Case Law Analysis
|National Company Law Appellate Tribunal
Fraudulent Transactions Do Not Constitute Financial Debt Under Section 5(8) IBC : NCLAT Rejects CIRP Admission for Unauthorized Disbursements
NCLAT holds that disbursements made into unauthorized accounts through fraudulent means cannot be classified as financial debt under the Insolvency and Bankruptcy Code, 2016. The ruling bars initiation of Corporate Insolvency Resolution Process (CIRP) where loan agreements lack valid authorization, reinforcing the doctrine of indoor management in financial transactions.