NCLAT holds that financial debt under IBC can be established via conduct, acknowledgements, or transactions absent a written agreement.
Loan Can Be Proved Without Formal Agreement Under Section 7 IBC: NCLAT Delhi
The NCLAT, Delhi, ruled that a financial debt under Section 5(8) of the IBC need not be supported by a formal loan agreement. It may be established through documentary evidence such as bank transfers, repayment conduct, interest acknowledgements, or correspondence evidencing creditor-debtor relationship.
The adjudicating authority had rejected a Section 7 petition for lack of a signed agreement. NCLAT set aside the order, noting that the IBC adopts a functional, not formalistic, approach to debt recognition. Evidence of credit facilities extended and repayment patterns were deemed sufficient to sustain the claim.
"The essence of financial debt lies in the existence of a commercial transaction with repayment obligation, not in the formality of a document."
This decision lowers evidentiary hurdles for operational creditors. Practitioners should compile transaction trails, emails, and acknowledgements to support debt claims, even in the absence of a contract.
Citations
- Insolvency and Bankruptcy Code, 2016, Section 5(8)
- Section 7