Wild Dreams Trading Company Private ... vs Ascendancy Financial Services Private ...

(Arising out of order dated 03.02.2026 passed by the National Company Law Tribunal, Chandigarh Bench-I in CP (IB) No. 335 of 2024)

In the matter of:

WILD DREAMS TRADING COMPANY PVT. LTD. A company having its registered office at: 401, 4th Floor, Landmark Plot, 554, Dr. G.M. Bhosale Marg, Nr. Mahindra Tower, Worli, Mumbai, Maharashtra - 400 018 ...Appellant

Vs.

ASCENDANCY FINANCIAL SERVICES PVT. LTD. A company having its registered office at: H. No.3, Sector 3, adjoining Khullar Market Extn., Yrikuta Nagar, Jammu, Union Territory of Jammu and Kashmir, India, 180012 ...Respondent

Present:

For Appellant: Mr. Tishampati Sen, Mr. Mukul Kulhari and Ms. Riddhi Sancheti, Advocates.

For Respondents:

J U D G M EN T (13th July, 2026)

INDEVAR PANDEY, MEMBER (T)

The present Company Appeal has been preferred under Section 61 of

the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as 'Code')

by Wild Dreams Trading Company Pvt. Ltd. (Financial Creditor), assailing the Judgment dated 03.02.2026 passed by the National Company Law

Tribunal, Chandigarh Bench (Court-I) (Adjudicating Authority) in CP (IB)

No. 335 of 2024, whereby the Adjudicating Authority dismissed the

Appellant's application filed under Section 7 seeking initiation of the

Corporate Insolvency Resolution Process (CIRP) against Ascendancy

Financial Services Pvt. Ltd. (Corporate Debtor). The Adjudicating Authority

held that the interest component could not be added to the claim of the

Financial Creditor merely on the basis of Tax Deducted at Source (TDS)

deductions and consequently concluded that the amount of default fell below

the statutory threshold prescribed under Section 4 of the Code. Aggrieved by

the dismissal of its Section 7 application despite the acknowledgment by the

Corporate Debtor of the entire outstanding financial debt, including the

interest component; the Appellant has preferred the present appeal

challenging the legality and correctness of the Impugned Judgment.

Brief Facts of the Case

2. The brief facts of the case relevant to this appeal are given below:

i. The Appellant, Wild Dreams Trading Company Pvt. Ltd., had been

extending financial assistance to the Respondent, Ascendancy

Financial Services Pvt. Ltd., in the form of Inter Corporate Deposits

(ICDs) over several years. Between 22.07.2016 and 18.07.2024, the

Appellant advanced an aggregate sum of Rs.2,32,00,000/- to the

Respondent under an oral and mutually agreed arrangement whereby

each ICD was repayable either on demand by the Appellant or within

Page 2 of 16 Company Appeal (AT) (Ins.) No. 636 of 2026 seven years from the respective date of disbursement, or within such

other period as might be mutually agreed between the parties,

whichever occurred earlier. The parties had also mutually agreed that

the Respondent would pay interest at the rate of 11.50% per annum on

the ICDs advanced during the financial years 2016-17 and 2017-18,

which was subsequently revised to 8% per annum in accordance with

prevailing market standards.

ii. Pursuant to the aforesaid understanding, the Respondent borrowed

various sums from the Appellant in the form of eleven Inter Corporate

Deposits (ICDs) advanced in different tranches during the period

between 22.07.2016 and 18.07.2024. The Appellant initially advanced

six ICDs during the period 2016-2017, followed by three ICDs in the

year 2022 and two further ICDs in the year 2024, thereby extending

total financial assistance of Rs.2,32,00,000/- to the Respondent, which

was repayable along with the agreed interest component.

iii. The Respondent thereafter made repayments towards the principal

amounts of certain ICDs from time to time. The Respondent repaid the

principal amount of the First to Eighth ICDs, either fully or in parts,

including payments made towards the First ICD in 2017 and 2023 and

substantial repayments towards other ICDs during May 2023. However,

despite repayment of the principal amounts, the Respondent failed to

pay the accrued interest on any of the said ICDs. Further, only a partial

payment of Rs.1,00,000/- was made towards the Ninth ICD, while the

remaining amount under the Ninth ICD along with the entire principal Page 3 of 16 Company Appeal (AT) (Ins.) No. 636 of 2026 amounts advanced under the Tenth and Eleventh ICDs remained

unpaid. Consequently, according to the Appellant, a principal amount

of Rs.62,00,000/- along with the accrued interest component continued

to remain outstanding against the Respondent.

iv. According to the Appellant, despite making partial repayments of

principal amounts under certain ICDs, the Respondent persistently

failed to honour its obligation to pay interest on any of the borrowings.

