The Insolvency and Bankruptcy Code, 2016 is a mechanism for corporate revival, not a debt recovery tool. A creditor cannot initiate the Corporate Insolvency Resolution Process solely to circumvent standard execution proceedings for a money decree, especially against a solvent corporate debtor.

J U D G M E N T

1. The appellant has preferred this appeal under Section 62 of the Insolvency and Bankruptcy Code, 2016 (“the IBC”), assailing the order dated 01.11.2022 of the National Company Law Appellate Tribunal, Principal Bench, New Delhi (“the NCLAT”) in Company Appeal (AT) (Insolvency) No. 904 of 2022. By that order, the NCLAT set aside the order of the National Company Law Tribunal, New Delhi Bench-IV (“the NCLT”) dated 20.06.2022 and directed the admission of a petition filed under Section 7 of the IBC by the respondent.

2. The respondent is a money lender. On 24.02.2010, he advanced a Signature Not Verified loan of Rs. 2,50,00,000/- to the appellant for a period of two months, Digitally signed by KAPIL TANDON Date: 2026.04.23 Reason:

carrying interest at 12.75% per annum payable on a half-yearly basis. The loan agreement also provided that in the event of default, the appellant would remain liable to pay interest at the stipulated rate. On 31.03.2010, a further loan of Rs. 2,00,00,000/- was taken by the appellant for a period of fifteen days, at 3% per month, again payable half-yearly. The appellant furnished cheques as security against both loans.

3. When presented, the cheques were dishonoured, leading to the respondent filing a complaint under Section 138 of the Negotiable Instruments Act, 1881, before the Metropolitan Magistrate, Tis Hazari, Delhi. During the pendency of those proceedings, the parties entered into a compromise on 31.08.2013, by which the appellant agreed to pay Rs. 3,22,02,660/- within twelve months. It is a fact that by 31.07.2014, the appellant had, in aggregate, made payments of Rs. 3,53,51,520/- to the respondent.

4. When the appellant did not honour the compromise in full, the respondent filed a summary suit before the Delhi High Court on 01.02.2016, praying for a decree of Rs. 4,38,00,617/- with pendente lite and future interest at 24% per annum. Under a second compromise deed dated 23.12.2016, which was executed between the parties during the pendency of the suit, the appellant agreed to pay Rs. 2,38,61,907/- as full and final settlement.

5. The suit was decreed by the learned Single Judge of the Delhi High Court on 11.01.2018 for Rs. 4,38,00,617/- with interest at 24% per annum from 01.02.2016. The decree also directed that Rs. 25,00,000/- paid by the appellant on 06.01.2018 be deducted, and that costs of Rs. 5,00,000/- be awarded. The appellant challenged this decree by way of RFA(OS) No. 48 of 2018 before the Division Bench, which was dismissed on 27.07.2018 with costs of Rs. 25,000/-. The appellant’s Special Leave Petition, Diary No. 22264 of 2021 was also dismissed by this Court on 22.10.2021. The decree accordingly attained finality.

6. Rather than proceeding to execute the decree, the respondent filed a petition under Section 7 of the IBC before the NCLT on 13.12.2021, being CP No. (IB)-766(ND)/2021, alleging that the decretal amount constituted a financial debt and that the appellant was in default thereof. 7. The NCLT dismissed the petition on 20.06.2022, primarily on the following four broad reasons. Firstly, the NCLT held that a decree holder is a separate class of creditor under Section 3(10) of the IBC and does not automatically become a “Financial Creditor” under Section 5(7). Secondly, the NCLT found that the debt in question did not qualify as a “financial debt” under Section 5(8) of the IBC. The original loan advances

were for extremely short periods and the respondent had not produced adequate evidence, such as financial statements, to establish that the amounts were disbursed against consideration for the time value of money. Thirdly, the NCLT observed that the appellant was a solvent and functioning enterprise, with revenue of approximately Rs. 35 crores and profits of Rs. 8 crores, employing 95 full-time staff. Fourthly, and most significantly for o