Limitation and financial default under insolvency law support admission of a complete section 7 petition and moratorium.

A section 7 Insolvency and Bankruptcy Code application is timely where the asserted defaults fall within three years and liability is acknowledged, engaging Article 137 of the Limitation Act with sections 18 and 19. On the stated facts, financial assistance, availed facilities, and non-payment of principal and interest were treated as sufficient to establish financial debt and default, with no bona fide defence shown. Once the application was found complete and an eligible interim resolution professional proposed, the statutory conditions for admission were satisfied and moratorium under section 14 followed. The corporate insolvency resolution process was therefore initiated against the corporate debtor.

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Issues: (i) whether the application under section 7 of the Insolvency and Bankruptcy Code, 2016 was within limitation; (ii) whether a financial debt and default were established against the corporate debtor; and (iii) whether the petition satisfied the requirements for admission and moratorium.

Issue (i): whether the application under section 7 of the Insolvency and Bankruptcy Code, 2016 was within limitation

Analysis: The dates of default emerging from the demand promissory notes showed that the application was filed within three years from the respective defaults. The record also reflected acknowledgment of liability and no valid plea taking the matter outside limitation. The application was, therefore, treated as timely under Article 137 of the Limitation Act, 1963, read with sections 18 and 19 thereof.

Conclusion: The application was held to be within limitation.

Issue (ii): whether a financial debt and default were established against the corporate debtor

Analysis: The documents placed on record showed that financial assistance had been advanced, the facilities had been availed, and the liability had not been disputed in substance. The materials established the existence of a financial debt and the occurrence of default in repayment of principal and interest. The application was also found to be complete, and no bona fide defence was disclosed.

Conclusion: The existence of financial debt and default was affirmed.

Issue (iii): whether the petition satisfied the requirements for admission and moratorium

Analysis: Once default and completeness of the application were established, the statutory requirements for admission under section 7 were satisfied. The proposed interim resolution professional was found to be eligible, and the consequences of admission under section 14 followed for commencement of the insolvency process and declaration of moratorium.

Conclusion: The petition was admitted and moratorium was ordered.

Final Conclusion: The corporate insolvency resolution process was initiated against the corporate debtor, and the matter stood disposed of with moratorium in force in accordance with the Code.

Ratio Decidendi: Where a financial creditor establishes a subsisting financial debt, a default within limitation, and a complete application, the adjudicating authority must admit the section 7 petition and declare moratorium under the Insolvency and Bankruptcy Code, 2016.

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