Section 7 insolvency claim upheld where settlement correspondence and creditor records proved financial debt, default, and limitation compliance.

A Section 7 insolvency application was found to be within limitation because the loan account was declared a non-performing asset on 01.06.2019 and the petition was filed on 27.10.2021, with revival letters and settlement correspondence supporting continuity of the claim. The corporate debtor's one-time settlement proposal and related correspondence were treated as an admission of liability, and the financial creditor's records were accepted as proof of financial debt and default. As the enquiry under Section 7 is confined to whether default has occurred, the insolvency application was held maintainable and the admission of CIRP was sustained.

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Issues: (i) Whether the Section 7 application was barred by limitation. (ii) Whether the financial creditor established the existence of a financial debt and default so as to justify admission of the insolvency petition.

Issue (i): Whether the Section 7 application was barred by limitation.

Analysis: The loan account was declared non-performing asset on 01.06.2019, and the Section 7 application was filed on 27.10.2021. On these facts, the claim was held to be within the limitation period. The earlier revival letters and the later settlement correspondence also supported the subsistence of the claim.

Conclusion: The limitation objection was rejected against the appellant.

Issue (ii): Whether the financial creditor established the existence of a financial debt and default so as to justify admission of the insolvency petition.

Analysis: The corporate debtor's own conduct, including the one time settlement proposal and related correspondence, was treated as an admission of liability. The account slipping into non-performing asset status, together with the documentary record placed by the financial creditor, was accepted as proof of financial debt and default. The scope of enquiry under Section 7 was confined to satisfaction about the occurrence of default, and once that was established the application was liable to be admitted.

Conclusion: The existence of financial debt and default was held proved, and admission of the insolvency application was upheld.

Final Conclusion: The appeal failed in its entirety, and the order admitting the corporate insolvency resolution process against the corporate debtor was sustained.

Ratio Decidendi: In a Section 7 proceeding, where the documentary record and the debtor's own settlement correspondence establish financial debt and default and the claim is within limitation, the adjudicating authority may admit the insolvency application.

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