Section 7 insolvency claims require proof of financial debt, actual default, and limitation from the default date, not demand notice.

A section 7 applicant must prove, with cogent material, that the claim is a financial debt disbursed against consideration for the time value of money and that it is a financial creditor entitled to invoke the Code. Where the record shows only an alleged oral loan, with no written sanction, loan agreement, or reliable evidence of agreed interest, the claim fails to meet that threshold. Limitation runs from the date of actual default, not from a later demand notice, and a section 7 filing made beyond three years from the last payment or default is time-barred unless a later default is established. A demand notice cannot substitute for proof of default in a financial debt case.

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Issues: (i) Whether the applicant established that the debt claimed constituted a financial debt and that it was a financial creditor entitled to invoke section 7; (ii) whether the application was barred by limitation; (iii) whether the demand notice could be treated as the date of default for a section 7 proceeding.

Issue (i): Whether the applicant established that the debt claimed constituted a financial debt and that it was a financial creditor entitled to invoke section 7.

Analysis: The application was founded on an alleged oral loan arrangement and the record did not contain a written sanction, loan agreement, or any reliable material showing the agreed interest or the basis on which the money was advanced. The authority found material contradictions between the original and amended pleadings regarding payment of interest and principal, and held that the applicant had not shown that the amount was disbursed against consideration for the time value of money. On that footing, the claim did not satisfy the ingredients of financial debt or financial creditor status under the Code.

Conclusion: The issue was decided against the applicant.

Issue (ii): Whether the application was barred by limitation.

Analysis: The authority held that limitation could not be shifted to the date of demand notice in a section 7 proceeding. On the applicant's own case, the last payment/default occurred on 07.05.2016, whereas the petition was filed on 21.06.2019. Applying the three-year period under article 137, the application was beyond limitation since the applicant failed to establish any later date of actual default or cause of action.

Conclusion: The issue was decided against the applicant.

Issue (iii): Whether the demand notice could be treated as the date of default for a section 7 proceeding.

Analysis: The authority distinguished the notice requirement under section 9 from the scheme of section 7 and held that, in a financial debt case, default must be shown by records or other evidence and not by treating a demand notice as the operative date of default. The applicant failed to produce any legal basis for substituting the notice date for the actual default date.

Conclusion: The issue was decided against the applicant.

Final Conclusion: The application under section 7 was held to be not maintainable on merits and was rejected as time-barred for failure to establish a financial debt and default.

Ratio Decidendi: For admission of a section 7 application, the applicant must establish a financial debt and a default by cogent material, and limitation runs from the date of actual default, not from the date of a demand notice.

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