Section 7 insolvency admission turns on debt and default, not collateral contractual disputes or the cause of default.

In Section 7 insolvency proceedings, the adjudicating authority confined its inquiry to whether a financial debt existed and whether default had occurred. The record of restructuring, overdue interest, recall of the facility, NPA classification, information utility entries, balance sheets, auditor's reports and account statements established continuing default, so admission was justified. Allegations that default was contrived by conduct of a third party, including escrow and concession-related disputes, could not displace the statutory finding of default, because the cause of default is not examined at this stage. Termination of the concession agreement and any contingent termination payment did not extinguish the borrower's liability to the lender or bar insolvency admission.

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Issues: (i) whether debt and default existed so as to justify admission of the Section 7 application; (ii) whether the plea of contrived default arising from NHAI's conduct in relation to the escrow account and suspension of the concession could defeat insolvency admission; (iii) whether termination of the concession agreement altered the corporate debtor's liability in the insolvency proceedings; and (iv) whether the adjudicating authority was required to investigate inter se contractual disputes before admitting the petition.

Issue (i): whether debt and default existed so as to justify admission of the Section 7 application

Analysis: The record showed repeated restructuring, persistent overdue interest, recall of the facility, classification of the account as NPA, authenticated information utility entries, balance sheets, auditor's reports, and account statements evidencing non-payment. The governing scheme of Section 7 permits the adjudicating authority to ascertain default from the information utility or other evidence, and once satisfied that default has occurred, admission follows. The existence of debt was not in dispute, and the material on record established continuing default by the corporate debtor.

Conclusion: The existence of debt and default was established, and admission of the Section 7 application was justified.

Issue (ii): whether the plea of contrived default arising from NHAI's conduct in relation to the escrow account and suspension of the concession could defeat insolvency admission

Analysis: The alleged inducement or causation of default by NHAI, including disputes over suspension, escrow control, deferred premium, extension of time, and project completion, was held to be outside the limited inquiry in Section 7 proceedings. The adjudicating authority is concerned with the existence of default, not with probing why the default occurred. The court also found that the financial creditor could not be held responsible for NHAI's alleged breaches or for disputes under the concession agreement, which were contractual matters to be pursued separately.

Conclusion: The plea of contrived default was rejected and did not displace the finding of default.

Issue (iii): whether termination of the concession agreement altered the corporate debtor's liability in the insolvency proceedings

Analysis: The termination notice and claimed termination payment arose from the concession arrangement between the corporate debtor and NHAI, whereas the financial creditor's claim arose under the loan agreement. The asserted termination payment was contingent, disputed by NHAI, and dependent on separate proceedings. Such contingent or disputed contractual claims could not override an established financial default owed to the lender or bar admission under Section 7.

Conclusion: Termination of the concession agreement did not extinguish the corporate debtor's liability to the financial creditor or bar insolvency proceedings.

Issue (iv): whether the adjudicating authority was required to investigate inter se contractual disputes before admitting the petition

Analysis: The statutory framework and binding precedent confine Section 7 inquiry to whether a financial debt exists and whether default has occurred. The adjudicating authority is not a forum for adjudicating the merits of disputes between the corporate debtor and third parties, including arbitration-bound disputes under the concession agreement. The court reiterated that it could not sit in equity or examine the causation of default once the statutory ingredients were satisfied.

Conclusion: The adjudicating authority was not required to investigate the contractual disputes before admitting the petition.

Final Conclusion: The insolvency admission was upheld, the corporate insolvency resolution process was allowed to continue, and the appeal failed.

Ratio Decidendi: In Section 7 proceedings, the adjudicating authority must confine itself to whether a financial debt is due and default has occurred; it cannot refuse admission by enquiring into the cause of default or by resolving collateral contractual disputes, and a disputed or contingent claim against a third party does not negate the debtor's liability to the financial creditor.

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