Section 7 insolvency admission upheld where default fell outside Section 10A and parallel SARFAESI action did not bar CIRP

A Section 7 insolvency application was maintainable because the operative default date was 31.05.2021, placing the financial debt outside Section 10A suspension; the default was treated as continuing and limitation was not defeated. Pendency of SARFAESI measures, the auction sale, and a later writ or settlement proposal did not displace the established debt and default or prevent admission into CIRP. The Tribunal also treated non-disclosure of material facts as adverse to the appellant. The order admitting the corporate debtor into CIRP was sustained and the appeal failed.

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Issues: (i) Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by Section 10A of the Code on the basis of the asserted date of default. (ii) Whether the pendency of SARFAESI proceedings, the auction sale, and the alleged concealment of material facts warranted interference with the order admitting the corporate debtor into CIRP.

Issue (i): Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was barred by Section 10A of the Code on the basis of the asserted date of default.

Analysis: The operative date of default was found to be 31.05.2021 as reflected in the creditor's record and the demand notice, and the debt was treated as an existing and quantified financial debt exceeding the statutory threshold. On that basis, the commencement of CIRP was held to fall outside the suspension under Section 10A, which applies only to defaults arising on or after 25.03.2020 within the protected period contemplated by the provision. The Tribunal also treated the default as continuing and held that limitation was not defeated.

Conclusion: The Section 7 application was held to be maintainable and not barred by Section 10A.

Issue (ii): Whether the pendency of SARFAESI proceedings, the auction sale, and the alleged concealment of material facts warranted interference with the order admitting the corporate debtor into CIRP.

Analysis: The Tribunal held that the SARFAESI measures and the writ proceedings did not nullify the creditor's right to pursue insolvency action where debt and default were established. The subsequent settlement proposal was treated as an admission bearing on liability, and the non-disclosure of material facts was considered significant against the appellant. The fact that the auction sale had already been conducted and sale certificate issued did not displace the findings supporting admission under Section 7.

Conclusion: No ground was found to interfere with the admission of the corporate debtor into CIRP.

Final Conclusion: The appeal failed, and the order admitting the corporate debtor to CIRP was sustained.

Ratio Decidendi: Where a financial debt and default are established outside the Section 10A suspension period, pendency of parallel SARFAESI action or a later settlement proposal does not, by itself, defeat admission of a Section 7 insolvency application.

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