Limitation exclusion and proof of financial debt justified admission of the section 7 insolvency petition.

Limitation for a section 7 insolvency application was computed from the date of default after excluding periods covered by the original lender's insolvency process under section 60(6), the Supreme Court's COVID-19 limitation extension, and a prior insolvency process involving the corporate debtor; the application was therefore within time. The record also showed financial debt, repeated default, and an amount above the statutory threshold, satisfying the requirement that the adjudicating authority verify debt and default in a complete section 7 petition. On that basis, the petition was admitted, corporate insolvency resolution process was initiated, and moratorium consequences followed.

---

---

Issues: (i) Whether the section 7 application was barred by limitation. (ii) Whether the financial debt and default were established so as to warrant admission of the petition and initiation of corporate insolvency resolution process.

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

Analysis: The limitation period was reckoned from the date of default, but the period during which the original lender was under corporate insolvency resolution process was excluded under section 60(6) of the Insolvency and Bankruptcy Code, 2016. The period covered by the Supreme Court's general extension of limitation during the COVID-19 era was also applied. In addition, the period during which the corporate debtor itself was under a prior corporate insolvency resolution process was excluded, with the result that the application filed on 23.09.2024 fell within the available limitation window.

Conclusion: The application was not barred by limitation.

Issue (ii): Whether the financial debt and default were established so as to warrant admission of the petition and initiation of corporate insolvency resolution process.

Analysis: The record disclosed a financial debt advanced to the corporate debtor, repeated default in repayment, and a debt amount well above the statutory threshold. The legal position applied was that in a section 7 proceeding the adjudicating authority is required to verify the existence of financial debt and default, and once default is shown, admission follows if the application is otherwise complete. On that basis, the prerequisites for initiation of corporate insolvency resolution process were satisfied.

Conclusion: The financial debt and default were proved and the section 7 petition was liable to be admitted.

Final Conclusion: The corporate insolvency resolution process was ordered to commence against the corporate debtor and an interim resolution professional was appointed, with moratorium and related statutory consequences following admission.

Ratio Decidendi: In computing limitation for a section 7 application, periods covered by moratorium or other legally excluded intervals must be deducted, and where financial debt and default are established in a complete application, admission of the petition follows.

---