Section 7 insolvency admission sustained where debt and default were shown, and contingent OTS proposals created no enforceable right.

Repeated acknowledgments of borrowing, restructuring steps, recall notices and default authentication were treated as sufficient to establish financial debt and default for admission of the Section 7 insolvency application, without requiring determination of the exact default quantum at that stage. The corporate debtor's objections based on an unapproved OTS, allegations of malicious initiation, and later settlement offers were rejected because the OTS was contingent on unanimous lender approval and never became a binding settlement, while later attempts to settle did not erase the admitted default. Once the CoC was constituted, any fresh settlement had to proceed through the statutory withdrawal route under Section 12A.

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Issues: (i) Whether the financial debt and default were established so as to justify admission of the Section 7 insolvency application; (ii) Whether the corporate debtor's challenge based on the OTS process, alleged malicious initiation under Section 65, and the later settlement offers warranted interference with the admitted insolvency proceedings.

Issue (i): Whether the financial debt and default were established so as to justify admission of the Section 7 insolvency application.

Analysis: The record showed repeated acknowledgments of borrowing, restructuring, recall notices, authentication of default, and multiple settlement proposals by the corporate debtor. The admitted disbursement and continued non-payment demonstrated a subsisting financial debt and default. The adjudicating authority was not required to determine the exact quantum of default for admission once the threshold default was shown and the application was otherwise complete.

Conclusion: The issue was decided against the appellant and in favour of admission of the insolvency application.

Issue (ii): Whether the corporate debtor's challenge based on the OTS process, alleged malicious initiation under Section 65, and the later settlement offers warranted interference with the admitted insolvency proceedings.

Analysis: The OTS proposal remained contingent on approval by all consortium lenders and never matured into a binding settlement. The lenders were entitled to annul the process when unanimous consent was not obtained, and the corporate debtor had no vested right to insist on acceptance of the proposal. The allegations of malicious initiation were rejected because the Section 7 application was founded on debt and default, not on a collateral purpose. The later attempts to settle, including those made after the matter had been reserved and after assignment of debt, did not undo the admitted default or render the proceedings non-maintainable. The appropriate route for any fresh settlement, once the CoC stood constituted, was under Section 12A.

Conclusion: The issue was decided against the appellant and in favour of upholding the impugned orders.

Final Conclusion: The insolvency admission and the rejection of the connected applications were sustained, while liberty was left open to pursue settlement through the statutory withdrawal mechanism.

Ratio Decidendi: A contingent OTS that has not received the requisite approvals from all required lenders does not create an enforceable right in favour of the borrower, and once debt and default are established, later settlement attempts do not by themselves defeat admission of a Section 7 proceeding or convert it into a malicious initiation.

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