Account-reflected unsecured loan may qualify as financial debt under the Insolvency and Bankruptcy Code, supporting section 7 admission.

An admitted unsecured loan reflected in the corporate debtor's accounts as long-term borrowing may constitute a financial debt under the Insolvency and Bankruptcy Code, even if no interest is stipulated, because the statutory definition includes debt with interest, if any. The note further states that where liability and default are established on the material before the Tribunal, the requirements for admission of a section 7 petition are satisfied, leading to commencement of CIRP with moratorium and appointment of an interim resolution professional.

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Issues: (i) Whether the amount advanced and reflected in the corporate debtor's books constituted a financial debt owed to the petitioner. (ii) Whether default having been established, the petition under section 7 of the Insolvency and Bankruptcy Code, 2016 was liable to be admitted and CIRP commenced.

Issue (i): Whether the amount advanced and reflected in the corporate debtor's books constituted a financial debt owed to the petitioner.

Analysis: The definitions of creditor, debt, financial creditor and financial debt under sections 3(10), 3(11), 5(7) and 5(8) of the Insolvency and Bankruptcy Code, 2016 were applied. The admitted balance confirmation and the statutory auditor's email showed the outstanding amount as an unsecured loan in the corporate debtor's accounts. The absence of interest did not, by itself, take the transaction outside the definition, because section 5(8) includes debt with interest, if any, and the amount was treated in the books as long term borrowings. The reliance placed on decisions where the debt was neither admitted nor reflected in the accounts was distinguished.

Conclusion: The amount was held to be a financial debt and the petitioner was treated as a financial creditor.

Issue (ii): Whether default having been established, the petition under section 7 of the Insolvency and Bankruptcy Code, 2016 was liable to be admitted and CIRP commenced.

Analysis: The corporate debtor's liability was found to be admitted and the default stood established on the material placed before the Tribunal. Once the debt and default were proved, the requirements for admission under section 7 were satisfied, and the Tribunal proceeded to appoint an interim resolution professional and declare moratorium under section 14.

Conclusion: The petition was admitted and CIRP was directed to commence.

Final Conclusion: The Tribunal concluded that the admitted unsecured loan constituted a financial debt and that default was proved, warranting admission of the insolvency petition and initiation of the corporate insolvency resolution process with moratorium.

Ratio Decidendi: An admitted and account-reflected unsecured loan can constitute a financial debt under the Insolvency and Bankruptcy Code even if no interest is stipulated, and once debt and default are established, a section 7 petition is liable to be admitted.

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