Section 7 insolvency admission turns on proved financial debt and default; counter-claims and parallel recovery actions do not bar CIRP.

An application under section 7 was found maintainable where the authorised officer was properly named and supported by a valid authorisation letter. The claim was held within limitation because acknowledgments in the corporate debtor's balance sheets and related records extended limitation under the Limitation Act as applied by section 238A of the IBC. Pendency of SARFAESI or DRT proceedings, and the existence of a counter-claim, did not displace the financial creditor's petition once debt and default were shown. On the record, sanctioned facilities, unpaid liabilities, acknowledgments and default established financial debt and default, so the petition was admitted and CIRP commenced with moratorium.

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Issues: (i) whether the application under section 7 was maintainable despite the objection as to authorization of the signatory, (ii) whether the application was barred by limitation, (iii) whether pendency of SARFAESI, DRT proceedings and counter-claim displaced the section 7 petition, and (iv) whether the financial debt and default were established so as to admit the petition and commence CIRP.

Issue (i): whether the application under section 7 was maintainable despite the objection as to authorization of the signatory

Analysis: The application disclosed the name and designation of the authorised officer who had signed it, and an authorisation letter in his favour was produced. The objection based on an earlier power of attorney was rejected because the record showed a valid authorisation for presentation of the petition.

Conclusion: The objection on authorisation failed and the application was maintainable.

Issue (ii): whether the application was barred by limitation

Analysis: The financial statements of the corporate debtor and other record evidence showed acknowledgment of liability within the limitation period. In view of section 238A of the Insolvency and Bankruptcy Code, 2016, the Limitation Act applied, and the acknowledgment in the balance-sheet extended limitation.

Conclusion: The claim was held to be within limitation and not barred.

Issue (iii): whether pendency of SARFAESI, DRT proceedings and counter-claim displaced the section 7 petition

Analysis: Pending recovery proceedings, SARFAESI measures and a counter-claim did not negate the existence of financial debt and default for the purposes of section 7. A counter-claim or set-off was not treated as a defence that could defeat admission of a financial creditor's application once debt and default were shown.

Conclusion: The pendency of other proceedings and the counter-claim did not bar admission of the petition.

Issue (iv): whether the financial debt and default were established so as to admit the petition and commence CIRP

Analysis: The records showed sanctioned credit facilities, further utilisation of credit, unpaid devolved liabilities, acknowledgments of debt, financial statements reflecting indebtedness, and default beyond the statutory threshold. These materials established a financial debt and default under the Code, warranting admission under section 7(5).

Conclusion: The petition was admitted and CIRP was directed to commence, with appointment of the proposed IRP and imposition of moratorium.

Final Conclusion: The insolvency application succeeded on merits, the corporate debtor was subjected to CIRP, and the statutory moratorium and related consequences followed from the admission order.

Ratio Decidendi: For admission of a section 7 application, once the existence of financial debt and default is shown, an objection based on counter-claim, parallel recovery proceedings, or similar collateral disputes does not prevent initiation of CIRP.

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