2018 (5) TMI 1031 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process - Eligible outstanding debt proof - Held that - Despite mandatory requirements of the Code and Rules, the dates and amount of various loans disbursed have not been furnished. Simply wild assertion that a huge financial assistance to the tune of ₹ 1120.98 lacs has been given from time to time since 2011 will not suffice. Onus to proof lies on the applicant and the same becomes more onerous when the claim is disputed. The applicant being a legal entity is supposed to have relevant documents, balance sheet and resolutions etc. to support the contention of disbursement of various loans for time value of money. Mere pleading of the applicant in the absence of supporting documentary evidence will not suffice to prove the disbursement and default. As reiterated that the applicant has miserably failed to furnish the details of various disbursements alleged to have been made since 2011 and also has failed to establish that such disbursements were made for time value of money, so as to come within the purview of financial creditor in order to maintain the present application preferred under Section 7 of the Code. Petition fails and the same is rejected.

Issues:
1. Application filed under section 7 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process.
2. Determination of the applicant as a financial creditor.
3. Requirement of proving default by the financial creditor.
4. Definition and criteria for a financial creditor and financial debt.
5. Compliance with the prescribed format and documentation for the application.
6. Burden of proof on the applicant in case of disputed claims.
7. Failure of the applicant to provide details of disbursements and establish financial creditor status.
8. Rejection of the petition due to lack of evidence.

Analysis:
1. The judgment pertains to an application filed under section 7 of the Insolvency and Bankruptcy Code, 2016, seeking the initiation of Corporate Insolvency Resolution Process against a respondent company claimed to be a corporate debtor.

2. The applicant, a company incorporated under the Companies Act, claimed to be a financial creditor, alleging outstanding dues from the respondent company. The applicant cited financial transactions and default dates as grounds for the claim.

3. The tribunal emphasized that the applicant, as a financial creditor, must prove the default to maintain the application under Section 7 of the Code. This requirement is crucial for the initiation of the Corporate Insolvency Resolution Process.

4. The judgment delves into the definitions of "financial creditor" and "financial debt" as per Section 5(7) and 5(8) of the Code, outlining the essential criteria for a creditor to be classified as a financial creditor based on the nature of the debt.

5. It was noted that the prescribed format under Rule 4 necessitates detailed information and documentation regarding the transactions, disbursements, and debt amounts. Failure to comply with these requirements can weaken the applicant's case.

6. In cases of disputed claims, the burden of proof lies heavily on the applicant to substantiate the allegations with concrete evidence, such as balance sheets, resolutions, and relevant documents supporting the financial transactions claimed.

7. The tribunal found the applicant lacking in providing specific details of disbursements and failed to establish that the loans were granted for the time value of money, a crucial factor in determining financial creditor status.

8. Consequently, due to the applicant's failure to furnish adequate evidence and meet the criteria for a financial creditor, the petition was rejected. The judgment clarified that the dismissal of the application should not prejudice the applicant's rights in pursuing the matter through other legal avenues.

This detailed analysis of the judgment highlights the importance of fulfilling the legal requirements and providing substantial evidence when seeking insolvency resolution processes under the Code.

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