SARFAESI proceedings do not bar insolvency initiation when financial debt, default, and complete application are established.

Pendency of proceedings under the SARFAESI Act does not bar initiation of a corporate insolvency resolution process under the Insolvency and Bankruptcy Code, because the Code operates with overriding effect and serves resolution, not mere recovery. The note also states that, for a section 7 application, the relevant enquiry is whether financial debt, default, and a complete application are shown; collateral disputes or SARFAESI possession do not extinguish the liability. It further explains that section 10A applies only to defaults arising during the protected suspension period, and is inapplicable where the default occurred earlier.

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Issues: (i) whether pendency of proceedings under the SARFAESI Act barred initiation of a corporate insolvency resolution process under section 7 of the Insolvency and Bankruptcy Code, 2016; (ii) whether the financial creditor established the existence of financial debt and default so as to justify admission of the section 7 application; (iii) whether section 10A of the Insolvency and Bankruptcy Code, 2016 applied to exclude the default.

Issue (i): whether pendency of proceedings under the SARFAESI Act barred initiation of a corporate insolvency resolution process under section 7 of the Insolvency and Bankruptcy Code, 2016.

Analysis: The Code was treated as a subsequent enactment with overriding effect under section 238. It was held that action under SARFAESI is not a legal bar to a section 7 application, because the insolvency process serves resolution of the corporate debtor and is not merely a parallel recovery mechanism. The existence of SARFAESI measures therefore did not obstruct initiation of proceedings under the Code.

Conclusion: The objection based on pendency of SARFAESI proceedings was rejected and the section 7 application was held maintainable.

Issue (ii): whether the financial creditor established the existence of financial debt and default so as to justify admission of the section 7 application.

Analysis: The Tribunal found that financial assistance had been advanced, the loan account had turned non-performing, and the debt remained unpaid in the amount claimed. It held that for section 7, the adjudicating authority is concerned with the existence of debt, default, and completeness of the application, and is not required to examine collateral disputes or treat SARFAESI possession as extinguishing the borrower's liability. On the admitted materials, debt and default were established and the application satisfied the statutory requirements for admission.

Conclusion: The existence of financial debt and default was affirmed and admission of the insolvency application was upheld.

Issue (iii): whether section 10A of the Insolvency and Bankruptcy Code, 2016 applied to exclude the default.

Analysis: The default was found to have occurred prior to the statutory suspension period introduced by section 10A. Since the default did not arise during the protected period, the embargo created by section 10A was held inapplicable.

Conclusion: Section 10A did not apply to the case.

Final Conclusion: The order admitting the section 7 application, appointing the interim resolution professional, and commencing corporate insolvency resolution process was sustained, and the appeal failed.

Ratio Decidendi: Pendency of SARFAESI proceedings does not bar a section 7 insolvency application under the Insolvency and Bankruptcy Code, 2016, and once financial debt, default, and a complete application are shown, admission follows unless a specific statutory exclusion applies.

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