Proof of default under insolvency law prevails over NPA disputes and parallel recovery proceedings; application admitted within limitation.

For admission of a section 7 insolvency application, the relevant enquiry is proof of default in payment of financial debt. Execution of loan and security documents, disbursement of facilities, and authentication by the information utility established default; the dispute over NPA classification and the DRT/SARFAESI proceedings did not displace the unpaid debt or bar insolvency remedies. The limitation objection also failed because the default date recorded by the information utility placed the application within time. The application was admitted, the corporate insolvency resolution process commenced, moratorium followed, and an interim resolution professional was appointed.

---

---

Issues: (i) Whether default in payment of financial debt was established for admission of the application under the Insolvency and Bankruptcy Code, 2016 notwithstanding the dispute regarding classification of the account as non-performing asset and the order of the Debt Recovery Tribunal. (ii) Whether the application was within limitation.

Issue (i): Whether default in payment of financial debt was established for admission of the application under the Insolvency and Bankruptcy Code, 2016 notwithstanding the dispute regarding classification of the account as non-performing asset and the order of the Debt Recovery Tribunal.

Analysis: The record showed execution of confirmation and security documents, disbursement of facilities, and authentication of the debt by the information utility. The relevant enquiry under section 7 is the occurrence of default, not whether the account continues to be treated as an NPA. The proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 are distinct from insolvency proceedings, and the quashing of the NPA declaration did not erase the unpaid financial debt. The defence based on the DRT order therefore did not defeat the existence of default.

Conclusion: Default was established and the objection based on NPA classification failed.

Issue (ii): Whether the application was within limitation.

Analysis: The date of default, as supported by the information utility record, was treated as 03.09.2016, and the application filed on 12.03.2019 was within the prescribed period. The challenge on limitation therefore did not succeed.

Conclusion: The application was within limitation.

Final Conclusion: The application was admitted, the corporate insolvency resolution process was initiated, and moratorium followed with appointment of an interim resolution professional.

Ratio Decidendi: For admission of an application under section 7 of the Insolvency and Bankruptcy Code, 2016, the test is proof of default in payment of financial debt, and the maintainability of such application does not depend upon the account being classified as NPA or upon parallel recovery proceedings under SARFAESI to the exclusion of insolvency remedies.

---