Section 7 admission requires proof of debt and default; NPA status and parallel recovery proceedings do not bar insolvency.

At the Section 7 admission stage, the Adjudicating Authority must be satisfied that the financial creditor was duly authorised, the application was filed in the prescribed form with the required documents, and no disciplinary bar existed against the proposed resolution professional. On the merits, loan records, account statements, security documents and the corporate debtor's own balance sheet established financial debt and default. Objections based on NPA classification, pendency of SARFAESI or DRT proceedings, and reliance on the RBI circular dated 12.02.2018 did not defeat the petition, as those matters do not negate proved default. The insolvency petition was admitted and moratorium followed.

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Issues: (i) whether the Section 7 application was filed by an authorised person and in the prescribed form with the requisite documents; (ii) whether financial debt and default were established so as to justify admission of the insolvency application; (iii) whether objections based on NPA classification, pendency of SARFAESI/DRT proceedings, and the RBI circular dated 12.02.2018 could defeat the Section 7 petition.

Issue (i): whether the Section 7 application was filed by an authorised person and in the prescribed form with the requisite documents.

Analysis: The application was supported by a power of attorney executed by the Bank through its officers, which authorised the signatory to institute proceedings in matters arising out of insolvency or bankruptcy and to act on behalf of the Bank. The application was filed in Form I with the prescribed supporting material, including the proposed resolution professional's consent and disclosures, and there was no disciplinary impediment shown against him. The objection that the petition lacked authorisation or was procedurally defective was not accepted.

Conclusion: The application was validly instituted and was procedurally complete.

Issue (ii): whether financial debt and default were established so as to justify admission of the insolvency application.

Analysis: The record contained loan sanction documents, disbursement papers, balance and security confirmation letters, demand promissory notes, mortgage documents, statements of account certified under the Banker's Books Evidence Act, 1891, and the corporate debtor's own balance sheet acknowledging indebtedness. The Code requires only a summary determination of default at the admission stage, and the material placed before the Tribunal showed that the loan facilities were availed, the debt remained unpaid, and default had occurred in a sum far exceeding the statutory threshold.

Conclusion: Financial debt and default were proved, and the application satisfied the requirements for admission.

Issue (iii): whether objections based on NPA classification, pendency of SARFAESI/DRT proceedings, and the RBI circular dated 12.02.2018 could defeat the Section 7 petition.

Analysis: The declaration of the account as NPA was held to be immaterial for a Section 7 proceeding, because the relevant enquiry is the existence of debt and default. Pendency of proceedings under SARFAESI or before the DRT was also not a bar to initiation of insolvency proceedings. The RBI circular relied upon by the corporate debtor could not assist it, since the Supreme Court had declared that circular ultra vires and the proceedings were not shown to have been initiated only because of that circular. The objections therefore did not displace the creditor's right to seek initiation of the insolvency process.

Conclusion: The collateral objections were rejected and did not prevent admission of the insolvency petition.

Final Conclusion: The insolvency petition was admitted, the corporate insolvency resolution process was triggered, an interim resolution professional was appointed, and moratorium followed in terms of the Code.

Ratio Decidendi: At the admission stage under Section 7 of the Insolvency and Bankruptcy Code, 2016, the Adjudicating Authority must be satisfied only that a financial debt exists, a default has occurred, and the application is complete with no disciplinary bar against the proposed resolution professional; objections as to NPA classification or parallel recovery proceedings do not defeat a proven default.

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