# In the matter of Pradeep Tayal vs. Essbert Fashion Pvt. Ltd. & Ors. Company Appeal (AT) (Insolvency) No. 950 of 2022

> NCLAT judgment dated 2023-01-12. Citation: TCN-2023-NCLAT-00774. The appeal was filed by a Suspended Director of the Corporate Debtor, challenging the…

- **Court:** NCLAT
- **Order date:** 12 Jan 2023
- **Citation:** TCN-2023-NCLAT-00774
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclat-new-delhi/pradeep-tayal-vs-essbert-fashion-pvt-ltd-ors-company-appeal-04f705be

## Summary

### Background

The appeal was filed by a Suspended Director of the Corporate Debtor, challenging the Adjudicating Authority's order dated 12.07.2022, which admitted the Section 7 application filed by the Respondents-Financial Creditors under the Insolvency and Bankruptcy Code, 2016. The Respondents extended financial facilities to the Corporate Debtor, and when the Corporate Debtor defaulted, demand notices were sent. The Corporate Debtor argued that the loan was for a tenure of 5 years and the notice was issued prematurely. The Financial Creditors filed a Section 7 application, which was admitted by the Adjudicating Authority.

## Facts

The Respondents extended financial facilities to the Corporate Debtor, M/s. Pytex Jewellers Private Ltd., to the extent of Rs. 3,10,00,000. The Corporate Debtor returned Rs. 15 Lacs to Respondent No. 4 on August 23, 2018. No formal loan agreement was executed. On February 11, 2019, the Respondents sent a demand notice to the Corporate Debtor demanding repayment of the unpaid loan. The Corporate Debtor replied on February 21, 2019, stating the loan was for a 5-year tenure. On June 6, 2019, the Respondents sent further notices. On November 30, 2020, the Respondents filed a Section 7 application under the IBC, claiming a total debt of Rs. 3,66,61,212. The Adjudicating Authority admitted the Section 7 application on July 12, 2022. The Corporate Debtor deducted TDS and

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## Issues and analysis

### Issue 1: Whether the absence of a formal loan agreement precludes the establishment of a 'financial debt' …

**Ratio:** A financial debt can be proven through documents other than a formal loan agreement, as

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**Reasoning:** The court referred to Section 5(8) of the IBC, which defines 'financial debt' and

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**Interpretation:** The interpretation of 'financial debt' under Section 5(8) is expansive and not

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**Application:** In this case, the court found that the loan was granted by the Financial

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## Parties

- **Judges:** Ashok Bh…; Barun M…
- **Appellants:** Pradeep…
- **Respondents:** M/s. Pytex…; M/s. Essbert…
- **Advocates:** Nitesh…; Vatsal Ch…; +3 more

## Timeline

- **2018-08-23 — Partial Rep…**: Corporate Debtor returned an amount of…
- **2019-02-11 — Demand Notice…**: Demand Notice was sent to the Corporate Debtor by the Respondent Nos. 1,2,3 and 4…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 7 — Initiation of corporate insolvency resolution…](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-7)

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