The Appellant asserted that the Respondent also failed to repay the

outstanding principal amount under the Ninth ICD as well as the entire

principal amounts advanced under the Tenth and Eleventh ICDs.

Consequently, a principal sum of Rs.62,00,000/- remained

outstanding, while interest amounting to Rs.45,44,700/- (net of TDS)

up to 30.09.2024 had accrued on the unpaid financial assistance. The

Appellant further alleged that although the Respondent had not

remitted the interest to the Appellant, it had consistently deducted and

deposited TDS on the interest component with the statutory authorities,

which according to the Appellant constituted an acknowledgment of its

liability to pay the agreed interest.

v. Following the continued non-payment, the Appellant addressed a

Demand Letter dated 13.09.2024 calling upon the Respondent to repay

a total outstanding amount of Rs.1,07,08,010/-, comprising

Rs.62,00,000/- towards the principal and Rs.45,08,010/- towards

accrued interest up to August 2024, within ten days. The demand letter

Page 4 of 16 Company Appeal (AT) (Ins.) No. 636 of 2026 was delivered by hand and was duly received by the Respondent on the

very same day.

vi. In response to the said demand, the Respondent, by its letter dated

19.09.2024, informed the Appellant that it was in the process of

arranging funds for repayment of Rs.1,07,08,010/- and sought an

extension of two weeks to clear the dues. According to the Appellant,

this communication constituted an express acknowledgment of the

entire outstanding financial debt, including both the principal and

interest components. However, upon expiry of the requested period on

03.10.2024, the Respondent failed to make payment of the admitted

dues.

vii. Owing to the continued default, the Appellant issued a second

demand letter on 08.10.2024, once again requiring the Respondent to

repay the outstanding financial debt within seven days, failing which

appropriate legal proceedings would be initiated. In reply dated

10.10.2024, the Respondent requested a further extension of a few days

and attributed its inability to repay the debt to significant financial

difficulties arising from delays in receiving payments from its own

debtors and creditors.

viii. As the Respondent continued to default despite repeated

opportunities, the Appellant instituted Company Petition (IB) No. 335

of 2024 under Section 7 of the Insolvency and Bankruptcy Code, 2016

before the National Company Law Tribunal, Chandigarh Bench on

Page 5 of 16 Company Appeal (AT) (Ins.) No. 636 of 2026 21.12.2024, seeking initiation of the Corporate Insolvency Resolution

Process against the Respondent on the basis of the alleged financial

debt and default.

ix. The Adjudicating Authority, vide the Impugned order dated

03.02.2026, dismissed the Section 7 application primarily on the

ground that the interest component calculated on the principal amount

could not be added merely on the basis of TDS deductions and,

consequently, held that the alleged default amount fell below the

statutory threshold prescribed under Section 4 of the Code.

x. Aggrieved by the dismissal of its Section 7 application despite

contending that the Respondent had expressly acknowledged the entire

outstanding financial debt, including the interest component, and that

the debt exceeded the statutory threshold under the Insolvency and

Bankruptcy Code, the Appellant instituted the present appeal,

challenging the legality, correctness and sustainability of the Impugned

Judgment passed by the Adjudicating Authority.

ANALYSIS AND FINDINGS

3. We have heard Learned Counsel appearing for the Appellant and gone

through the documents on record. Despite service of notice, the Respondent

has chosen not to appear before this Tribunal and has been proceeded ex

parte. However, merely because the Respondent has remained absent in the

present Appeal, this Tribunal is still required to examine the correctness of

the Impugned Order dated 03.02.2026 passed by the Adjudicating Authority, Page 6 of 16 Company Appeal (AT) (Ins.) No. 636 of 2026 and determine whether the ingredients necessary for admission of an

application under Section 7 of the Code were satisfied on the basis of the

material available on record.

4. The present Appeal arises from the dismissal of the Application filed by

the Appellant under Section 7 of the Code seeking initiation of Corporate

Insolvency Resolution Process against the Corporate Debtor. The Adjudicating

Authority rejected the Application primarily on the ground that the principal

outstanding amount was only Rs.62,00,000/- and that the interest

component claimed by the Financial Creditor could not be added merely on

the basis of TDS deductions. On such reasoning, the Adjudicating Authority

concluded that the default amount did not cross the minimum threshold

prescribed under Section 4 of the IBC and consequently dismissed the Section

7 Application.

5. The submission advanced by Learned Counsel for the Appellant is that

the Adjudicating Authority has proceeded on an incorrect appreciation of the

factual and legal position. It is contended that the Appellant had advanced

various Inter Corporate Deposits ("ICDs") to the Corporate Debtor from time

to time aggregating to Rs.2,32,00,000/-, which carried an agreed rate of

interest. It is further submitted that although the Corporate Debtor repaid

certain principal amounts, it failed to discharge the complete outstanding

liability, resulting in an unpaid principal amount of Rs.62,00,000/- along

with accrued interest. According to the Appellant, the total amount due and

payable by the Corporate Debtor was Rs.1,07,08,010/-, which was well above

the threshold prescribed under Section 4 of the Code. Page 7 of 16 Company Appeal (AT) (Ins.) No. 636 of 2026

