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Issues: (i) Whether a single financial creditor could maintain an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 despite the existence of a consortium arrangement; (ii) Whether the debt and default were established and whether the application was barred by limitation or was otherwise not maintainable.
Issue (i): Whether a single financial creditor could maintain an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 despite the existence of a consortium arrangement.
Analysis: Section 7 permits a financial creditor to initiate corporate insolvency resolution process either by itself or jointly with other financial creditors. The debtor had admittedly borrowed funds from the petitioner under the consortium lending arrangement, and the recovery certificate issued in the debt recovery proceedings entitled the consortium banks to recover their dues jointly and severally. The mere fact that other consortium banks were not joined as applicants did not render the petition defective.
Conclusion: The petition was maintainable at the instance of the petitioner alone, and this objection was rejected.
Issue (ii): Whether the debt and default were established and whether the application was barred by limitation or was otherwise not maintainable.
Analysis: The record showed sanction of financial assistance, subsequent default, a decree and recovery certificate in the debt recovery proceedings, and continuing non-payment by the corporate debtor. The Tribunal treated the debt as financial debt owed to the petitioner, noted that default had occurred and continued, and held that the claim was supported by the recovery certificate and demand notice. It also held that limitation did not bar the petition because the debt remained unpaid and the cause of action continued. The Tribunal further held that the petitioner was a financial creditor within the meaning of the Code.
Conclusion: Debt and default were proved, the petition was within limitation, and the objection that the petitioner was not a financial creditor was rejected.
Final Conclusion: The corporate insolvency resolution process was admitted against the corporate debtor, an interim resolution professional was appointed, and moratorium was ordered.
Ratio Decidendi: A financial creditor may independently invoke Section 7 of the Insolvency and Bankruptcy Code, 2016, and where debt and continuing default are established, supported by admissible recovery proceedings, the application is to be admitted unless it is otherwise incomplete or barred.
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