Section 7 insolvency admission cannot be denied despite default, parallel recovery proceedings, or unproved mala fides.

Once financial debt and default were admitted, CIRP could not be refused on a broad reading of Vidarbha Industries or on the corporate debtor's asserted going-concern status; the NCLAT treated discretion under Section 7 as narrowly confined and held that admission was warranted. Pendency of SARFAESI and DRT recovery actions did not bar the insolvency petition, and unproven allegations of mala fides or recovery-driven motive did not attract Section 65. A third party lacked locus to oppose admission, and the objection based on absence of a provisional NOC failed because the restructuring had already been validly revoked after breach of the repayment schedule.

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Issues: (i) Whether a Section 7 application could be rejected despite the admitted existence of financial debt and default on the strength of Vidarbha Industries and the corporate debtor being a going concern; (ii) whether pendency of SARFAESI and DRT proceedings, and allegations of recovery-driven motive or mala fides, barred admission under the Insolvency and Bankruptcy Code, 2016; (iii) whether the intervention application and objections based on the lack of provisional NOC had any bearing on admission of CIRP.

Issue (i): Whether a Section 7 application could be rejected despite the admitted existence of financial debt and default on the strength of Vidarbha Industries and the corporate debtor being a going concern.

Analysis: The admitted facts showed sanction of financial facilities, continuous default, classification of the account as NPA, assignment of debt, and repeated failure to cure default even after restructuring. The legal position applied was that, once debt and default are established, the Adjudicating Authority is ordinarily required to admit the application, and Vidarbha Industries was confined to its peculiar facts. The subsequent Supreme Court authorities were treated as reaffirming that discretion under Section 7 is narrowly confined and does not permit refusal of admission merely because the corporate debtor asserts viability or that CIRP may affect stakeholders.

Conclusion: The rejection of admission on the basis of Vidarbha Industries and the corporate debtor's alleged going-concern status was unsustainable. CIRP ought to be admitted.

Issue (ii): Whether pendency of SARFAESI and DRT proceedings, and allegations of recovery-driven motive or mala fides, barred admission under the Insolvency and Bankruptcy Code, 2016.

Analysis: The proceedings under SARFAESI and before the DRT were held to be independent recovery actions and not a legal embargo on invoking Section 7. The existence of parallel remedies did not negate the creditor's right to seek insolvency resolution. The materials relied upon to allege mala fides did not establish any fraudulent or malicious intent of the kind that would attract Section 65. The creditor's efforts to recover dues through available legal remedies were not treated as forum shopping or abuse of process.

Conclusion: Pendency of recovery proceedings did not bar the Section 7 petition, and the allegation of mala fide or misuse of process was rejected.

Issue (iii): Whether the intervention application and objections based on the lack of provisional NOC had any bearing on admission of CIRP.

Analysis: The intervenor was found to be a third party with no locus to oppose admission at the Section 7 stage. The objection that the creditor failed to issue a provisional NOC was rejected because the restructuring had already been validly revoked after breach of the agreed repayment schedule, and there was no continuing obligation to revive the arrangement or issue NOC contrary to the contractual terms. These objections did not affect the statutory test of debt and default.

Conclusion: The intervention application lacked locus standi, and the NOC-based objection did not justify refusal of CIRP.

Final Conclusion: The impugned order was set aside, and the Section 7 petition was directed to be admitted, as the existence of debt and default stood established and no legally sustainable ground remained to refuse CIRP.

Ratio Decidendi: Under Section 7 of the Insolvency and Bankruptcy Code, 2016, once financial debt and default are established, admission of CIRP cannot be refused on speculative considerations of viability, parallel recovery proceedings, or unproved allegations of mala fide, except where a legally cognisable ground justifying non-admission is shown.

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