2026 (2) TMI 1216 - AT - IBC

Debt and default under insolvency law: NeSL records and absence of account reconciliation can justify petition admission and affect limitation.

Examines whether outstanding debt and default, evidenced by ledger entries and NeSL records and unchallenged by reconciliation or statement of account, ... Debt and default within the meaning of the IBC, 2016 - admission of Section 7 application - date of default and limitation - reliance on NeSL records - offer of one-time settlement as evidence of default - mandatory admission where debt and default established - HELD THAT:- The fact that the Corporate Debtor is in default is clearly proved by various offers of the OTS as relied by the Appellant in this appeal. As noted above, Appellant even after passing of the order dated 03.12.2025 have submitted OTS proposal on 30.12.2025, which has not been accepted by the Bank. Prior to aforesaid OTS proposal, the Corporate Debtor has earlier also submitted several OTS proposals which are detailed in the affidavit which were not accepted by the Bank. Submission of OTS proposal is clear proof of default by the Corporate Debtor. The claim of the Corporate Debtor is that it deposited huge amount before the Financial Creditor but no statement of account or reconciliation has been produced. The Adjudicating Authority has rightly placed reliance on the judgment of Hon’ble Supreme Court in “M. Suresh Kumar Reddy [2023 (5) TMI 570 - SUPREME COURT]” that once the Tribunal is satisfied that an outstanding debt exists and a default has occurred, the Adjudicating Authority had to admit the Section 7 application. We, thus, are of the view that no grounds have been made out in this appeal to interfere with the impugned order. Appeal is dismissed. Issues: (i) Whether there is debt and default within the meaning of the Insolvency and Bankruptcy Code, 2016 such as to warrant admission of the Section 7 petition; (ii) Whether the Section 7 application was barred by limitation.Issue (i): Whether there is debt and default within the meaning of the Insolvency and Bankruptcy Code, 2016 such as to warrant admission of the Section 7 petition.Analysis: The Adjudicating Authority found outstanding debt exceeding the statutory threshold and relied on NeSL record showing default. Multiple OTS proposals by the corporate debtor, including one after admission, were noted as evidencing default. No reconciliation or statement of account was produced by the corporate debtor to controvert the claim. The Adjudicating Authority applied the principle that once outstanding debt and default are established, admission under Section 7 follows.Conclusion: The Section 7 petition was rightly admitted on the ground that debt and default as contemplated by the Insolvency and Bankruptcy Code, 2016 were established.Issue (ii): Whether the Section 7 application was barred by limitation.Analysis: The date of default recorded in the application and NeSL was 08.06.2023. The Section 7 application filed on 15.01.2025 was held to be within the prescribed limitation period based on the date of default as recorded in the loan and NeSL records. The Adjudicating Authority's conclusion on limitation was accepted.Conclusion: The Section 7 application was not barred by limitation.Final Conclusion: The impugned admission order under Section 7 of the Insolvency and Bankruptcy Code, 2016 is upheld and the appeal is dismissed.Ratio Decidendi: Where the Adjudicating Authority is satisfied that an outstanding debt exists and a default has occurred, admission of a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 is required.