Section 7 insolvency admission upheld where financial debt and default were shown despite a recovery injunction and quantum dispute.

Section 7 insolvency admission depends on proof of a financial debt and default, not on a full adjudication of the underlying money dispute. The text states that the corporate debtor had availed financial facilities, the account was treated as non-performing, and later debt recovery proceedings fixed an amount payable; the operative appellate quantification left an unpaid sum above the statutory threshold. A dispute over the exact quantum did not negate debt or default. An interim High Court injunction against coercive recovery did not bar initiation of CIRP or prevent the adjudicating authority from proceeding under the IBC, because insolvency resolution is distinct from recovery litigation. The Section 7 application was therefore maintainable and the admission order was upheld.

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Issues: Whether the Section 7 application was rightly admitted on the basis that a financial debt and default were established, and whether the pendency of writ proceedings and an interim injunction against coercive recovery barred initiation of corporate insolvency resolution process.

Analysis: The materials showed that the corporate debtor had availed financial facilities from the bank, the account had been classified as non-performing, and subsequent adjudication before the debt recovery fora had fixed an amount payable by the corporate debtor. The later appellate determination was treated as the operative quantification, and the unpaid amount remained above the statutory threshold. A mere dispute about the exact quantum did not negate the existence of a financial debt or default for the purposes of Section 7. The interim order of the High Court restrained coercive steps, but it did not operate as a stay of the debt recovery appellate determination or as a bar on the adjudicating authority proceeding under the Insolvency and Bankruptcy Code. The Code was applied on the basis that insolvency resolution is distinct from recovery litigation, and that the adjudicating authority is concerned with the existence of debt and default, not with a full money adjudication.

Conclusion: The Section 7 application was maintainable and the admission order was upheld; the challenge by the corporate debtor failed.

Ratio Decidendi: For admission under Section 7 of the Insolvency and Bankruptcy Code, the adjudicating authority must be satisfied that a financial debt is due and that default has occurred, and an interim injunction against coercive recovery does not by itself bar insolvency proceedings where the debt remains unpaid and above the threshold.

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