Parties cleverly attempted to convert operational debt into financial debt: NCLT junks Section 7 petition

The advance amount disbursed, which was later converted to an inter-corporate loan, was in breach of the limit specified under Section 186(2) of the Act, the Tribunal held.
Parties cleverly attempted to convert operational debt into financial debt: NCLT junks Section 7 petition
NCLT

The National Company Law Tribunal (NCLT) on Monday held that an operational credit cannot be converted into a financial debt by way of a Memorandum of Understanding (MoU) if the financial creditor is not eligible to advance a loan as per the terms of Section 186 of the Companies Act [Jambudwip Exports and Imports Limited v. UP Bone Mills Private Limited].

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