Section 7 insolvency admission upheld where financial debt, default, and limitation were established on the record.

Section 7 admission under the Insolvency and Bankruptcy Code turned on whether the claim was within limitation and whether financial debt and default were established. The Limitation Act applied through section 238A, and a claim enforced against mortgaged immovable property attracted the twelve-year period under Article 62; on the stated dates, the application was within time. The statement of accounts was accepted as adequate, objections based on the joint lenders' forum were treated as irrelevant to section 7 adjudication, and the debt was found to be financial debt with default proved on the record. The insolvency petition was admitted and CIRP directed to commence with moratorium and an interim resolution professional.

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Issues: (i) Whether the application under section 7 was barred by limitation; (ii) whether the objections regarding the statement of accounts, the joint lenders' forum, and the alleged non-assignment of part of the debt defeated the existence of financial debt and default, and whether the application was liable to be admitted.

Issue (i): Whether the application under section 7 was barred by limitation.

Analysis: The Limitation Act applies to proceedings under the Insolvency and Bankruptcy Code from its inception by virtue of section 238A. For a claim enforced against mortgaged immovable property, the applicable period is twelve years under Article 62 of the Limitation Act, 1963. On the facts, the date of default was shown as 11.03.2015 and the application was filed on 29.09.2017. In the absence of any convincing rebuttal, the claim was found to be within limitation even on the shorter three-year basis relied upon by the corporate debtor.

Conclusion: The limitation objection was rejected.

Issue (ii): Whether the objections regarding the statement of accounts, the joint lenders' forum, and the alleged non-assignment of part of the debt defeated the existence of financial debt and default, and whether the application was liable to be admitted.

Analysis: For admission of a section 7 application, the adjudicating authority is required to see whether a debt and default exist and whether the application is complete. The statement of accounts was held to be adequate for the purpose of the insolvency application. The joint lenders' forum objections were treated as irrelevant to section 7 adjudication. The debt was found to be a financial debt, and default was established on the basis of the materials on record, including the admitted borrowing and the unpaid liability in respect of the surviving loans. The proposed interim resolution professional was also found to be unobjectionable.

Conclusion: The existence of financial debt and default was established and the application was admitted.

Final Conclusion: The insolvency petition satisfied the requirements for admission, the challenge on limitation failed, and corporate insolvency resolution process was directed to commence with moratorium and appointment of an interim resolution professional.

Ratio Decidendi: In a section 7 proceeding, the adjudicating authority must admit the application once existence of a financial debt and default are established and the application is complete, and limitation under the Insolvency and Bankruptcy Code is governed by the Limitation Act as applicable to the nature of the claim.

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