Section 7 insolvency admission turns on proved disbursement, contractual interest obligations from disbursement, and default shown by account records.

Disbursed debt and default under Section 7 of the Insolvency and Bankruptcy Code, 2016 may be proved through loan documents and account records showing credit entries to the corporate debtor. Here, bank records reflected disbursement in four tranches, and subsequent fund transfers did not displace the fact of financial debt. The loan terms also required payment of PEMI and monthly interest from the date of first disbursement, so default could arise before the EMI amortisation period began. General allegations in collateral applications under Sections 65 and 75 did not undermine the statutory requirements for admission of the insolvency petition.

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Issues: (i) whether debt and disbursement to the corporate debtor were established; (ii) whether EMI liability arose only after 48 months from the first disbursement and, therefore, no default could have occurred before 30.07.2021; (iii) whether the application under Sections 65 and 75 of the Insolvency and Bankruptcy Code, 2016 was properly adjudicated and whether it affected the Section 7 proceedings.

Issue (i): Whether debt and disbursement to the corporate debtor were established.

Analysis: The bank records showed credit entries in the corporate debtor's accounts reflecting disbursement of Rs. 90.50 crores in four tranches. The subsequent transfer of funds from the account did not negate the fact of disbursement, and no concrete material was produced to show that the credit entries were fabricated or that the lender had manipulated the account operations. The existence of disbursement and consequent financial debt was therefore established.

Conclusion: This issue was decided against the appellant and in favour of the respondent.

Issue (ii): Whether EMI liability arose only after 48 months from the first disbursement and, therefore, no default could have occurred before 30.07.2021.

Analysis: The loan agreement distinguished between EMI and PEMI. EMI was linked to the amortisation period beginning after 48 months, but PEMI and monthly interest were payable from the date of first disbursement. Clause 3.1 and Clause 3.4 required repayment of interest from the disbursement date, and default in such payment could trigger an event of default. On that construction, repayment obligations existed before the commencement of EMI.

Conclusion: This issue was decided against the appellant and in favour of the respondent.

Issue (iii): Whether the application under Sections 65 and 75 of the Insolvency and Bankruptcy Code, 2016 was properly adjudicated and whether it affected the Section 7 proceedings.

Analysis: The allegations in the collateral application were found to be general and unsupported by specific particulars. Such proceedings did not alter the substantive requirements for admission under Section 7, namely the existence of debt, default, and satisfaction of the statutory threshold. Those ingredients having been met, the admission order was not shown to suffer from legal error.

Conclusion: This issue was decided against the appellant and in favour of the respondent.

Final Conclusion: The statutory requirements for admission of the insolvency petition were satisfied, and the challenge to the admission order failed on all counts.

Ratio Decidendi: For admission under Section 7 of the Insolvency and Bankruptcy Code, 2016, the existence of disbursed debt and default may be established by the loan documents and account records, and a contractual obligation to pay interest or PEMI from the date of disbursement can constitute default even before the commencement of EMI; collateral allegations under Sections 65 and 75 do not, by themselves, defeat a duly supported Section 7 application.

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