TaxTMI 
TaxTMI 
2026 (1) TMI 794
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...., SREI Equipment Finance Limited, Respondent No. 1 herein. Respondent No. 1, who initiated the proceedings under Section 7 of the I & B Code, 2016, had sought commencement of the CIRP against the Corporate Debtor on the ground, as contended before the Ld. Adjudicating Authority, that they had extended certain financial assistance by way of credit facilities to the Corporate Debtor, allegedly amounting to Rs. 43,96,27,959/- under various facility and loan agreements, and pursuant to the same, various deeds were executed, including the deed of hypothecation, the certificate of registration of charge, the personal guarantee, and the loan agreement. 2. It was contended by the Financial Creditor that, on account of the Corporate Debtor's default in remitting the loan amount extended by the Financial Creditor, an amount of Rs. 277,77,89,288/-, as stated in the demand notice dated 29.03.2022, had become due and payable. Since the liability and apparent default arising from the said notice were not discharged by the Corporate Debtor despite several demands, Respondent No. 1/Financial Creditor is said to have initiated proceedings by invoking Section 7 of the I & B Code, 2016. 3. In r....
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....tablish the actual disbursement of a loan facility, something that could not be substantiated from the documents filed before the Ld. NCLT. 8. The Corporate Debtor also argued that the Financial Creditor failed to establish that any vehicle purchases were actually made out of the alleged financial assistance, or that any such amount had been defaulted, so as to justify initiation of proceedings under Section 7 of the I & B Code, 2016. 9. The Corporate Debtor additionally raised a vague plea that the proceedings under Section 7 suffered from misjoinder of cause of action, asserting that different claims arising from separate communications had been improperly clubbed together. It was argued that the application was ambiguous and failed to establish the existence of a debt, particularly due to inconsistency as to whether the alleged debt pertained to financial assistance for the Corporate Debtor's business or exclusively for the purchase of vehicles. 10. The Corporate Debtor further argued that, since different contracts were governed by different charges, consolidation of debts for recovery was impermissible, resulting in misjoinder of cause of action, and therefore the pro....
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....da) v. C. Shivakumar Reddy, decided on 04.08.2021 in Civil Appeal No. 1650 of 2020, which settled the principles for determining existing debt liability. For the purpose of brevity, para 118 is extracted hereunder: - "118. In Pandam Tea Co. Ltd., In re [Pandam Tea Co. Ltd., In re, 1973 SCC OnLine Cal 93 : AIR 1974 Cal 170], Sabyasachi Mukharji, J. held : (SCC OnLine Cal para 4) "4. Now the question is whether the statements, which are contained in the profits and loss accounts and the assets and liabilities side indicating the liability of the petitioning creditor along with the statement of the Directors made to the shareholders as Directors' report should be read together and if so whether reading these two statements together these amount to an acknowledgment as contemplated under Section 18 of the Limitation Act, 1963, or Section 19 of the Limitation Act, 1908. In my opinion, both these statements have to be read together. The balance sheet is meant to be presented and passed by the shareholders and is generally accompanied by the Directors' report to the shareholders. Therefore in understanding the balance sheets and in explaining the statements in th....
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....aking the statement by an involved and far-fetched reasoning. In order to find out the intention of the document by which acknowledgment was to be construed the document as a whole must be read and the intention of the parties must be found out from the total effect of the document read as a whole." 15. In the summary of the judgment in Dena Bank (Supra), the Hon'ble Apex Court concluded that if an amount is reflected in the balance sheet of the Corporate Debtor as a long-term borrowing, as is the case here reflected in the Auditor's Report dated 07.12.2020, it would amount to an acknowledgment of debt within the meaning of Section 18 of the Limitation Act. While reinforcing this finding, the Ld. Tribunal held that the principle laid down in various judgments of the Hon'ble Apex Court and the Hon'ble Delhi High Court, particularly those referred to in Para 118 of the Dena Bank judgment (Supra), establishes that an acknowledgment of debt itself constitutes a liability to pay the outstanding amount when the same is reflected in the balance sheet, especially when it is based on an independent Auditor's report, the propriety of which has not been denied by the Corporate Debtor in an....
