Insolvency admission requires clear debt and default, and disputed transaction documents can defeat a Section 7 petition.

An application under Section 7 of the Insolvency and Bankruptcy Code was held not maintainable because the transaction documents, identity of the contracting entities, and the legal basis for fastening liability were inconsistent and disputed. The tribunal found that the materials did not disclose a clear, undisputed, and enforceable financial debt capable of summary adjudication, and the guarantee and related papers formed part of a contested factual matrix requiring proof beyond the limited scope of insolvency proceedings. As the ingredients for admission were not established, prima facie debt and default were not made out and initiation of corporate insolvency resolution process was refused.

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Issues: Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was maintainable on the basis of the transaction documents and guarantee, and whether a prima facie financial debt and default were established so as to warrant initiation of corporate insolvency resolution process.

Analysis: The transaction documents were found to be inconsistent and disputed, including the identity of the contracting entities and the exact legal basis on which liability was sought to be fastened on the respondent. The request to invoke insolvency was examined in the light of the earlier proceedings and the surrounding correspondence, but the materials did not present a clear, undisputed and enforceable debt capable of being adjudicated in summary insolvency proceedings. The guarantee and related documents were also treated as part of a contested factual matrix, requiring proof beyond the limited scope of the proceeding. On the record, the tribunal was not satisfied that the ingredients necessary for admission under Section 7 had been made out.

Conclusion: The application under Section 7 was not maintainable on the facts presented, and the claim failed for want of a prima facie established debt and default.

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