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Issues: (i) Whether the application under section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation. (ii) Whether default and financial debt were established so as to admit the application and commence the corporate insolvency resolution process.
Issue (i): Whether the application under section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by limitation.
Analysis: The plea of limitation was rejected on the footing that the debt was secured by equitable mortgage of immovable property, and the relevant period for enforcing payment of money secured by mortgage was twelve years under Article 62 of the Limitation Act, 1963. The Tribunal also noted the prior proceedings and the absence of a basis to treat the claim as time barred on the facts presented. The contention founded on Article 137 of the Limitation Act, 1963 and section 238A of the Insolvency and Bankruptcy Code, 2016 did not prevail on the facts of the case.
Conclusion: The application was not barred by limitation.
Issue (ii): Whether default and financial debt were established so as to admit the application and commence the corporate insolvency resolution process.
Analysis: The Tribunal found that the corporate debtor had admitted the debt and that the financial facilities had been taken and secured by equitable mortgage. It held that the debt answered the description of default under section 3(12) of the Insolvency and Bankruptcy Code, 2016, and that the claim constituted financial debt within section 5(8) of the Insolvency and Bankruptcy Code, 2016. It further found that the application satisfied the requirements of section 7 of the Insolvency and Bankruptcy Code, 2016 read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, and that no pre-existing dispute defeated the petition.
Conclusion: Default and financial debt were proved, and the application was admitted.
Final Conclusion: The corporate insolvency resolution process was initiated against the corporate debtor, an interim resolution professional was appointed, and moratorium followed in accordance with the Code.
Ratio Decidendi: A section 7 application may be admitted when a financial debt and default are established, no pre-existing dispute defeats the claim, and a mortgage-secured debt is not shown to be time barred on the facts of the case.
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