SARFAESI and DRT proceedings do not bar section 7 insolvency admission; alleged service defects need prejudice to warrant interference.

Pendency of SARFAESI Act action or recovery proceedings before the DRT does not bar initiation or admission of a section 7 insolvency application under the Insolvency and Bankruptcy Code, which operates with overriding effect under section 238. The prior remedies pursued by the financial creditor therefore do not make the insolvency petition non-maintainable. On service, repeated attempts and record evidence of service at the registered office supported the finding of due notice; an alleged defect in service on individual directors, without prejudice or a basis for remand, was insufficient to interfere with admission.

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Issues: (i) Whether pendency of proceedings under the SARFAESI Act and the Recovery of Debts Due to Banks and Financial Institutions Act bars initiation or admission of an application under section 7 of the Insolvency and Bankruptcy Code, 2016. (ii) Whether the alleged defect in service of notice on the corporate debtor and its directors warranted interference with the admission order.

Issue (i): Whether pendency of proceedings under the SARFAESI Act and the Recovery of Debts Due to Banks and Financial Institutions Act bars initiation or admission of an application under section 7 of the Insolvency and Bankruptcy Code, 2016.

Analysis: The pendency of secured creditor action under the SARFAESI Act or recovery proceedings before the Debt Recovery Tribunal does not create a legal bar to an application under section 7 of the Insolvency and Bankruptcy Code, 2016. The Code is a subsequent legislation, and its provisions operate with overriding effect under section 238. The prior remedies pursued by the financial creditor therefore do not render the insolvency application non-maintainable.

Conclusion: The objection to maintainability on the ground of prior SARFAESI and DRT proceedings is rejected and the finding is against the appellant.

Issue (ii): Whether the alleged defect in service of notice on the corporate debtor and its directors warranted interference with the admission order.

Analysis: The record showed repeated attempts at service and material indicating service at the registered office. The adjudicating authority recorded due service, and no sufficient ground was shown to dislodge that finding. Even assuming some imperfection in service on individual directors, no basis for remand or interference was established.

Conclusion: The challenge based on alleged defective service fails and is against the appellant.

Final Conclusion: The admission of the insolvency application was upheld, and no ground was made out for appellate interference.

Ratio Decidendi: Prior initiation or pendency of SARFAESI or DRT proceedings does not bar a section 7 insolvency application, and a recorded finding of due service will not be disturbed absent a showing of prejudice or a ground for remand.

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