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of <h1>Dismissal of Insolvency Application for Lack of Evidence of Financial Debt under</h1> <h3>Orator Marketing P. Ltd. Versus Samtex Desinz P. Ltd.</h3> The application under section 7 of the Insolvency and Bankruptcy Code, 2016 to trigger the corporate insolvency resolution process was dismissed by the ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - onus to prove debt - HELD THAT:- There is no dispute that the applicant initially had disbursed the amount interest free to the respondent-company. A perusal of the application is it clear that the loan was given interest free - In order to allow any application under section 7 of the Code, the applicant has to proof that the application is maintainable as the applicant is a 'financial creditor', and the debts claimed in the application come within the purview of 'financial debt' as defined under the Code. In the absence of evidence that the amount was disbursed for time value of money, the applicant does not come within the meaning of 'financial creditor' - It is well-settled that the onus lies on the applicant to establish that the loan was given against the consideration for time value of money. Onus to prove also lies on the applicant to establish that the debt claimed in the application comes within the purview of 'financial debt' and that the applicant is a 'financial creditor' in respect of the present claim in question. The applicant has miserably failed to substantiate with supporting documentary evidence that interest, as claimed at Part IV of the application, is payable as per the agreed loan covenants. Neither the present claim can be termed to be a 'financial debt' nor does the applicant come within the meaning of 'financial creditor'. Once the applicant does not come within the meaning of 'financial creditor', he becomes ineligible to file the application under section 7 of the Insolvency and Bankruptcy Code, 2016 - petition stands dismissed as not maintainable. Issues:1. Application under section 7 of the Insolvency and Bankruptcy Code, 2016 for triggering corporate insolvency resolution process.2. Determination of the applicant's status as a financial creditor.3. Requirement of the debt to qualify as a financial debt.4. Onus of proof on the applicant regarding the loan and interest terms.Analysis:1. The petitioner filed an application under section 7 of the Insolvency and Bankruptcy Code, 2016, seeking to initiate the corporate insolvency resolution process against the respondent company due to default in payment of a significant debt amounting to Rs. 1,56,89,740.2. The applicant claimed to be a financial creditor as the assignee of the original lender to the corporate debtor, stepping into the shoes of the original lender through a debt assignment agreement executed by the original lender and the financial creditor.3. The Tribunal emphasized the necessity for the debt to meet the definition of a financial debt under the Code, which includes being disbursed against the consideration for the time value of money. The applicant failed to provide evidence establishing the loan as a financial debt, especially regarding the payment or agreement of interest.4. The onus of proving that the debt qualifies as a financial debt and that the applicant is a financial creditor lies with the petitioner. However, the absence of a loan agreement specifying interest terms and the failure to demonstrate that the loan was disbursed against the consideration for time value of money led to the dismissal of the application.5. Citing precedents, the Tribunal highlighted that without evidence of disbursement against the time value of money or any agreed interest, the applicant cannot be considered a financial creditor. Consequently, the application was deemed not maintainable, and the petition was dismissed.6. The Tribunal clarified that the dismissal of the application should not prejudice the rights of the applicants before any other forum, and the order was served to the concerned parties for compliance and information.This detailed analysis of the judgment highlights the key legal aspects and reasoning behind the Tribunal's decision in the matter.
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