On 30 May 2022 a three-judge bench of the Supreme Court, in Kotak Mahindra Bank Ltd v. A. Balakrishnan, held that the liability arising from a Recovery Certificate issued by a Debts Recovery Tribunal under Section 19 of the RDDBFI Act is a 'financial debt' within the meaning of Section 5(8) of the IBC, that the holder of such a Certificate is a 'financial creditor' under Section 5(7) entitled to file a Section 7 application, and — most consequentially for limitation practice — that the Certificate creates a fresh cause of action so that limitation under Article 137 of the Limitation Act runs from the date of its issuance, not from the date of the original default. A close reading of the bench's reasoning, its extension of the Dena Bank v. C. Shivakumar Reddy line, and what the ruling has come to mean for banks, ARCs and corporate debtors at the s.7 admission stage.
On 1 February 2021 a three-judge bench of the Supreme Court, in Phoenix ARC (P) Ltd v. Spade Financial Services Ltd, supplied the definitive Indian statement of the substantive content of financial debt — disbursement, consideration for the time value of money, and the commercial-effect-of-borrowing test — and held that collusive or sham transactions structured to mimic loans do not give rise to financial-creditor status. The judgment also extended the related-party exclusion in the first proviso to Section 21(2) to entities that were related to the corporate debtor at the time the debt was incurred but had since formally divested, rejecting a mechanical 'praesenti' reading. A close reading of Justice Chandrachud's judgment, the doctrinal architecture, and the post-Phoenix practice.