Section 7 insolvency needs proof of default and financial debt; recovery-style claims are not fit for admission.

A section 7 insolvency application requires credible material establishing the date of default and the existence of a financial debt with time value of money. Where the loan tenure, repayment demand, or default date is not documented, limitation cannot be treated as satisfactorily excluded. The note also states that unsubstantiated interest claims and post-dated cheques, being supported only by rebuttable presumptions, do not by themselves prove a financial debt for insolvency purposes. In substance, a proceeding used to recover money rather than to trigger insolvency resolution is not maintainable under the Code, and other civil or statutory remedies remain available.

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Issues: (i) whether the application under section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation in the absence of material establishing the date of default or loan tenure; (ii) whether the transaction disclosed a financial debt with time value of money or was in substance a recovery proceeding not fit for admission under the Code.

Issue (i): whether the application under section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation in the absence of material establishing the date of default or loan tenure.

Analysis: The advances were made in different financial years, but no documentation established the loan tenure or a clear demand for repayment. In the absence of such material, the date of default could not be ascertained with certainty.

Conclusion: The issue was answered against the applicants, and limitation was not proved to be excluded.

Issue (ii): whether the transaction disclosed a financial debt with time value of money or was in substance a recovery proceeding not fit for admission under the Code.

Analysis: The claim of interest remained unsubstantiated, the post-dated cheques did not amount to an unqualified admission of debt because the statutory presumptions under the Negotiable Instruments Act were rebuttable, and the material was insufficient to show the essential ingredients of a financial debt. The proceeding was found to be, in substance, an attempt at money recovery rather than insolvency resolution.

Conclusion: The issue was answered against the applicants, and the petition was held not maintainable under section 7 of the Insolvency and Bankruptcy Code, 2016.

Final Conclusion: The application was not admitted and stood dismissed, while remedies under other laws were left open.

Ratio Decidendi: A section 7 application cannot be admitted unless the date of default and the existence of a financial debt with time value of money are established on credible material; insolvency proceedings cannot be used as a substitute for ordinary debt recovery.

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