Section 7 insolvency admission requires reliable proof of debt and default; rejected and withdrawn materials cannot sustain admission.
Admission under Section 7 of the Insolvency and Bankruptcy Code requires reliable proof of an existing financial debt and subsisting default. The Tribunal found that the alleged disbursement and default were not supported by credible material, while bank evidence indicated repayment of the amount claimed; the creditor failed to dislodge that position. It also held that reliance on a supplementary affidavit already rejected and on materials from a withdrawn earlier proceeding was impermissible. The admission order, moratorium, appointment of the Interim Resolution Professional, and all consequential actions were set aside, and the Section 7 application was dismissed.
Issues: (i) Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was maintainable in the absence of reliable proof of disbursement and subsisting default; (ii) Whether the Adjudicating Authority could rely on a supplementary affidavit already rejected and on materials from a withdrawn earlier proceeding to sustain admission.
Issue (i): Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was maintainable in the absence of reliable proof of disbursement and subsisting default.
Analysis: The record showed that the alleged disbursement and the asserted default were not supported by credible material sufficient to establish an existing financial debt due and payable on the date of filing. The corporate debtor produced bank evidence indicating repayment of the amount said to have been disbursed under the relevant loan agreement, while the creditor did not produce reliable proof to dislodge that position.
Conclusion: The Section 7 proceeding was not sustainable on the material placed before the Tribunal, and the admission order could not be maintained.
Issue (ii): Whether the Adjudicating Authority could rely on a supplementary affidavit already rejected and on materials from a withdrawn earlier proceeding to sustain admission.
Analysis: A document expressly rejected earlier could not properly form the basis of admission. Likewise, materials from a prior proceeding that had been withdrawn could not be relied upon to fasten liability in the present proceeding. The admission order was therefore founded on impermissible reliance on unsupported and unavailable material.
Conclusion: The Adjudicating Authority erred in relying on the rejected supplementary affidavit and withdrawn proceeding material, and the resulting admission was unsustainable.
Final Conclusion: The insolvency admission, moratorium, appointment of the Interim Resolution Professional, and all consequential actions were set aside, and the Section 7 application was dismissed.
Ratio Decidendi: Admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 requires reliable proof of an existing financial debt and default, and an admission order cannot rest on rejected material or on documents from a withdrawn proceeding.
TaxTMI 
AI Drafter ✕
TaxTMI 
