Financial debt and default under insolvency law can be proved by acknowledgements, account confirmations, and repayment records despite collateral objections.

A section 7 insolvency petition was treated as maintainable where loan disbursement, repeated acknowledgements, confirmation of accounts, and interest repayments established a creditor-debtor relationship and a financial debt based on the time value of money. Objections that there was no express loan agreement, that the security cheque was only collateral, that pledged shares barred recovery, and that the account evidence lacked a Bankers' Books certificate were rejected. Admission of liability also undermined the security-cheque defence. The petition was admitted, the corporate insolvency resolution process commenced, the moratorium became operative, and the proposed interim resolution professional was appointed.

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Issues: Whether the petition under section 7 of the Insolvency and Bankruptcy Code, 2016 was maintainable and liable to be admitted on proof of financial debt and default despite objections regarding absence of an express loan agreement, alleged security cheque, pledged shares, and the form of account evidence.

Analysis: The application was examined on the basis of the disbursement of loan, repeated acknowledgements by the corporate debtor, the statement of confirmation of accounts, and the entries showing repayment of interest till July 2011. These materials established a creditor-debtor relationship and demonstrated that the transaction was for consideration for the time value of money, bringing it within the definition of financial debt under section 5(8) of the Insolvency and Bankruptcy Code, 2016. The objections that there was no express agreement for loan or interest, and that the account statements lacked a certificate under the Bankers' Books Evidence Act, 1891, were rejected. The pledged shares did not prevent the financial creditor from proceeding on the debt, because section 176 of the Indian Contract Act, 1872 permits the pawnee either to sue on the debt and retain the pledged goods or to sell them on notice, and the debtor cannot compel a particular mode of recovery. The admission of liability also negatived the defence that the cheque was merely security.

Conclusion: The debt was held to be a financial debt, default was established, and the section 7 petition was admitted.

Final Conclusion: The corporate insolvency resolution process was directed to commence, the moratorium became operative, and the proposed interim resolution professional was appointed to proceed in accordance with the Code.

Ratio Decidendi: A section 7 application is admissible once the existence of financial debt and default is established by credible material, and objections based on absence of an express agreement, non-enforcement of pledged security, or technical challenges to account evidence do not defeat admission where liability is otherwise acknowledged.

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