The acknowledgment of debt through correspondence and balance sheets constitutes a valid basis for initiating CIRP under the IBC, supporting the financial creditor's claims despite disputes over the debt amount.

JUDGMENT

(Hybrid Mode)

[Per: Justice Sharad Kumar Sharma, Member (Judicial)]

The Appellant before this Appellate Tribunal is the erstwhile Managing Director of the Corporate Debtor, M/s. AKR Construction Limited, which has been admitted into CIRP by the proceedings in CP(IB) No. 207/7/HDB/2022, initiated by the Financial Creditor, i.e., 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 response, the Corporate Debtor filed an objection, disputing the very basis of the demand raised by the Financial Creditor. It was asserted that there existed various discrepancies and significant inconsistencies in the application filed under Section 7 of the I & B Code, 2016, for recovery of the amount allegedly due under the demand notice dated 29.03.2022.

4. The Appellant contended before the Ld. NCLT that the Financial Creditor had failed to demonstrate the authenticity of the amount claimed in the notice dated 29.03.2022. It was argued that no credible evidence had been produced to establish that the amount allegedly due had in fact been extended as financial assistance falling within the definition of “debt” under Section 7 of the I & B Code, 2016.

5. Another significant aspect, which will remain a point of contention when we address the issues in the present company appeal, concerns a peculiar argument raised by the Appellant. It was contended before the Ld. Adjudicating Authority that the alleged extension of credit facilities by the Financial Creditor could not be accepted as true in terms of the hypothecation deed and other executed documents, such as the certificate of registration of charge and the personal guarantee loan agreement.

6. To take the demand raised by the Financial Creditor outside the ambit of “debt,” the Corporate Debtor asserted that the so-called financial assistance was actually a facility extended exclusively for the purchase of vehicles, and not a loan. The Appellant contends that Respondent No. 1 h