# In the matter of Vishwa Nath Singh vs. Visa Drugs & Pharmaceuticals Pvt. Ltd.

> NCLAT judgment dated 2017-12-13. Citation: TCN-2017-NCLAT-00015. The case involves an appeal against orders passed by the National Company Law Tribunal…

- **Court:** NCLAT
- **Order date:** 13 Dec 2017
- **Citation:** TCN-2017-NCLAT-00015
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclat-new-delhi/vishwa-nath-singh-vs-visa-drugs-pharmaceuticals-pvt-ltd-7e3f3e85

## Summary

### Background

The case involves an appeal against orders passed by the National Company Law Tribunal (NCLT), Chandigarh Bench, which admitted an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (I&B Code). The application was initially filed as a winding-up petition under Sections 433 and 434 of the Companies Act, 1956, which was later transferred to the NCLT following a government notification. The appellant, a director/shareholder of Swan Aluminiums Private Limited (Corporate Debtor), challenged the NCLT's decision, arguing that the respondent, Visa Drugs & Pharmaceuticals Pvt. Ltd., was merely a shareholder and not a 'Financial Creditor' as defined under the I&B Code.

## Facts

The erstwhile shareholders of Swan Aluminiums Private Limited (Corporate Debtor) approached the company for the sale of their entire shareholding. A Memorandum of Understanding was executed on February 18, 2013, between Swan Aluminiums and Jupiter Strips Private Limited. On December 9, 2013, all bank accounts of Swan Aluminiums were closed after clearing all dues. However, the balance sheets prepared on March 31, 2014, and March 31, 2015, did not show any debt or liability payable to the respondent, Visa Drugs & Pharmaceuticals Pvt. Ltd. On August 11, 2016, six identical demand notices were sent by the erstwhile shareholders, including the respondent, under Sections 433 and 434 of the Companies Act, 1956. On September 20, 2016, Swan Aluminium disputed the claim.

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## Issues and analysis

### Issue 1: Whether the respondent, Visa Drugs & Pharmaceuticals Pvt. Ltd., qualifies as a 'Financial …

**Ratio:** A 'Financial Creditor' is defined as a person to whom a financial debt is owed and

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**Reasoning:** The court reasoned that the respondent failed to demonstrate that the loan provided to

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**Interpretation:** The interpretation of 'Financial Creditor' under Section 5(7) and 'financial

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**Application:** In this case, the respondent's loan to the Corporate Debtor did not meet the

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## Parties

- **Judges:** S.J. Mukhop…; Bansi Lal…
- **Appellants:** Vishwa Nath…
- **Respondents:** Swan Aluminiums…; M/s. Visa Drugs &…
- **Advocates:** Virender…; Vipul G…; +3 more

## Timeline

- **2013-02-18 — Memorandum of…**: A Memorandum of Understanding was executed between M/s. Swan Aluminiums Pvt. Ltd. and…
- **2013-12-09 — Closure of Bank…**: All bank accounts in the name of M/s. Swan Aluminiums Pvt. Ltd. were closed after…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 5(7) — Definitions](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-5)

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