Tribunal deems unsecured loans as financial debt under Insolvency Code, sets hearing date

The Tribunal found the application under Section 7 of the Insolvency and Bankruptcy Code maintainable. The Financial Creditor's claim for initiating Corporate Insolvency Resolution Process against the Corporate Debtor, based on interest-free unsecured loans totaling Rs. 1,45,03,369, was supported by documentary evidence. The Tribunal emphasized the expansive definition of "financial debt" under the Code, allowing for unsecured loans to be considered as such. The Corporate Debtor was directed to respond within two weeks, with further hearings scheduled. The judgment highlighted that an express agreement was not necessary to establish the loan, relying on past cases' evidence of accounts.

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Issues Involved:
- Maintainability of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016.

Analysis:
1. The application was filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 by the Financial Creditor against the Corporate Debtor for initiating Corporate Insolvency Resolution Process (CIRP).
2. The Corporate Debtor, engaged in construction and real estate business, received interest-free unsecured loans from the Financial Creditor over a period from March 2015 to February 2021 totaling Rs. 1,45,03,369.
3. Despite a demand for repayment made through a Demand Notice and email, the Corporate Debtor failed to repay the loan amount, leading to default.
4. The Financial Creditor contended that the Corporate Debtor had not paid the due amount, which was Rs. 1,45,03,369 as of March 31, 2021.
5. The issue for adjudication was whether the application under Section 7 was maintainable as per the Insolvency and Bankruptcy Code.
6. Citing relevant case laws, the Tribunal observed that the unsecured loan provided by a Director of the Company could be treated as a Financial Debt under Section 5(8) of the Insolvency and Bankruptcy Code, 2016.
7. The Tribunal noted that the transactions of providing the unsecured loan were supported by documentary evidence, including entries in the HDFC Bank account of the Financial Creditor and the audited balance sheet of the Corporate Debtor.
8. Consequently, the Tribunal directed the registry to issue a notice to the Corporate Debtor, requiring a reply within two weeks, and scheduled further hearings for resolution on 29.08.2022.
9. The Tribunal emphasized the inclusive nature of the definition of "financial debt" under the Insolvency and Bankruptcy Code, highlighting that even transactions not explicitly described could be classified as such.
10. The judgment underscored that the existence of an express agreement was not compulsory to prove the loan and its disbursement, as demonstrated in the statement of accounts produced as evidence in previous cases.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision regarding the maintainability of the application under the Insolvency and Bankruptcy Code, 2016.

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