6. The Appellant has further submitted that the present case was not one

where interest liability was sought to be established only through TDS

deductions. It is argued that the Adjudicating Authority failed to consider the

most material document on record, namely the letter dated 19.09.2024 issued

by the Corporate Debtor itself, wherein the Corporate Debtor acknowledged

the outstanding amount of Rs.1,07,08,010/- and sought time for arranging

funds to repay the same. The Appellant therefore submits that once the

Corporate Debtor had itself acknowledged the liability comprising both

principal and interest, there was no occasion for the Adjudicating Authority

to exclude the interest component while determining the threshold

requirement.

7. Before examining the correctness of the Impugned Order, it is necessary

to notice the scope of enquiry contemplated under Section 7 of the IBC. At the

stage of considering an application filed by a Financial Creditor, the

Adjudicating Authority is required to satisfy itself regarding: (i) existence of a

financial debt; (ii) occurrence of default; and (iii) completeness of the

application. The enquiry is not in the nature of a recovery proceeding but is

limited to determining whether a financial debt exceeding the statutory

threshold exists and whether there has been a default in repayment of such

debt.

8. Section 5(8) of the IBC defines "financial debt" as a debt along with

interest, if any, which is disbursed against consideration for the time value of

money. The same is extracted below:

Page 8 of 16

Company Appeal (AT) (Ins.) No. 636 of 2026 Section 5(8)

(8)"financial debt" means a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money and includes---

9. The expression itself makes it clear that where interest forms part of

the agreed financial arrangement between the parties, such interest cannot

be artificially separated while determining the amount of financial debt. The

legislative intent behind Section 5(8) is to include the complete financial

obligation arising from a transaction involving time value of money and not

merely the original principal amount advanced.

10. In the present case, the material placed on record indicates that the

Corporate Debtor had received financial assistance from the Appellant in the

form of ICDs. The nature of the transaction as financial assistance has not

been disputed. The record further reflects that the ICDs were not gratuitous

advances, but were accompanied by an understanding regarding payment of

interest. The Appellant's case is supported not merely by unilateral

calculations of interest, but also by the conduct of the Corporate Debtor,

including deduction of TDS on the interest component and its subsequent

correspondence acknowledging the outstanding liability.

11. At this stage, it becomes necessary to consider the correspondence

exchanged between the parties prior to initiation of proceedings under Section

7 of the Code. The Financial Creditor issued a Demand Letter dated

13.09.2024 calling upon the Corporate Debtor to repay the total outstanding

amount of Rs.1,07,08,010/-, comprising Rs.62,00,000/- towards the

Page 9 of 16 Company Appeal (AT) (Ins.) No. 636 of 2026 principal amount and Rs.45,08,010/- towards the accrued interest

component. The said communication clearly reflected that the claim of the

Financial Creditor was not confined only to the principal amount but also

included the interest payable on the ICDs advanced to the Corporate Debtor.

The same has been extracted below:

12. The response of the Corporate Debtor to the aforesaid Demand Letter

assumes significance. By its Reply dated 19.09.2024, the Corporate Debtor

did not dispute either the amount claimed or the liability towards payment of

interest. On the contrary, the Corporate Debtor stated that it was in the

Page 10 of 16 Company Appeal (AT) (Ins.) No. 636 of 2026 process of arranging funds for repayment of the amount of Rs.1,07,08,010/-

and requested a period of two weeks for making the payment. The said

communication amounts to a clear acknowledgment of the outstanding

liability comprising both principal and interest components. Relevant

document has been extracted below:

Page 11 of 16

Company Appeal (AT) (Ins.) No. 636 of 2026

13. Even thereafter, in response to the second Demand Letter dated

08.10.2024, the Corporate Debtor, vide communication dated 10.10.2024,

did not dispute either the outstanding amount or the interest component and

instead sought further time for repayment on account of financial difficulties.

14. Thus, the present case cannot be examined merely from the perspective

of whether deduction of TDS independently establishes liability towards

interest. The Demand Letter dated 13.09.2024, when read together with the

Corporate Debtor's Reply dated 19.09.2024, clearly demonstrates that the

Corporate Debtor was aware of the complete claim raised against it and

nevertheless sought time for repayment instead of disputing the interest

component. The acknowledgment of liability, coupled with the admitted ICD

transactions and TDS deductions, establishes the existence of financial debt

exceeding the statutory threshold prescribed under Section 4 of the Code.

