Financial debt and default proved by balance sheets and records, while a later resolution plan made the challenge infructuous.

Audited balance sheets, ledger entries, bank statements, Form 26AS and other financial records showing disbursement and interest supported the finding that the amounts advanced were financial debt and not equity. The corporate debtor's signed balance sheets recorded the liability, amounting to acknowledgement of debt, and non-repayment despite demand established default. The appellate challenge to the Section 7 admission also became infructuous after subsequent approval of the resolution plan in connected proceedings, and in any event the record supported the admission order. The appellate challenge therefore failed and the Section 7 order was left undisturbed.

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Issues: (i) Whether the amounts advanced to the corporate debtor constituted financial debt disbursed against the consideration for the time value of money, and whether default in repayment was established so as to sustain the Section 7 admission; (ii) Whether the appeal had become infructuous in view of subsequent developments, including approval of the resolution plan, and whether any interference was warranted on merits.

Issue (i): Whether the amounts advanced to the corporate debtor constituted financial debt disbursed against the consideration for the time value of money, and whether default in repayment was established so as to sustain the Section 7 admission.

Analysis: The record contained disbursement details, bank statements, ledger entries, audited balance sheets and Form 26AS reflecting the advances and interest component. The balance sheets of the corporate debtor, signed by its directors, recorded the liability, which amounted to acknowledgement of debt. The materials established that the funds were advanced as loan and not merely as an equity investment, and the corporate debtor had failed to repay the outstanding amount despite demand.

Conclusion: The issue was answered against the appellants and in favour of the respondent. The financial debt and default stood established, and the admission of the Section 7 petition did not suffer from infirmity.

Issue (ii): Whether the appeal had become infructuous in view of subsequent developments, including approval of the resolution plan, and whether any interference was warranted on merits.

Analysis: By the time the appeal was heard, the same corporate debtor had already been dealt with in connected proceedings, and the resolution plan had been approved in subsequent litigation. In that background, the appeal against the admission order no longer served any effective purpose. Even otherwise, the merits of the record supported the finding of debt and default.

Conclusion: The issue was answered against the appellants. The appeal was infructuous and also lacked merit.

Final Conclusion: The appellate challenge failed in its entirety, and the admission order under Section 7 was left undisturbed.

Ratio Decidendi: Audited balance sheets, ledger entries and allied financial records acknowledging liability can establish acknowledgement of debt and support a Section 7 insolvency application where disbursement and default are otherwise proved; a later supervening resolution process may also render the challenge to the admission order infructuous.

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