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....rded as a continuation of the Corporate Debtor's acknowledgment of liability, consistent with the earlier letter dated 16.06.2022. The relevant paragraph of the communication made by the Appellant himself on 19.07.2025 is extracted hereunder: - "To, SREI Equipment Finance Limited, Y-10, EP-BLOCK, SECTOR V SALT LAKE KOLKATA - 700 091 Dear Sir, Sub: One time settlement - Reg. loan agreement No.123376 for Rs 5 Crore. Ref: Discussions took between Mr. A. Krishna Reddy & Mr. Anupam Jain CEO of SREI Equipment Finance Ltd during 29th May 2025 at SREI office Chambers, Hyderabad. ........ ........ ........ ........ ....... ....... As the prevailing situation was worsening during the year 2020, as a priority AKRCL had started discussions with SREI for one time settlement for an amount of Rs.2.50cr. The OTS amount was mutually arrived at after several rounds of discussions between officials of AKRCL and SREI Equipment Finance Limited. We were appraised by SREI that the recommendations for OTS were also submitted to the SREI Board for its consideration and approval. Sin....
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....s under Section 7 of the I & B Code, 2016. This is especially so when the Appellant did not controvert the contents of these documents, except to argue that they are not be considered since they were allegedly not taken on record, an argument already addressed by this Tribunal. 23. Rule 2(19) of the NCLT Rules, 2016, is broad enough to include within its scope the Rejoinder and the three accompanying documents referred to above, and these may therefore be read for adjudication of the lis on its merits. This is particularly true in the absence of any legal bar preventing such documents from being read in evidence, given that they form part of the pleadings and their contents have not been denied. 24. Moreover, when the Ld. Counsel for the Appellant restricts his argument to the alleged absence of leave for filing the Rejoinder, it is notable that he has failed to establish, either through legal authority or judicial precedent, that any such formal permission is required to place these documents on record. The attempt to exclude these documents from consideration, despite implicitly admitting their contents, undermines the Appellant's own defence, revealing an effort to avoid s....
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....2025, which was issued after the impugned order dated 23.03.2023. 29. In light of the illustrations under Section 104 of the Bharatiya Sakshya Adhinayam, 2023, once a person seeks to benefit from a document, either by asserting its execution or denying it, the burden of proof lies upon him to establish the contrary. The Financial Creditor is not required to prove a negative, particularly when the Appellant's documents are consistent with subsequent communications executed by him. 30. The Ld. Counsel for the Appellant has referred to the copy of the Rejoinder filed along with the memorandum of appeal in Volume III, containing the Auditor's Report, the balance sheet, and the letter dated 16.06.2022, an issue already addressed by this Tribunal. Since these documents and the Rejoinder form part of the pleadings, no formal permission was required from the Ld. Tribunal for them to be considered. If the Appellant sought to argue otherwise, the burden of proof rested upon him, a burden he completely failed to discharge. 31. Even assuming, for the sake of argument, that the documents filed with the Rejoinder were not formally taken on record by the Ld. Adjudicating Authority as per....
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.... a continuation of the proceedings of the original court, from considering documents already on record, since the Appellate Court is the first superior court of fact and law before which the matter is open to scrutiny. 34. Hence, we too have exercised our powers to examine the Rejoinder affidavit and the documents annexed thereto, and we are of the considered view that the Auditor's Report and the provisional balance sheet indeed reflect the relevant balances. Since these are public documents, and upon being satisfied as to their authenticity, we have proceeded to consider them on merits. It is a settled position of law that once an amount is reflected in the balance sheet, it is presumed to be an amount due and payable by the Corporate Debtor to the Financial Creditor. 35. The Ld. Counsel for the Appellant submitted that they had specifically taken this stand, regarding the reading of the Rejoinder affidavit and the supporting documents, in the written submissions filed before the Ld. NCLT. We find it appropriate to clarify that oral and written submissions do not constitute pleadings. They are merely an elaboration of arguments already advanced before the judicial forum and....
