Acknowledged liability in balance sheets can support default and limitation for section 7 insolvency admission.

An acknowledged liability shown in balance sheets and a balance confirmation letter was treated as sufficient to establish default for a section 7 Insolvency and Bankruptcy Code application. The tribunal found that the absence of later balance sheets did not displace the financial statements on record, which were accepted as true and correct. On that basis, the application was considered complete, within limitation, and maintainable, leading to admission and commencement of the corporate insolvency resolution process with confirmation of the proposed interim resolution professional.

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Issues: Whether the application under section 7 of the Insolvency and Bankruptcy Code, 2016 was complete, disclosed default, and was within limitation so as to warrant admission.

Analysis: The financial creditor produced the balance sheet for 31.03.2016 showing liability toward the restructuring loan and also the balance confirmation letter dated 31.01.2015 acknowledging the amount due. The objection that later balance sheets were not filed did not displace the financial statements on record, which were found to be true and correct. On the basis of the acknowledged liability and the default in repayment of the restructured debt, the application was treated as complete and within limitation.

Conclusion: The application under section 7 was held maintainable and was admitted; the corporate insolvency resolution process was directed to commence and the proposed interim resolution professional was confirmed.

Ratio Decidendi: An acknowledged liability reflected in balance sheets and balance confirmation documents is sufficient to support a finding of default and to sustain admission of a section 7 insolvency application within limitation.

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