In Brief
Phoenix ARC Pvt. Ltd. held shares pledged by a corporate debtor (Doshion Veolia) as collateral security for its parent company's debt. When the parent company defaulted, Phoenix claimed to be a 'financial creditor' under the Insolvency Code and sought to participate in the corporate insolvency resolution process. The Supreme Court held that a person with only collateral security over a corporate debtor's assets is not a financial creditor, regardless of being a 'secured creditor'. A financial creditor requires a direct financial debt owed by the corporate debtor. A pledge of shares, even securing another's debt, without an express guarantee, is mere security, not a financial debt. The Court distinguished financial creditors (with functional involvement in the debtor's business revival) from secured creditors (interested only in asset realization). Appeal dismissed.
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