Section 7 insolvency claim fails where financial debt, default and valid limitation evidence are not proved.

An application under Section 7 of the Insolvency and Bankruptcy Code was rejected because the applicant failed to establish, with credible supporting material, the existence of a financial debt and default. The documents relied on, including the ledger, did not satisfactorily prove a duly documented financial contract or reliable interest payments referable to the alleged advances. The claim was also treated as time-barred, as the last asserted advance was in 2012 and there was no clear acknowledgement extending limitation. In the absence of such acknowledgement, Article 137 of the Limitation Act, 1963 applied, rendering the claim stale and the application not maintainable.

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Issues: Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was maintainable in the absence of sufficient evidence establishing financial debt and default and in view of limitation.

Analysis: The application was examined on the requirements of Section 7, namely the existence of a financial debt, proof of default, and supporting records or evidence. The materials relied upon did not convincingly establish a duly documented financial contract, nor did they furnish reliable evidence of regular interest payments referable to the alleged advances. The ledger and other documents were found insufficient to prove that the claimed amount constituted a financial debt as pleaded. The claim was also treated as time-barred because the last asserted advance was in 2012 and there was no clear acknowledgement of debt extending limitation. In the absence of such acknowledgement, Article 137 of the Limitation Act, 1963 was held applicable.

Conclusion: The application under Section 7 was not maintainable and was rejected.

Ratio Decidendi: An insolvency application under Section 7 cannot be admitted unless the applicant establishes a financial debt and default with credible supporting material, and a stale claim without valid acknowledgement of debt is barred by limitation under Article 137 of the Limitation Act, 1963.

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