Section 7 insolvency applications can proceed despite lender consortium terms, parallel recovery actions, and quantum disputes.

Section 7 of the Insolvency and Bankruptcy Code allows a financial creditor to apply individually or jointly, and inter-se lender arrangements cannot defeat that statutory right. A Section 7 filing must also be properly authorised and complete, including valid consent and disclosures from the proposed interim resolution professional, with no pending disciplinary proceeding. Parallel SARFAESI or DRT recovery actions, disputes over the exact quantum, or claim objections do not by themselves bar admission where default is otherwise established. The text further explains that loan documents, acknowledgments, revival letters, mortgage confirmations and account statements can prove financial debt and default, supporting admission and commencement of corporate insolvency resolution process.

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Issues: (i) whether the financial creditor could maintain the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 despite the consortium arrangement and objections based on inter-se agreements; (ii) whether the application was duly authorised and complete, including the proposed interim resolution professional; (iii) whether pendency of SARFAESI and DRT proceedings, disputes regarding quantum, and objections to the claim could prevent admission; and (iv) whether default and existence of financial debt were established so as to warrant admission and commencement of corporate insolvency resolution process.

Issue (i): whether the financial creditor could maintain the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 despite the consortium arrangement and objections based on inter-se agreements;

Analysis: Section 7 permits a financial creditor to apply either by itself or jointly with other financial creditors. The inter-se arrangement among lenders cannot override the statutory right conferred by the Code, particularly in view of its overriding effect. The corporate debtor, not being a party to such inter-se arrangement, cannot rely on it to defeat the statutory remedy.

Conclusion: The application was maintainable at the instance of the applicant bank alone.

Issue (ii): whether the application was duly authorised and complete, including the proposed interim resolution professional;

Analysis: The officer who filed the application was shown to be duly authorised by the bank. The proposed interim resolution professional furnished the requisite consent and disclosures, and no disciplinary proceeding was pending. The objection based on the earlier proposed name of another insolvency professional stood rectified.

Conclusion: The application was duly authorised and complete, and the proposed interim resolution professional satisfied the statutory requirements.

Issue (iii): whether pendency of SARFAESI and DRT proceedings, disputes regarding quantum, and objections to the claim could prevent admission;

Analysis: The existence of parallel recovery proceedings does not bar initiation of corporate insolvency resolution process under Section 7. The adjudicating authority is concerned with the existence of default and not with adjudication of the exact quantum of dues. Mere discrepancies in the amount claimed, absence of restructuring, or settlement discussions do not prevent admission when default is otherwise shown.

Conclusion: These objections did not defeat the Section 7 application.

Issue (iv): whether default and existence of financial debt were established so as to warrant admission and commencement of corporate insolvency resolution process.

Analysis: The loan documents, acknowledgments, revival letters, mortgage confirmations, promissory notes and certified account statements showed disbursal of loans against consideration for time value of money and persistent non-payment after default. The debt therefore fell within the definition of financial debt and the applicant bank was a financial creditor. The statutory conditions for admission under Section 7 were satisfied.

Conclusion: Default and financial debt were proved, and the application was admitted, with moratorium declared and an interim resolution professional appointed.

Final Conclusion: The statutory requirements for commencement of insolvency resolution were satisfied, the objections raised by the corporate debtor were rejected, and corporate insolvency resolution process was ordered to proceed against the corporate debtor.

Ratio Decidendi: Under Section 7 of the Insolvency and Bankruptcy Code, 2016, the adjudicating authority must admit the application once it is complete, default is shown, and no disciplinary proceeding is pending against the proposed resolution professional; collateral contractual arrangements, parallel recovery actions, or disputes over the exact quantum of debt do not bar admission.

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