitted under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), citing a default by Swal Limited on a financial debt involving an inter-corporate loan. The tribunal's decision underscores that such loans, if they satisfy the criteria of time value of money and the commercial effect of borrowing, qualify as financial debts under Section 5(8) of the IBC.
The case involved an inter-corporate loan agreement executed on January 15, 2025, where Scorpion Nirman Private Limited advanced a loan of Rs. 6.65 Crores to Swal Limited. Despite repeated reminders, Swal Limited failed to pay the accruing interest, leading to the initiation of the insolvency proceedings.
Swal Limited contested the petition, arguing that the loan did not constitute a financial debt under the IBC and claimed the transaction was in violation of the Companies Act, 2013. However, the tribunal concluded that the loan was lawful, supported by a board resolution passed by Scorpion Nirman Private Limited.
The NCLT reiterated that inter-corporate loans are not excluded from the definition of financial debt, provided they meet the necessary criteria. The tribunal also referenced past judgments, including the decision in Narendra Kumar Agarwal v. Montrone Leasing Private Limited, which supported the inclusion of inter-corporate loans as financial debt under the IBC.
Following the admission of the application, a moratorium has been imposed as per Section 14 of the IBC, halting any suits or proceedings against Swal Limited and restricting the transfer or disposal of its assets. Mr. Neeraj Jain has been appointed as the Interim Resolution Professional (IRP) to oversee the CIRP, with directives to carry out his functions under the IBC.
The tribunal's order mandates a timely public announcement and calls for the submission of claims by creditors, emphasizing the need for a time-bound insolvency resolution process. The next hearing for the progress report by the IRP is scheduled for July 15, 2026.
Bottom line:-
An inter-corporate loan, satisfying the test of time value of money and having the commercial effect of borrowing, qualifies as financial debt under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 (IBC).
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 Sections 7, 5(8), 14; Companies Act, 2013 Section 186.
Scorpion Nirman Private Limited v. Swal Limited, (NCLT)(Kolkata) : Law Finder Doc id # 2935806
