Written loan agreement not strictly required to prove financial debt under the Insolvency and Bankruptcy Code, rules NCLAT Delhi

The National Company Law Appellate Tribunal in Delhi has ruled that a formal written loan agreement is not a mandatory prerequisite for establishing a financial debt under the Insolvency and Bankruptcy Code. The appellate authority clarified that financial creditors can substantiate debt claims using alternative corroborative documentary evidence and banking records. Under the insolvency framework, admitting an application by a financial creditor depends on demonstrating the existence of a default on a financial debt as defined by the statute.

The historical practice often emphasized formal contract documentation, whereas this ruling confirms that surrounding financial records, bank statements, and correspondence can suffice to prove the debt. Insolvency professionals, corporate legal counsel, and financial creditors must compile comprehensive financial trails, bank transfers, and correspondence when preparing insolvency petitions without formal contracts.

Practitioners should review their documentation strategies to ensure all available proof of fund disbursement is presented to adjudicating authorities. Bottom line: Utilize alternative documentary evidence effectively when establishing financial debt claims under insolvency laws.