Parties Cannot Demand Financial Records As A Right In IBC Section 7 Proceedings: NCLT Indore

The National Company Law Tribunal (NCLT), Indore, on 16 October held that Rule 43 of the National Company Law Tribunal Rules, 2016, does not confer an automatic right on a party to compel the production of financial records in proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC).

A Bench comprising Judicial Member Brajendra Mani Tripathi and Technical Member Man Mohan Gupta also stated that the Tribunal may direct such production only when necessary for proper adjudication, and rejected an application by Ghanshyam Das And Company seeking the production of financial records of Century 21 Malls Pvt. Ltd. It observed:

“In the event that the petitioner fails to discharge this burden, the petition would be decided accordingly. Therefore, the Applicant cannot, as a matter of right, compel the Respondent to produce the financial records of the Corporate Debtor for the purpose of substantiating the Applicant's defence.”

The dispute arose from an application seeking financial records in proceedings under Section 7 of the IBC. Ghanshyam Das And Company contended that the alleged debt did not carry the time value of money and sought the records to substantiate its defence. Century 21 Malls argued that the petitioner bore the burden of establishing the existence of a financial debt and default.

The Tribunal observed that Rule 43 empowers it to direct parties or other persons and institutions to produce relevant documents when necessary for proper adjudication. However, it held that the provision does not entitle a party to demand such production as a matter of right.

At the admission stage of a Section 7 petition, the Bench must determine whether a financial debt and default exist without undertaking a roving enquiry. It may also draw an adverse inference where legally required documents are not produced.

Accordingly, the NCLT rejected the application in limine.