Financial debt under insolvency law requires proof of disbursal, time value of money, and reliable evidence of default.

Section 7 of the Insolvency and Bankruptcy Code requires the applicant to show a legally cognisable financial debt, disbursal for consideration of time value of money, and default on reliable material. The record was found insufficient because the alleged unsecured advances were not supported by dependable documents showing the character of a financial debt or a borrowing by the corporate debtor. Incomplete pleadings, missing particulars, and inconsistencies in figures and dates further weakened the claim. Mere payment of interest or deduction of TDS was held inadequate to establish financial creditor status or default, so refusal to commence CIRP was upheld.

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Issues: Whether the appellant established, for the purposes of Section 7 of the Insolvency and Bankruptcy Code, 2016, that the unsecured advances constituted a financial debt and that default was proved so as to justify initiation of insolvency proceedings.

Analysis: The application was tested on the requirements of Section 7 of the Insolvency and Bankruptcy Code, 2016, read with the definition of financial debt and default. The record was found deficient because the appellant did not produce reliable material to show disbursal against the consideration for time value of money, nor sufficient documents to establish the character of the alleged loan as financial debt. The application was also found incomplete, with missing particulars and inconsistencies in the figures and dates asserted. The Tribunal further noted the absence of dependable evidence showing that the corporate debtor borrowed the amount in the manner required by the Code.

Conclusion: The appellant failed to establish financial creditor status, financial debt, and default. The refusal to initiate corporate insolvency resolution process was upheld and the appeal failed.

Ratio Decidendi: For admission of an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, the applicant must demonstrate a legally cognizable financial debt disbursed for time value of money and prove default through reliable material; unsupported assertions, incomplete filings, and mere payment of interest or deduction of TDS are insufficient.

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