Balance-sheet admissions and settlement correspondence can prove financial debt and default in Section 7 insolvency proceedings.

A rejoinder and its annexures could be read in evidence because pleadings under the NCLT Rules include a rejoinder, and the documents were relevant to the controversy; the appellant failed to disprove their genuineness. The tribunal also treated balance-sheet entries, an auditor's report, and written correspondence acknowledging liability and proposing one-time settlement as evidence of financial debt and default. Disputed quantum did not by itself defeat maintainability where debt and default were otherwise shown. On that basis, the Section 7 insolvency application was sustained and the challenge to admission failed.

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Issues: (i) Whether the rejoinder and the documents filed with it could be taken on record and read in evidence. (ii) Whether the financial debt and default were established so as to sustain admission of the Section 7 insolvency application.

Issue (i): Whether the rejoinder and the documents filed with it could be taken on record and read in evidence.

Analysis: Rule 2(19) of the National Company Law Tribunal Rules, 2016 broadly defines pleadings to include a rejoinder. On that basis, the rejoinder and its annexures did not require separate formal leave merely to be considered along with the appeal. The balance sheet and auditor's report were treated as public documents, and the appellant did not discharge the burden of proving the alleged non-genuineness of the correspondence relied upon. Procedural objections could not exclude material already forming part of the pleadings and relevant to the controversy.

Conclusion: The rejoinder and the accompanying documents were rightly read in evidence.

Issue (ii): Whether the financial debt and default were established so as to sustain admission of the Section 7 insolvency application.

Analysis: The record showed long-term borrowings in the balance sheet, an independent auditor's report, and correspondence dated 16.06.2022 and 19.07.2025 evidencing acknowledgement of liability and proposals for one-time settlement. An entry in the balance sheet was treated as an acknowledgment of debt, and a settlement proposal was treated as an admission of liability. Under the insolvency framework, the adjudicating authority is required to examine whether a financial debt is due and whether default has occurred, and disputed quantum does not by itself defeat maintainability where debt and default are otherwise shown.

Conclusion: The existence of financial debt and default was established, and admission of the Section 7 application was sustained.

Final Conclusion: The challenge to the admission order failed, as the appellate tribunal found both the evidentiary materials and the debtor's own communications sufficient to prove liability and default under the insolvency code.

Ratio Decidendi: A balance sheet entry, corroborated by an auditor's report and subsequent written acknowledgements or one-time settlement proposals, can amount to admission of debt and establish default for the purpose of Section 7 insolvency proceedings; procedural objections to a rejoinder will not defeat such proof where the documents are part of the pleadings and their contents are not effectively disproved.

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