NCLT Delhi Dismisses Insolvency Plea: Loan Agreement & Director Emails Insufficient Without Financial Records
Pranav B Prem
The National Company Law Tribunal, New Delhi Bench (Court-IV) comprising Shri Manni Sankariah Shanmuga Sundaram (Judicial Member) and Shri Atul Chaturvedi (Technical Member) has dismissed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, filed by Altitude Finvest Limited against Causis E-Mobility Private Limited. The Tribunal held that communications from directors of the corporate debtor cannot override the absence of substantive documentary proof such as audited financials, books of accounts, or banking records to establish disbursement of a loan.
Background of the case
Altitude Finvest Limited, a non-banking financial company, approached the NCLT seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against Causis E-Mobility Private Limited on the ground that the corporate debtor had defaulted in repayment of an alleged loan of ₹1,14,97,186/-. The date of default was claimed as 19 July 2023.
According to the financial creditor, the corporate debtor, through its authorised representatives, had approached it in January 2023 for a loan of ₹55,00,000/-. A board resolution was passed on 18 January 2023 authorising directors to raise the loan, and on 20 January 2023, a loan agreement was executed. The creditor relied upon this loan agreement, a drawdown letter, and a series of communications exchanged between the parties to assert that the loan was disbursed.
The agreement stipulated repayment within six months, with interest at 24% per annum and additional penal interest for default. The financial creditor also claimed that securities had been created, including a hypothecation deed of an electric bus chassis, personal guarantees, and the deposit of title documents of a flat.
However, on 30 January 2023—just ten days after execution of the loan agreement—the corporate debtor’s director and financial controller communicated that the loan had been taken without his approval and sought reversal of the transaction. The creditor then demanded repayment, but despite assurances through emails from another director and an employee of the corporate debtor, the alleged loan amount was not repaid. Notices were subsequently issued, but no payment was made.
Tribunal’s findings
The Tribunal noted that while the financial creditor had relied heavily on the loan agreement and subsequent communications, no primary evidence of actual disbursement was furnished. The order records: “While the loan agreement and email correspondences may indicate that the parties had negotiated and agreed upon certain terms, such documentation by itself does not suffice to establish that disbursement of the loan actually took place, unless substantiated by financial records.”
The Bench observed that the applicant had failed to produce any bank statements, account entries, or audited financial statements either from itself or from the corporate debtor to prove the credit of ₹55,00,000/-. No entry in the books of account or balance sheet acknowledged the alleged loan. The Tribunal held that communications from directors, without corroborative financial evidence, could not establish either disbursement of loan or default.
The order further noted that the case law relied upon by the financial creditor—such as Vidarbha Industries Power Ltd. v. Axis Bank, Innoventive Industries Ltd. v. ICICI Bank, and E.S. Krishnamurthy v. Bharath Hi-Tech Builders (P) Ltd.—did not advance its case since the threshold requirement of establishing financial debt and default through cogent evidence was not satisfied.
Holding that the applicant had not met the evidentiary threshold under Section 7(5) of the IBC, the Tribunal concluded that there was no demonstrable financial debt or default. Accordingly, the application CP (IB) 811 (ND) 2024 filed by Altitude Finvest Limited was dismissed. No order as to costs was made.
Appearance
For the Applicant: Ms. Daisy Hannah, Advocate.
Cause Title: Altitude Finvest Limited V. CAUSIS E-Mobility Private Limited
Case No: Company Petititon (IB) 811 (ND) 2024
Coram: Shri Manni Sankariah Shanmuga Sundaram [Judicial Member], Shri Atul Chaturvedi [Technical Member]
