Insolvency - NCLAT rejects disputed Loan Agreements due to inconsistencies, lack of evidence

NCLAT Upholds Rejection of Disputed Loan Claims in Vibrant Buildwell Insolvency Case, Tribunal affirms dismissal of claims citing inconsistencies and lack of evidence, reinforcing the importance of credible documentation in insolvency proceedings.

In a significant ruling, the National Company Law Appellate Tribunal (NCLAT) Principal Bench, New Delhi, has upheld the rejection of loan claims filed by appellants in the corporate insolvency resolution process of Vibrant Buildwell Private Limited. The bench, comprising Justice Ashok Bhushan and Member (Technical) Barun Mitra, dismissed the appeals challenging the orders of the National Company Law Tribunal (NCLT), New Delhi Bench-IV, which had previously rejected the claims due to inconsistencies and lack of evidence.

The appellants, Mr. Surender Modi and M/s Primex Estates Pvt. Ltd., had submitted claims based on alleged loan agreements with Vibrant Buildwell, which were dismissed by the Resolution Professional (RP) and subsequently by the NCLT. The claims were primarily rejected due to discrepancies in the loan agreements, lack of proper authorization, absence of supporting financial evidence, and classification of the amounts as "Other Advances" instead of "Long Term Borrowings" in the corporate debtor's records.

The NCLAT, after a thorough examination, concurred with the NCLT's findings that the claims were not bona fide. The tribunal noted that the loan agreements had significant inconsistencies, such as discrepancies in dates and lack of repayment schedules. Furthermore, the tribunal observed that there was no documentation or records indicating any demand for repayment or interest from the corporate debtor over the past 15 years, casting doubt on the legitimacy of the claims.

The tribunal's decision also emphasized the principle that claims not forming part of the resolution plan are extinguished upon its approval by the adjudicating authority, aligning with the "clean slate" doctrine outlined in previous Supreme Court judgments.

The ruling reinforces the critical importance of submitting well-documented and genuine claims in insolvency proceedings, as claims lacking credible evidence or showing signs of fabrication are liable to be rejected. The decision serves as a reminder to claimants to ensure the authenticity and accuracy of their claims to avoid dismissal in insolvency cases.

The NCLAT's judgment, dated December 10, 2025, provides clarity on the treatment of disputed claims in insolvency proceedings, highlighting the tribunal's role in safeguarding the integrity of the corporate insolvency resolution process.

Bottom Line:

Insolvency and Bankruptcy Code - Claims filed based on disputed Loan Agreements rejected due to inconsistencies, lack of evidence, and doubts on authenticity. Claims must be supported by reliable documentation and cannot contradict financial statements of the Corporate Debtor.

Statutory provisions: Insolvency and Bankruptcy Code, 2016 - Sections 61, 5(8); Regulation 10 and 13 of IBBI Regulations, 2016

Mr. Surender Modi v. Mr. Ashish Singh, (NCLAT)(Principal Bench, New Delhi) : Law Finder Doc id # 2820090