Debt, default and CoC commercial wisdom upheld in insolvency admission and resolution plan scrutiny.

Debt and default remained established for section 7 admission where credit facilities were availed, security documents were executed, dues persisted, and the liability exceeded the statutory threshold. Classification of the account as NPA under the RBI prudential framework, and later permission to continue limited operations, did not erase the underlying default or defeat insolvency admission. For resolution plan approval, scrutiny remained limited to compliance with the Code, and the Committee of Creditors' commercial wisdom was not to be interfered with absent legal infirmity. The additional amount towards accrued interest was treated as part of the resolution design, so the plan was sustained.

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Issues: (i) Whether the admission of the section 7 insolvency application was unsustainable for want of debt and default, including the effect of NPA classification and continued holding-on-operations of the account; (ii) Whether the approval of the resolution plan could be interfered with on the ground that it provided an additional amount of Rs. 1 crore towards accrued interest over and above the admitted claim of the secured financial creditor.

Issue (i): Whether the admission of the section 7 insolvency application was unsustainable for want of debt and default, including the effect of NPA classification and continued holding-on-operations of the account.

Analysis: The record showed availing of credit facilities, execution of security documents, persistent dues, and an outstanding liability well above the statutory threshold. The account had been classified as NPA in accordance with the applicable RBI prudential framework, and subsequent permission to continue operations on a reduced basis did not erase the underlying liability or default. The challenge to interest computation was found unpersuasive, and the Tribunal accepted that the Adjudicating Authority had correctly appreciated the existence of debt and default.

Conclusion: The admission of the section 7 application was upheld and the challenge to CIRP admission failed.

Issue (ii): Whether the approval of the resolution plan could be interfered with on the ground that it provided an additional amount of Rs. 1 crore towards accrued interest over and above the admitted claim of the secured financial creditor.

Analysis: The Tribunal reiterated that scrutiny over a resolution plan is confined to compliance with the Code and that the commercial wisdom of the Committee of Creditors is ordinarily non-justiciable. The plan had been approved unanimously by the CoC, treated the secured financial creditor as fully paid, and also made provisions for other stakeholders. On that basis, the additional amount towards accrued interest was held to be part of the resolution design and not a legal infirmity warranting interference.

Conclusion: The approval of the resolution plan was sustained and the challenge to the additional payment component was rejected.

Final Conclusion: Both appeals were found to be without merit, and the impugned orders admitting insolvency and approving the resolution plan were affirmed.

Ratio Decidendi: Once debt and default are established above the statutory threshold, subsequent account-management measures do not negate insolvency admission, and a resolution plan approved within the CoC's commercial wisdom will not be interfered with unless it violates the Code.

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