NCLAT Rules Written Loan Agreements Are Not Required to Prove Financial Debt Under IBC

The National Company Law Appellate Tribunal in Delhi held that the absence of a formal written loan agreement does not bar a creditor from proving financial debt under the Insolvency and Bankruptcy Code. The tribunal ruled that financial debt can be legally substantiated through alternative evidentiary proofs including admissions, tax deducted at source records, financial balance sheets, and written correspondence. Under the Insolvency and Bankruptcy Code framework, financial creditors initiate corporate insolvency resolution processes by demonstrating the existence of a financial debt and a default.

While a written loan contract is standard practice, commercial realities often involve informal lending, inter-corporate deposits, or running accounts backed by secondary financial trails rather than notarized agreements. Recognizing secondary evidence prevents genuine creditors from being locked out of statutory debt resolution remedies due to procedural documentation gaps. Insolvency professionals and corporate creditors must compile comprehensive documentary trails-such as ledger entries, TDS filings, and email exchanges-when filing insolvency applications without formal loan agreements.

Legal advisors should review evidentiary thresholds before initiating NCLT proceedings. Bottom line: maintain meticulous financial records and correspondence to secure debt claims under insolvency laws.