In Brief
Phoenix Arc challenged findings that Spade Financial Services and AAA Landmark were financial creditors of AKME Projects. The Supreme Court held that while the NCLAT correctly excluded them from the Committee of Creditors as related parties, the characterization as financial creditors was erroneous. The transactions were collusive, lacking genuine consideration for the time value of money. Although the entities later ceased being related parties, the exclusion applied because they were related parties when the alleged debt was created. The Court rejected a purely literal interpretation of \"is a related party,\" adopting purposive interpretation to prevent circumvention of statutory safeguards through commercial contrivances. Appeals were disposed of affirming the exclusion from CoC."
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