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Srei Equipment Finance Limited v. Rajeev Anand

Civil Appeal · 2020 INSC 538Decided 8 Sept 2020
Civil Appeal No. 9425 of 2019
Justice Rohinton Fali Nariman · Justice Navin Sinha · Justice Indira Banerjee

Background

Srei Equipment Finance, a financial creditor, had restructured a corporate debtor's loan into two facilities in 2016. After an initial Section 7 insolvency application was withdrawn as premature, a fresh application was filed claiming a specific amount remained outstanding. Based on the corporate debtor's own prior admissions and a supplementary affidavit, the National Company Law Tribunal (NCLT) admitted the application and appointed a Resolution Professional. The National Company Law Appellate Tribunal (NCLAT), however, reversed this, holding that the NCLT had wrongly relied on a document from an earlier, withdrawn petition and that there was no evidence the claimed amount was actually outstanding.

Decision Breakdown

The Supreme Court found the NCLAT's reasoning incorrect on every count. The document it treated as an inadmissible "pleading from a withdrawn petition" was in fact a counter affidavit filed by the corporate debtor itself, containing a clear admission of the outstanding debt, not evidence offered by the creditor that could be excluded on that technical ground. The NCLT had properly weighed this admission together with a supplementary affidavit and supporting documents in concluding that a loan amount remained due. The Supreme Court therefore set aside the NCLAT's order and restored the NCLT's order admitting the insolvency application, directing that the resolution process resume from where it had been interrupted. Two connected appeals arising from the same dispute were disposed of on the same basis, and an intervenor was permitted to withdraw its application to pursue relief elsewhere.

Lesson Learnt

In insolvency proceedings, a corporate debtor's own admissions made in earlier court filings can be used as proof of an outstanding debt, and an appellate tribunal cannot discard such evidence merely because it originated in connection with an earlier, withdrawn application: what matters is the substance of what was admitted, not the procedural history of the filing that contains it.

Official source (sci.gov.in)View Judgment (PDF)

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