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....efits the party asserting it. In the present case, the Appellant has made no attempt whatsoever to discharge this burden or to establish that the documents were obtained through fraudulent means. 41. More importantly, during the proceedings before the Ld. Adjudicating Authority, when the Section 7 application under the I & B Code was under consideration, the Ld. Authority framed a specific question to be examined for determining the matter. The questions which were framed by the Ld. Tribunal are extracted hereunder: - "VII. In the light of the aforestated contentions, the point that emerged for our due consideration is: • Whether a financial debt as claimed by the financial creditor is due and payable by the corporate debtor, if so, whether the corporate debtor defaulted in payment of the same?" 42. In fact, if the way in which these two questions were sought to be answered by the Appellant are considered, it clearly demonstrates that the Appellant never attempted to pursue or establish the allegation of fraud through appreciation of evidence. Having failed to act upon his own rights, he cannot later resile from the stand already taken and adopt a contra....
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....73 180,173 Shri ram Transnr: finance 146,107,770 146,107,770 HDFC BANK TERM LOANS 4,443,659 4,443659 Srei infrastructure term loans 116,135 116,135 BOB -Car Loans Vimal Credit Corporate ltd The all the above loans became NPAs a) Sub Total 15,26,39,753 15,26,39,753 (b) Mobilisation Advances From Customers 7,78,76,147 8,58,99,770 (The Mobilisation advance is Guaranteed by Terms of Repayment (Terms of repayment: Deduction From Work bills) Sub-Total 23,05,15,900 23,85,39,523 Unsecured (a) Loans and advances from related parties 20,28,81,967 14,71,67,754 Sub-Total 20,28,81,967 14,71,67,754 Grand Total 43,33,97,867 38,57,07,277 44. The Ld. Counsel for Respondent No. 1 broadly submitted that acknowledgment of liability can be clearly inferred from the amount reflected in the balance sheet, and such acknowledgment may be determined on the basis of the ratio laid down in the judgment reported as MANU/SC/0279/2021, Asset Reconstruction Company (India) v. Bishal Jaiswal, wherein the Hon'ble Ape....
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....e Code gets triggered the moment default is of rupees one lakh or more (Section 4). The corporate insolvency resolution process may be triggered by the corporate debtor itself or a financial creditor or operational creditor. A distinction is made by the Code between debts owed to financial creditors and operational creditors. A financial creditor has been defined under Section 5(7) as a person to whom a financial debt is owed and a financial debt is defined in Section 5(8) to mean a debt which is disbursed against consideration for the time value of money. As opposed to this, an operational creditor means a person to whom an operational debt is owed and an operational debt under Section 5(21) means a claim in respect of provision of goods or services. 28. When it comes to a financial creditor triggering the process, Section 7 becomes relevant. Under the explanation to Section 7(1), a default is in respect of a financial debt owed to any financial creditor of the corporate debtor - it need not be a debt owed to the applicant financial creditor. Under Section 7(2), an application is to be made under sub- section (1) in such form and manner as is prescribed, which takes us to....
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.... of proceedings under Section 7 of the I & B Code, 2016; quantification becomes relevant only at a later stage, when the matter is adjudicated on its merits. 47. This principle is reiterated in Para 30 of the judgment in M/s Innoventive Industries Limited v. ICICI Bank Limited, reported in (2018) 1 SCC 407, extracted below: "30. On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is "due" i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise." 48. In view of the aforesaid facts and reasons, the only questions pressed by the Appellant are as follows: i. That the Rejoinder cannot be taken on record. ii. That the documents fil....