Section 7 insolvency petition upheld on authorisation, limitation, and default, triggering moratorium and IRP appointment.
A Section 7 Insolvency and Bankruptcy Code application was examined on three points: authorisation, limitation, and default. The bank officer was treated as duly empowered to file the petition because the authorisation covered insolvency proceedings on behalf of the bank. Limitation was held to be extended by an acknowledgment of debt signed by directors of the corporate debtor, so the filing was treated as within time. Documentary evidence was found sufficient to establish financial default and the application was considered complete, leading to admission of the insolvency petition, commencement of moratorium, and appointment of an interim resolution professional.
Issues: (i) Whether the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 was maintainable when filed by the bank official; (ii) Whether the petition was barred by limitation in view of the date of default and the acknowledgment of debt; (iii) Whether the corporate debtor had committed default warranting admission of the petition and consequential moratorium and appointment of an interim resolution professional.
Issue (i): Whether the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 was maintainable when filed by the bank official.
Analysis: The authorization issued in favour of the Chief Manager empowered him to sanction loans and to initiate bankruptcy, insolvency, or liquidation proceedings on behalf of the bank. On that basis, the filing authority was treated as duly empowered to institute the application.
Conclusion: The objection to maintainability on the ground of lack of authority was rejected.
Issue (ii): Whether the petition was barred by limitation in view of the date of default and the acknowledgment of debt.
Analysis: The record showed the last transaction in the account on 27.01.2016 and an acknowledgment of debt dated 20.11.2018 signed by two directors of the corporate debtor. The acknowledgment was relied upon to extend limitation, and the objection that the later affidavit could not be considered was not accepted.
Conclusion: The petition was held to be within limitation.
Issue (iii): Whether the corporate debtor had committed default warranting admission of the petition and consequential moratorium and appointment of an interim resolution professional.
Analysis: The documentary material was found sufficient to establish default in repayment of the financial debt and to show that the application was complete. Once default was established, admission under Section 7 followed, and the statutory moratorium under Section 14 and appointment of an interim insolvency resolution professional were directed.
Conclusion: The petition was admitted, moratorium commenced, and the proposed interim resolution professional was appointed.
Final Conclusion: The insolvency application was allowed, the corporate debtor was brought into the corporate insolvency resolution process, and ancillary objections were rejected.
Ratio Decidendi: A Section 7 application is maintainable when filed by a duly authorized bank officer, an acknowledgment of debt can extend limitation, and once default and completeness of the application are established, admission, moratorium, and appointment of an interim resolution professional must follow.
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