Financial debt and default established for section 7 admission under the Insolvency and Bankruptcy Code.

For admission under section 7 of the Insolvency and Bankruptcy Code, 2016, the adjudicating authority must be satisfied from the record that a financial debt is due and default has occurred. Here, the loan and security documents were undisputed, credit facilities had been extended to the corporate debtor, the demand notice was not complied with, the one-time settlement proposal was not honoured, and the balance sheet reflected the outstanding liability. On that material, financial debt and default were established, and the petition was maintainable for commencement of corporate insolvency resolution process.

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Issues: Whether the financial creditor established the existence of a financial debt and default so as to warrant admission of the petition under section 7 of the Insolvency and Bankruptcy Code, 2016.

Analysis: The loan and security documents were undisputed, and the record showed that credit facilities had been extended to the corporate debtor. The demand notice remained uncomplied with, the one-time settlement proposal was not honoured, and the balance sheet of the corporate debtor also reflected the outstanding liability. On this material, the financial debt and the default were found to be established for the purpose of section 7.

Conclusion: The petition was maintainable and the corporate debtor was liable to be admitted into corporate insolvency resolution process.

Final Conclusion: The application succeeded on proof of financial debt and default, and insolvency resolution proceedings were directed to commence against the corporate debtor.

Ratio Decidendi: For admission under section 7 of the Insolvency and Bankruptcy Code, 2016, the adjudicating authority must be satisfied from the record and other evidence placed by the financial creditor that a financial debt is due and a default has occurred.

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