NCLAT : In Andhra Bank vs. M/s. F.M. Hammerle Textile Ltd.

Under clause (8) of Section 5, any indemnity obligation in respect of a guarantee also come within the meaning of ‘Financial Debt’.

The only thing which is to be ascertained is whether the person who claimed to be ‘Financial Creditor’, whether his debt owed to him come within the meaning of ‘Financial Debt’ as defined under Section 5(8). Proviso (h) of clause (8) of Section 5 states that financial debts includes “any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution”. Since the indemnity obligation in respect of a guarantee also come within the meaning of ‘Financial Debt’ as defined under the said provision and the debt has been disbursed against “consideration for time value of money” then it is treated to be a ‘Financial Debt’.

Link : https://nclat.nic.in/Useradmin/upload/7456493665b6a891d72c52.pdf