ONCE ‘DEBT' IS CONVERTED INTO ‘CAPITAL', IT CANNOT BE TERMED AS ‘FINANCIAL DEBT' AND THE APPELLANT CANNOT BE DESCRIBED AS ‘FINANCIAL CREDITOR': NCLAT

The National Company Law Appellate Tribunal (NCLAT) has ruled that once ‘Debt’ is converted into ‘Capital’ it cannot be termed as ‘Financial Debt’ and the Appellant cannot be described as ‘Financial Creditor’.

In this case, the Appellant had given a loan of ₹40 lakhs to the Respondent which was to be repaid in four installments. The Respondent did not repay the Principal amount or the interest. She also alleged that the loan has been converted into equity, which is against the terms and conditions of ‘Loan Agreement’. She further averred that her late husband had also invested ₹1 Crore and that he had not been repaid either the principal amount or the interest amount. She also asserted that she is a ‘Financial Creditor’.