Insolvency as a recovery tool rejected where a going concern shows credible repayment prospects and admits liability.

A Section 7 petition under the Insolvency and Bankruptcy Code may be declined even where debt and default are admitted if the corporate debtor is a functioning going concern with credible repayment prospects. The record reflected a running account, partial repayments, stated funding arrangements, and continuing business operations with employees and revenue generation. Insolvency proceedings were treated as unsuitable for use as a mere recovery mechanism when dues could be cleared within a short period. The debtor was given 90 days to settle the claim, with liberty to the petitioner to file a fresh petition if payment was not made.

---

---

Issues: Whether the petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 should be admitted on the basis of admitted debt and default; and whether, in the circumstances, the corporate debtor should be granted time to clear the outstanding dues instead of being subjected to corporate insolvency resolution process.

Analysis: The corporate debtor admitted the liability and expressed readiness to pay, seeking additional time for settlement. The record showed a running account between the parties, partial repayments already made, and arrangements stated to be in place for payment through working capital support and expected receivables. The petitioning process under the Code was viewed in light of the principle that insolvency proceedings are not meant to function as a recovery mechanism or to imperil an otherwise functioning business. The corporate debtor was found to be a going concern with continuing operations, employees, and substantial revenue generation. The order also took note of the broader economic distress and the policy emphasis against premature resort to insolvency where repayment could be achieved within a short time.

Conclusion: The request for more time was accepted, and the petition was not admitted into corporate insolvency resolution process. The corporate debtor was directed to settle the claim within 90 days, with liberty to the petitioner to initiate a fresh petition if payment was not made.

Final Conclusion: The matter was disposed of by declining immediate insolvency admission and by permitting a short opportunity for repayment, leaving the petitioner free to revive the remedy upon non-compliance.

Ratio Decidendi: A petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 may be declined where admitted default exists but the debtor is a functioning going concern with credible prospects of repayment, since the Code is not to be used as a mere recovery device.

---