Section 7 insolvency admission turns on debt and default; RBI guideline disputes and parallel recovery proceedings do not bar it.

In a section 7 insolvency application, the inquiry is confined to the existence of financial debt and default, and admission follows once those elements are established and the application is otherwise complete. Alleged breaches of RBI lending or priority sector guidelines were held irrelevant to admission under section 7. The date of default was found to be 31 December 2013, supported by the supplementary affidavit and repeated acknowledgments in the corporate debtor's balance-sheets. Pendency of recovery proceedings before the Debt Recovery Tribunal did not bar initiation of insolvency proceedings. The challenge to admission therefore failed and the insolvency admission was upheld.

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Issues: Whether the admission of the section 7 application initiating the corporate insolvency resolution process was liable to be set aside on the grounds that the bank allegedly breached RBI priority sector guidelines, the date of default was not established, and a pending recovery proceeding before the Debt Recovery Tribunal barred admission.

Analysis: The appellate tribunal held that, for a section 7 application, the adjudicating authority is concerned with the existence of debt and default, and once those elements are shown, the application is to be admitted if otherwise complete and unencumbered by disciplinary issues against the proposed resolution professional. Alleged violations of RBI lending guidelines were held to be outside the scope of scrutiny under section 7 and could not defeat insolvency admission. The date of default was found to be 31.12.2013, with the account classified as NPA on 31.03.2014, and this was supported by the supplementary affidavit and repeated acknowledgments in the corporate debtor's balance-sheets. The pendency of proceedings before the Debt Recovery Tribunal was held not to preclude initiation of insolvency proceedings.

Conclusion: The challenge to the admission order failed; the section 7 admission was upheld.

Final Conclusion: The appeal did not disclose any error in the impugned order and was dismissed, leaving the insolvency admission undisturbed.

Ratio Decidendi: In a section 7 insolvency proceeding, the adjudicating authority's inquiry is confined to whether a financial debt and default exist, and collateral disputes such as alleged banking irregularities or parallel recovery proceedings do not negate admission once default is established.

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