Complete insolvency application with proved debt and default can proceed despite pending SARFAESI and DRT recovery proceedings.

A complete section 10 insolvency application disclosing debt and default was found admissible for commencement of CIRP because the applicant filed the requisite books of account, the proposed interim resolution professional's consent, and the shareholders' resolution, and the account had turned non-performing. Pending SARFAESI action and proceedings before the DRT were held not to bar admission, as recovery proceedings do not prevent initiation of insolvency where the Code application is otherwise complete and its overriding effect applies. The corporate debtor was accordingly admitted into CIRP and an interim resolution professional was appointed.

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Issues: (i) Whether the application under section 10 of the Insolvency and Bankruptcy Code, 2016 was complete and disclosed debt and default warranting admission for initiation of corporate insolvency resolution process; (ii) Whether pendency of proceedings under the SARFAESI mechanism and before the Debt Recovery Tribunal was a valid ground to refuse admission.

Issue (i): Whether the application under section 10 of the Insolvency and Bankruptcy Code, 2016 was complete and disclosed debt and default warranting admission for initiation of corporate insolvency resolution process.

Analysis: The application was supported by the requisite books of account, the proposed interim resolution professional's consent, and the shareholders' resolution. The existence of debt above the statutory threshold and default was found to be established, with the account having become non-performing. The Tribunal also recorded that the application was filed within limitation and was complete in all respects for commencement of the corporate insolvency resolution process.

Conclusion: The issue was answered in favour of the applicant. The section 10 application was held admissible.

Issue (ii): Whether pendency of proceedings under the SARFAESI mechanism and before the Debt Recovery Tribunal was a valid ground to refuse admission.

Analysis: The Tribunal relied on settled law that proceedings under SARFAESI and before the DRT do not bar initiation of insolvency proceedings under the Code where the application is otherwise complete. It further noted the overriding effect of section 238 of the Code, and rejected the objection that such pending recovery proceedings could prevent commencement of CIRP.

Conclusion: The issue was answered against the objecting financial creditor. Pendency of SARFAESI or DRT proceedings was held not to be a bar to admission.

Final Conclusion: The corporate debtor was admitted into corporate insolvency resolution process, moratorium was , and an interim resolution professional was appointed.

Ratio Decidendi: A complete section 10 application disclosing debt and default must be admitted, and pending SARFAESI or recovery proceedings do not bar initiation of CIRP in view of the overriding effect of the Code.

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