The National Company Law Appellate Tribunal (NCLAT) has set aside the adjudicating authority’s ruling that recording the “loan” as “other liabilities” negates the existence of a financial debt on the ground that a written agreement is not a condition precedent to proving the existence of a financial debt.
“Acknowledgments by the Corporate Debtor and supporting documents like ledger accounts can be sufficient to prove the debt,” Justice Ashok Bhushan (Chairperson); Barun Mitra (Technical Member) and Arun Baroka (Technical Member (Technical).
The appellate tribunal has relied on the precedent that a written financial contract is not a mandatory requirement to prove financial debt under the IBC and it is sufficient to establish the debt through other relevant documents.
The issue before the tribunal was whether the amount advanced by the appellant qualifies as a financial debt under Section 5(8) of the IBC with the confirmation of accounts, TDS deduction and other material on record.
The NCLAT has ordered Brick and Mortar Realty Private Limited to proceed under Section 7 of the Code.
Further directing the NCLT to issue the necessary order in this regard within 30 days.
