Section 10 insolvency applications cannot be rejected on extraneous SARFAESI or financial-statement scrutiny beyond statutory limits.

In a section 10 Insolvency and Bankruptcy Code application, the adjudicating authority's scrutiny is confined to whether the application is complete, debt and default are shown, and the corporate applicant is not disqualified under section 11. Rule 7 of the Application to Adjudicating Authority Rules only prescribes the filing form and does not permit a wider merits-based examination of financial statements or collateral matters. Pending SARFAESI action or DRT proceedings cannot be used as extraneous grounds to reject a complete application. Rejection on such grounds was held to exceed jurisdiction, and the application had to be reconsidered for admission in accordance with law.

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Issues: Whether the adjudicating authority could reject an application under section 10 of the Insolvency and Bankruptcy Code, 2016 by examining the applicant's financial statements and by treating pending SARFAESI measures as a ground to infer ulterior motive.

Analysis: An application under section 10 is to be admitted once debt and default are shown and the corporate applicant is not disqualified under section 11, unless the application is incomplete. Rule 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 only prescribes the manner of filing in Form 6 and does not authorise a wider scrutiny of financial statements or collateral issues beyond the statutory requirements. Matters such as action taken under the SARFAESI Act, 2002 or pending proceedings under the DRT Act, 1993 are not grounds to reject a complete section 10 application. Rejection on discrepancies not falling within the statutory parameters amounted to exceeding jurisdiction.

Conclusion: The rejection was unsustainable. The application under section 10 could not be refused on the grounds invoked, and the matter had to be reconsidered for admission in accordance with law.

Ratio Decidendi: In a section 10 insolvency application, the adjudicating authority's inquiry is confined to completeness, existence of debt and default, and section 11 ineligibility, and it cannot reject the application on extraneous grounds or by conducting a merits-based examination of financial statements.

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