IBC admission declined where debtor was functional and given time to repay admitted liability before CIRP could be triggered.

An application under Section 7 of the Insolvency and Bankruptcy Code was not admitted where debt and default were undisputed but the corporate debtor sought time to clear the liability and showed that it was a going concern with receivables, existing working capital support, and settlements with other creditors. The reasoning emphasised that insolvency proceedings are not meant to be used as a recovery mechanism against a functional business that is otherwise capable of repayment. The corporate debtor was granted 90 days to pay the balance debt or settled amount, and the financial creditor was given liberty to file a fresh petition if payment was not made within that period.

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Issues: Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 deserved admission for initiation of corporate insolvency resolution process, or whether the corporate debtor should be granted time to clear the admitted liability.

Analysis: The debt and default were not in dispute, but the corporate debtor expressed willingness to pay and sought time for settlement. The record showed that the company was operating as a going concern, had substantial receivables, had already settled dues of several other creditors, and was supported by working capital arrangements. The legal purpose of insolvency proceedings is not recovery of a disputed or admitted debt where the debtor is otherwise functional, and insolvency should not be invoked to push a solvent business into CIRP. In the prevailing economic circumstances, the request for reasonable time to repay was considered justified.

Conclusion: The application was not admitted for CIRP. The corporate debtor was granted time to repay the balance debt or settled amount within 90 days, failing which the financial creditor was left at liberty to file a fresh petition.

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