Section 7 insolvency admission turns on debt and default, not lender breach claims or separate civil suit disputes.

A Section 7 application under the Insolvency and Bankruptcy Code is to be admitted once financial debt and default are established, and the inquiry does not extend to why the default occurred. Allegations that lenders did not fully disburse the sanctioned amount do not defeat admission where the borrower's repayment obligation under restructuring documents is unconditional. A separate civil suit by the corporate debtor, including claims of lender breach, set-off, or counterclaim, is not a ground to refuse admission if the petition is otherwise complete. On that basis, the note states that rejection of the Section 7 applications was unsustainable.

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Issues: Whether a Section 7 application under the Insolvency and Bankruptcy Code, 2016 could be rejected on the ground that the financial creditors allegedly contributed to the default by not fully disbursing the sanctioned amounts, or because the corporate debtor had instituted a civil suit raising claims against the lenders.

Analysis: The existence of financial debt and default was supported by the loan documents, restructuring arrangements, acknowledgements of liability, and the admitted NPA classification. The governing principle is that, once the adjudicating authority is satisfied that default has occurred, the Section 7 application must be admitted unless it is incomplete. The reason for default is not the relevant inquiry under Section 7, and allegations that lenders failed to disburse the entire sanctioned amount do not defeat the statutory trigger where the borrower's repayment obligation under the restructuring documents is unconditional. Claims raised by the corporate debtor in a separate civil suit, including assertions of lender breach or entitlement to set-off or counterclaim, do not furnish a ground to refuse admission of a Section 7 petition.

Conclusion: The rejection of the Section 7 applications was unsustainable. The applications ought to have been admitted, and the appeals succeeded.

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