Evidentiary Flexibility Under IBC: NCLAT Rules Information Utility Registration Not Mandatory for Section 7 Admission

The procedural intricacies of initiating a Corporate Insolvency Resolution Process (CIRP) have been a subject of intense judicial scrutiny since the inception of the Insolvency and Bankruptcy Code, 2016. One of the most debated aspects is the evidentiary requirement to establish a default. A landmark judicial determination by the National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, in the matter of Vijay Kumar Singhania Vs Bank of Baroda, has provided definitive clarity on this front.

The appellate authority decisively ruled that lodging default information with an Information Utility (IU) is not an absolute prerequisite for maintaining a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016. This comprehensive analysis delves into the factual background, the appellant's contentions, the statutory framework, and the tribunal's rationale that reinforces the evidentiary flexibility available to financial creditors.

Factual Matrix of the Dispute

The genesis of the dispute traces back to credit facilities availed by Cygnus Splendid Limited (the Corporate Debtor). Originally operating as a partnership firm, the entity transitioned into a registered company and subsequently had its credit facilities sanctioned and revised by Bank of Baroda (the Financial Creditor).

The financial arrangements included:

  • A Term Loan amounting to ₹9.02 crore.
  • A Cash Credit facility of ₹3.64 crore.

Following a period of financial indiscipline and failure to adhere to repayment schedules, the loan accounts were officially classified as Non-Performing Assets (NPA) on March 13, 2017. To recover the outstanding dues, the bank initiated statutory mechanisms. A demand notice was issued on May 6, 2017, under Section 13(2) of the SARFAESI Act, 2002, followed by the bank taking symbolic possession of the secured assets on September 13, 2017, under Section 13(4) of the same Act. Concurrently, the bank filed an Original Application (OA No. 615 of 2017) before the Debt Recovery Tribunal (DRT) seeking the recovery of ₹7.85 crore.

In an attempt to resolve the financial impasse, the Corporate Debtor submitted a series of One-Time Settlement (OTS) proposals. These settlement offers were communicated on various dates, specifically September 5, 2019; September 7, 2019; September 23, 2019; December 16, 2019; September 21, 2020; and November 3, 2020. Through these communications, the company unequivocally acknowledged its outstanding financial obligations.

Eventually, on January 3, 2023, the bank invoked the insolvency jurisdiction by filing a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, citing an aggregate default of ₹13.49 crore. The National Company Law Tribunal (NCLT) admitted the petition on July 26, 2023, prompting the suspended director to elevate the matter to the NCLAT.