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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: (i) whether a financial creditor forming part of a consortium could independently maintain an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 despite the lead bank having initiated SARFAESI and DRT proceedings; (ii) whether debt and default were established so as to warrant admission of the corporate insolvency resolution process application.
Issue (i): whether a financial creditor forming part of a consortium could independently maintain an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 despite the lead bank having initiated SARFAESI and DRT proceedings.
Analysis: The application was held to be maintainable on the footing that the applicant had independently sanctioned credit facilities and was itself a financial creditor within the meaning of the Code. The pendency of proceedings before the DRT and steps under the SARFAESI Act did not operate as a bar to initiation of proceedings under Section 7. The absence of any stay order from the High Court was also noted, and the plea that only the lead bank could initiate proceedings was rejected.
Conclusion: The objection to maintainability was rejected, and the application was held to be maintainable in favour of the petitioner.
Issue (ii): whether debt and default were established so as to warrant admission of the corporate insolvency resolution process application.
Analysis: The account was classified as non-performing, recall notice was issued, and the demand remained unpaid. The Tribunal found that the application was complete, within limitation, and supported by the required affidavit and disclosures. It also held that the pendency of SARFAESI measures did not dilute the existence of debt and default, and that the threshold for admission under the Code had been met.
Conclusion: Debt and default were found to be established, and the application was admitted.
Final Conclusion: The corporate debtor was admitted into the corporate insolvency resolution process, moratorium followed, and an interim resolution professional was appointed to commence the insolvency process.
Ratio Decidendi: An independent financial creditor in a consortium may maintain a Section 7 application, and pendency of SARFAESI or DRT proceedings does not bar admission where debt, default, and procedural completeness are established.
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