Default under insolvency law depends on unpaid debt and proof of default, not on a separate NPA classification challenge.

For admission of a section 7 insolvency application, the adjudicating authority must be satisfied about a debt due and payable, a default, and admissible proof of that default. A challenge to classification of the account as a non-performing asset does not by itself negate default or bar CIRP where the debt remained unpaid and the default was reflected in the information utility record. On limitation, the three-year period under section 238A of the Insolvency and Bankruptcy Code read with article 137 of the Limitation Act was applied, and the application filed within that period was found to be in time. The admission order was therefore affirmed.

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Issues: (i) whether the classification of the account as a non-performing asset affected the existence of default for the purpose of initiation of corporate insolvency resolution process under section 7 of the Insolvency and Bankruptcy Code, 2016; (ii) whether the section 7 application was barred by limitation.

Issue (i): whether the classification of the account as a non-performing asset affected the existence of default for the purpose of initiation of corporate insolvency resolution process under section 7 of the Insolvency and Bankruptcy Code, 2016.

Analysis: The application under section 7 was required to establish only the existence of a debt due and payable, occurrence of default, and supporting record of default from an information utility or other admissible evidence. The Tribunal treated the NPA issue as distinct from the insolvency trigger, holding that the proceedings under the insolvency code are concerned with default and not with the legality of NPA classification under the SARFAESI framework. The record showed that the debt had fallen due and remained unpaid, and the default was reflected in the information utility record.

Conclusion: The NPA challenge did not defeat the finding of default and the initiation of CIRP was upheld.

Issue (ii): whether the section 7 application was barred by limitation.

Analysis: The relevant date of default was taken as 03.09.2016, and the application was filed on 12.03.2019. Applying the three-year limitation framework under section 238A of the Insolvency and Bankruptcy Code, 2016 read with article 137 of the Limitation Act, 1963, the application was within time. The Tribunal therefore found no bar of limitation.

Conclusion: The application was within limitation.

Final Conclusion: The order admitting the insolvency application was affirmed and the appeal failed.

Ratio Decidendi: For admission of a section 7 insolvency application, the adjudicating authority must be satisfied only about debt, default, and admissible proof of default, and a challenge to NPA classification does not by itself negate default or prevent admission if the application is otherwise within limitation.

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