Section 7 insolvency admission turns on financial debt and default; extraneous viability factors and society intervention cannot defeat the statutory scheme.

In Section 7 insolvency proceedings, admission depends on proof of financial debt and default, and the adjudicatory forum should not consider commercial viability, project completion, anticipated receivables, or stakeholder hardship once those ingredients are established. The narrow Vidarbha Industries exception does not displace that rule where default is admitted, and parallel SARFAESI or DRT proceedings do not bar CIRP absent specific proof of abuse of process. A housing society or homebuyers' association has no independent locus to intervene in pre-admission Section 7 proceedings unless the Code confers such participation; Rule 11 of the NCLAT Rules cannot create that substantive right. The CIRP admission and refusal of intervention were therefore upheld.

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Issues: (i) Whether the Corporate Debtor was rightly admitted into the corporate insolvency resolution process on proof of financial debt and default; and (ii) whether the housing society had locus standi to intervene in the Section 7 proceedings before the appellate forum.

Issue (i): Whether the Corporate Debtor was rightly admitted into the corporate insolvency resolution process on proof of financial debt and default.

Analysis: Admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 is controlled by the existence of a financial debt and the occurrence of default. Once those ingredients are established, the adjudicatory forum is not to weigh commercial viability, project completion, anticipated receivables, or alleged hardship to stakeholders at the admission stage. The narrow exception recognised in Vidarbha Industries does not displace the general rule and cannot be used to refuse admission where default is admitted and no legally sustainable ground is shown to negate it. Parallel recovery proceedings under SARFAESI or before the DRT do not bar initiation of CIRP, and allegations of coercive or mala fide invocation require specific pleading and proof of abuse of process.

Conclusion: The Corporate Debtor was rightly admitted into CIRP; the challenge to admission fails and is against the appellant.

Issue (ii): Whether the housing society had locus standi to intervene in the Section 7 proceedings before the appellate forum.

Analysis: A society or association of homebuyers is not, by that status alone, a financial creditor or an operational creditor under the Code. The right to participate in insolvency proceedings is statutory, and pre-admission proceedings under Section 7 remain essentially confined to the applicant creditor and the corporate debtor. Collective participation of allottees is channelled through the statutory framework after admission, including representation in the committee of creditors through the authorised representative mechanism. Rule 11 of the NCLAT Rules, 2016 cannot be used to create a substantive right of audience contrary to the Code. In the absence of demonstrated statutory standing or a legally cognizable right to intervene, no prejudice or violation of natural justice is made out.

Conclusion: The society had no locus standi to intervene, and rejection of its intervention application is upheld.

Final Conclusion: The admitted debt and default justified CIRP, and the proposed intervention by the society could not override the statutory scheme governing participation in insolvency proceedings.

Ratio Decidendi: In a Section 7 proceeding, once financial debt and default are established, admission follows and extraneous considerations of viability or alleged creditor motive cannot defeat the petition, while a society of allottees has no independent locus to intervene unless the Code confers such participation.

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