15. In order to substantiate the aforesaid outstanding liability and the

manner in which the total financial debt was computed, the Financial Creditor

had placed on record the calculation of interest payable on the ICDs along

with details of TDS deposited on such interest component which is available

on page nos. 111 and 112 of appeal paper book, same is extracted below:

Page 12 of 16

Company Appeal (AT) (Ins.) No. 636 of 2026

16. The aforesaid calculation indicates that apart from the outstanding

principal amount of Rs.62,00,000/-, an interest component of

Rs.45,08,010/- had accrued, thereby taking the total outstanding financial

debt to Rs.1,07,08,010/-. The said material, when considered along with the

Page 13 of 16 Company Appeal (AT) (Ins.) No. 636 of 2026 subsequent acknowledgment by the Corporate Debtor, demonstrates that the

claim was not based merely upon TDS deductions but upon the overall

financial arrangement between the parties.

17. The present case was not one where the Financial Creditor relied only

upon TDS entries to create an interest liability. The TDS deductions were only

one circumstance forming part of the overall chain of evidence. The

acknowledgment dated 19.09.2024, the admitted receipt of ICD amounts, the

previous repayment conduct of the Corporate Debtor, and the absence of any

contemporaneous denial of interest liability were all relevant factors which

ought to have been considered cumulatively. The Adjudicating Authority was

required to examine the entire transaction and could not isolate one piece of

evidence while disregarding other relevant documents.

18. It is true that there was no written agreement executed between the

parties specifically recording the rate of interest payable on the ICDs.

However, the absence of a written agreement by itself cannot be a ground to

disregard the interest component when the surrounding circumstances and

subsequent conduct of the parties demonstrate the existence of such an

understanding. The payment of interest was based on the mutual oral

arrangement between the parties, which stood corroborated by the calculation

of interest, deduction and deposit of TDS on such interest, and the

subsequent communications exchanged between the parties acknowledging

the outstanding liability. Thus, the interest component claimed by the

Financial Creditor cannot be treated as a unilateral claim unsupported by

material evidence.

Page 14 of 16 Company Appeal (AT) (Ins.) No. 636 of 2026

19. The Adjudicating Authority, while passing the Impugned Order,

appears to have confined its consideration only to the question whether TDS

deductions by themselves could establish an agreement to pay interest. The

Adjudicating Authority proceeded on the premise that since the principal

outstanding amount was Rs.62,00,000/-, the threshold under Section 4 was

not satisfied. However, such an approach ignores the statutory definition of

financial debt, which expressly includes interest, if applicable. The threshold

requirement under Section 4 is to be examined with reference to the total

amount of default in respect of the financial debt and not by excluding a

legally payable interest component forming part of such debt.

20. We are conscious that proceedings under the IBC cannot be used as a

substitute for recovery proceedings and that disputed claims cannot be

mechanically admitted merely on the assertion of a creditor. However, the

facts of the present case disclose more than a mere claim for recovery. The

Corporate Debtor had availed ICD facilities, had made repayments towards

the same, had acknowledged its obligation to repay the outstanding amount

and had sought time for arranging funds. These circumstances establish the

existence of financial debt and occurrence of default within the meaning of

the Code.

21. In view of the aforesaid discussion, we are of the considered opinion

that the Adjudicating Authority erred in rejecting the Section 7 Application by

excluding the interest component from consideration. The Impugned Order

failed to appreciate the cumulative effect of the documents available on record

and proceeded on a narrow consideration that interest was claimed only on

Page 15 of 16 Company Appeal (AT) (Ins.) No. 636 of 2026 the basis of TDS deductions. The acknowledgment of liability by the Corporate

Debtor and the admitted financial transactions between the parties clearly

established that the outstanding financial debt exceeded the threshold

prescribed under Section 4 of the IBC.

22. We accordingly hold that the Impugned Order dated 03.02.2026 passed

by the Adjudicating Authority cannot be sustained. The Appellant had

successfully established the existence of financial debt and default exceeding

the statutory threshold required under Section 7 of the IBC. Accordingly, the

Appeal is allowed, with the further direction that the Corporate Debtor/

Respondent is allowed 15 days' time from the date of issue of this order for

making full payment of outstanding debt along with interest due. In case the

Respondent fails to make the payment, the Adjudicating Authority would

admit the Section 7 petition and issue appropriate orders initiating CIRP

Proceedings against the Respondent after a period of 15 days from the date of

this order. Pending IA's, if any, are closed. No order as to costs.

Justice N. Seshasayee Member (Judicial)

Arun Baroka Member (Technical)

Indevar Pandey Member (Technical)

Place: New Delhi Harleen/ Pragya (LRA)

Page 16 of 16 Company Appeal (AT) (Ins.) No. 636 of 2026