Section 7 insolvency admission upheld where financial debt, default and pre-COVID default excluded Section 10A protection.

A financial creditor's Section 7 application was found maintainable where loan documents, a promissory note, a guarantee, a mortgage memorandum, account statements and NPA classification established financial debt and default; the corporate debtor's one-time settlement proposals also evidenced acknowledgment of liability, so the application was admitted and CIRP commenced. Section 10A did not bar admission because the default was found to have arisen before the COVID-19 suspension period, and the enhanced threshold did not assist the debtor since the default already exceeded the relevant limit on the filing date.

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Issues: (i) Whether the financial creditor established the existence of a financial debt and default so as to warrant admission of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016. (ii) Whether Section 10A of the Insolvency and Bankruptcy Code, 2016 barred admission of the application.

Issue (i): Whether the financial creditor established the existence of a financial debt and default so as to warrant admission of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016.

Analysis: The loan agreement, demand promissory note, guarantee, memorandum of deposit of title deeds, statement of accounts and the classification of the account as non-performing asset supported the claim that financial debt existed and that repayment had not been made. The Tribunal also noted that the corporate debtor's own proposals for one time settlement showed that the liability was acknowledged, and that the defence based on financial difficulty did not negate default for the purposes of Section 7. On the statutory scheme, once financial debt and default above the threshold are shown, admission follows.

Conclusion: The issue is answered in favour of the financial creditor. The application was liable to be admitted and the corporate insolvency resolution process triggered.

Issue (ii): Whether Section 10A of the Insolvency and Bankruptcy Code, 2016 barred admission of the application.

Analysis: Section 10A excludes defaults occurring during the specified COVID-19 suspension period. The default in the present case was found to have arisen much prior to that period, and therefore the statutory bar did not apply. The Tribunal further noted that the threshold enhancement did not assist the corporate debtor because the default amount was already above the relevant limit on the date of filing.

Conclusion: The issue is answered against the corporate debtor. Section 10A did not apply to the facts of the case.

Final Conclusion: The application under Section 7 was admitted, moratorium followed, and the interim resolution professional was appointed to carry forward the insolvency resolution process.

Ratio Decidendi: Where the adjudicating authority is satisfied that a financial debt exists, default is proved, and no statutory exclusion applies, admission under Section 7 is mandatory and the corporate insolvency resolution process must commence.

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