Section 7 insolvency admission requires proved debt, default, and a complete filing before moratorium and resolution process begin.
An application under Section 7 of the Insolvency and Bankruptcy Code may be admitted where the record shows financial debt, default, and a complete application. On the facts noted, credit sanction and disbursement, security creation, non-performing classification, account statements, and persistent non-payment established debt and default, so the application was treated as admissible. The proposed interim resolution professional was eligible because consent was filed in the prescribed form and no disciplinary proceedings were pending. Upon admission, moratorium under Section 14 operated, barring suits, enforcement actions, transfer of assets, and recovery proceedings, and the interim resolution professional was to take charge of the process and protect the debtor's assets.
Issues: (i) Whether the financial creditor established the existence of financial debt and default so as to warrant admission of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016; (ii) Whether the proposed interim resolution professional satisfied the statutory requirements for appointment; (iii) Whether moratorium was liable to be declared on admission of the application.
Issue (i): Whether the financial creditor established the existence of financial debt and default so as to warrant admission of the application under Section 7 of the Insolvency and Bankruptcy Code, 2016.
Analysis: The materials on record showed sanction and disbursement of credit facilities, creation of security, classification of the accounts as non-performing, and persistent non-payment. The filing was supported by account statements and other records, and the debtor's default was treated as admitted in the course of proceedings. For admission under Section 7, the adjudicating authority is required to be satisfied that a financial debt exists and that default has occurred, and the application must be complete in all respects.
Conclusion: The requirement of financial debt and default was satisfied and the application was held admissible.
Issue (ii): Whether the proposed interim resolution professional satisfied the statutory requirements for appointment.
Analysis: The proposed professional had furnished consent in the prescribed form and the record showed no pending disciplinary proceedings. This met the requirement of Section 7(3)(b) of the Insolvency and Bankruptcy Code, 2016 read with Rule 9(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.
Conclusion: The proposed interim resolution professional was found eligible for appointment.
Issue (iii): Whether moratorium was liable to be declared on admission of the application.
Analysis: Once the application was admitted, the statutory consequences under Section 14 of the Insolvency and Bankruptcy Code, 2016 followed, including the restrictions on suits, transfer of assets, enforcement actions, and recovery of property. The order also recorded the duties of the interim resolution professional to take charge of the process and protect the corporate debtor's assets.
Conclusion: Moratorium was declared and the consequential statutory prohibitions were brought into operation.
Final Conclusion: The corporate insolvency resolution process was commenced against the corporate debtor, an interim resolution professional was appointed, and the statutory moratorium took effect.
Ratio Decidendi: An application under Section 7 of the Insolvency and Bankruptcy Code, 2016 is to be admitted when the adjudicating authority is satisfied that a financial debt exists, default has occurred, and the application is otherwise complete, after which the statutory consequences of admission follow.
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