Section 7 insolvency proof: bank records, liability acknowledgments, and pending suits can still support admission.
For a Section 7 insolvency application, default may be proved by evidence other than an information-utility record, because Regulation 20(1A) does not make such authentication the exclusive mode of proof; statements of account and bankers' book certificates can suffice. Counter-claims, money suits, and alleged pre-existing disputes do not negate financial debt or default in a Section 7 proceeding, which turns on debt and default rather than the operational-debt dispute framework. Repeated one-time settlement proposals can amount to acknowledgments of liability and extend limitation, even if marked without prejudice, and an objection to the filing signatory failed where the power of attorney authorised institution of the proceedings.
Issues: (i) Whether non-filing of a record of default from an information utility, after insertion of Regulation 20(1A) of the Information Utilities Regulations, rendered the Section 7 application non-maintainable. (ii) Whether the corporate debtor's counter-claim, money suit, and plea of pre-existing dispute negatived the existence of financial debt and default. (iii) Whether the Section 7 application was barred by limitation or was otherwise invalid because the one-time settlement communications were marked without prejudice and because of the objection to authorisation of the filing signatory.
Issue (i): Whether non-filing of a record of default from an information utility, after insertion of Regulation 20(1A) of the Information Utilities Regulations, rendered the Section 7 application non-maintainable.
Analysis: Section 7(3)(a) permits the financial creditor to furnish the record of default recorded with an information utility or such other record or evidence of default as may be specified. Rule 4 of the Application to Adjudicating Authority Rules and Regulation 2A of the CIRP Regulations contemplate other admissible evidence, including certified bankers' book entries. Regulation 20(1A) cannot be read as overriding the parent Code and the rules to make information-utility authentication the sole mode of proof. The application was supported by statements of account and bankers' book certificates, which constituted valid evidence of default.
Conclusion: The objection was rejected and the admission of the Section 7 application was upheld on this ground.
Issue (ii): Whether the corporate debtor's counter-claim, money suit, and plea of pre-existing dispute negatived the existence of financial debt and default.
Analysis: In a Section 7 proceeding, the adjudicating authority is concerned with debt and default, and not with any concept of pre-existing dispute as applicable to operational debt. Pending counter-claims or independent civil proceedings do not extinguish the financial debt or prevent admission where default is otherwise shown. The repeated settlement offers and surrounding correspondence evidenced acknowledgment of liability, while the corporate debtor's pending claims were matters for separate adjudication and did not defeat the financial creditor's case.
Conclusion: The counter-claim, money suit, and alleged pre-existing dispute did not displace the finding of financial debt and default.
Issue (iii): Whether the Section 7 application was barred by limitation or was otherwise invalid because the one-time settlement communications were marked without prejudice and because of the objection to authorisation of the filing signatory.
Analysis: The repeated one-time settlement proposals constituted acknowledgments of liability for the purpose of limitation. A letter or offer labelled without prejudice does not lose its evidentiary character where it amounts to an acknowledgment of liability. The limitation period was extended by the acknowledgments. As to authorisation, the power of attorney authorised substitution and nomination, and the signatory was properly authorised to institute the proceedings.
Conclusion: The application was not barred by limitation, and the authorisation objection failed.
Final Conclusion: No ground was made out to interfere with the order admitting the Section 7 application and commencing insolvency resolution.
Ratio Decidendi: For admission of a financial creditor's Section 7 application, default may be established by evidence other than an information-utility record, acknowledgments of liability extend limitation, and pending counterclaims or suits do not negate financial debt and default.