NCLAT Holds Documentary Evidence Can Prove Debt Without Written Contract

NCLAT Holds Documentary Evidence Can Prove Debt Without Written Contract

Introduction

The National Company Law Appellate Tribunal (N) New Delhi bench of Justice Rakesh Kumar Jain, Justice Mohd Faiz Alam Khan and Mr. Naresh Salecha (Technical Member) has held that a written contract is not a precondition to prove the existence of a legally payable debt.

Factual Background

The present appeal was filed under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC) against an order passed by National Company Law Tribunal (NCLT) Kolkata, admitting an application under Section 7 of the IBC.

Procedural Background

The NCLT Kolkata had admitted the Section 7 application, and the Appellant challenged this order before the NCLAT. The Appellant argued that the Adjudicating Authority had exceeded its jurisdiction by considering issues beyond limitation.

Reasoning and Analysis

The NCLAT observed that the Corporate Debtor had acknowledged the debt in its balance sheet, deducted TDS on interest, and the demand notice and matching figures of loan and interest proved the existence of a legally payable debt. The tribunal held that Regulation 8(2) of the CIRP Regulations does not require all documents to prove existence of debt, and any of the documents mentioned under the Regulations may be provided to prove the debt.

The NCLAT relied on its previous judgment in Agarwal Polysacks Limited vs K.K. Agro Foods and Storage Limited, 2023, which held that financial debt can be proved from other relevant documents and is not mandatory that a written financial contract can be the only basis for proving the financial debt.

Issues

The primary issue before the NCLAT was whether a written contract is necessary to prove the existence of a legally payable debt.

Contentions of the Parties

Appellant: The Appellant submitted that there was no financial contract produced before the NCLT, and therefore, the debt was not proved.

Respondent: The Respondent argued that the debt was proved through other documentary evidence, including the Corporate Debtor's balance sheet and TDS deduction certificate.

Implications

This judgment clarifies that a written contract is not a precondition to prove the existence of a debt. The decision emphasizes the importance of considering all relevant documentary evidence in insolvency proceedings.

In this case the appellant was represented by Mr. Krishnendu Datta, Sr. Advocate along with Mr. Ritesh Agrawal & Ms. Priyanshi Sharma, Advocates. Meanwhile the respondent was represented by Mr. Sunil Choraria, for R-1/RP along with Ms. Pooja Agrawal, for R-2