Financial debt and default under IBC require reliable proof; an unstamped ambiguous document and silence to notice were insufficient.

An application under section 7 of the Insolvency and Bankruptcy Code was rejected because the applicant failed to establish a legally enforceable financial debt and default. The Tribunal found that the company was treated as active on the filing date, so the maintainability objection on non-existence failed; however, the relied-upon unstamped document did not satisfy the essentials of a promissory note or receipt, did not show repayment terms or consideration for time value of money, and therefore did not prove a financial debt. Default was also not proved, as demand notices and absence of reply were insufficient without reliable supporting material such as an information utility record or bank statement.

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Issues: (i) Whether the corporate debtor was in existence on the date of filing of the application and the petition was maintainable, (ii) Whether the document relied on was a promissory note or receipt and whether the alleged claim constituted a financial debt, and (iii) Whether default was proved for admission under section 7 of the Insolvency and Bankruptcy Code, 2016.

Issue (i): Whether the corporate debtor was in existence on the date of filing of the application and the petition was maintainable.

Analysis: The record showed that the company master data produced by the respondent did not establish the exact date of strike-off. The applicant produced an earlier company master data extract showing the company as active, and the respondent's own board resolution dated after the filing indicated that the company was functioning and authorising representation. On that basis, the status of the company on the filing date was treated as active.

Conclusion: The objection to maintainability on the ground that the respondent company was not in existence failed.

Issue (ii): Whether the document relied on was a promissory note or receipt and whether the alleged claim constituted a financial debt.

Analysis: The document relied upon was an unstamped writing that did not contain the essential features of a promissory note or receipt. The names in the petition and in the document were inconsistent, the original instrument was not produced, and no clear promise to repay with interest or after a fixed period was shown. Applying the statutory definition of promissory note and the concept of financial debt, the Tribunal found that the transaction did not disclose consideration for the time value of money and did not establish a legally enforceable financial debt.

Conclusion: The document was not accepted as a promissory note or receipt, and the alleged claim was not a financial debt.

Issue (iii): Whether default was proved for admission under section 7 of the Insolvency and Bankruptcy Code, 2016.

Analysis: The applicant relied mainly on demand notices and absence of reply, but no information utility record, bank statement, or other satisfactory proof of default was produced. In a section 7 proceeding, existence of default must be established by appropriate material, and mere non-response to notice was held insufficient on the facts of the case.

Conclusion: Default was not proved.

Final Conclusion: The application for initiation of corporate insolvency resolution process was not allowed, as the alleged debt was not shown to be a financial debt and default was not established.

Ratio Decidendi: For admission of an application under section 7 of the Insolvency and Bankruptcy Code, 2016, the applicant must establish a legally enforceable financial debt and default by reliable material; an unstamped and ambiguous document without proof of repayment terms or time value of money cannot be treated as such debt, and non-reply to a demand notice by itself is insufficient proof of default.

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