Section 7 insolvency remains maintainable on default, despite recovery objections, settlement talks, or a dormant corporate debtor.

A Section 7 insolvency application remains maintainable once default is established, and it cannot be resisted merely by describing the proceeding as a debt recovery device. Settlement discussions do not, by themselves, bar admission of the application, especially after constitution of the Committee of Creditors, because any settlement then must be placed before that body in accordance with law. The alleged non-functioning of the corporate debtor is also insufficient to prevent commencement of resolution proceedings against a defaulting debtor. The admission challenge therefore failed, while the appellant was left free to pursue any lawful settlement before the creditor and the Committee of Creditors.

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Issues: Whether a Section 7 insolvency application could be interfered with on the ground that it was being used as a recovery mechanism, and whether an asserted willingness to settle or the alleged non-functioning of the corporate debtor barred continuation of the insolvency process.

Analysis: A financial creditor is entitled to invoke the insolvency framework when default is established, because the object of the Code is resolution of the corporate debtor and not mere debt recovery. The existence of settlement discussions does not, by itself, invalidate admission of the Section 7 application, particularly once the Committee of Creditors is constituted, since any settlement thereafter must be placed before it in accordance with law. The fact that the corporate debtor had not been functioning for some time was also held insufficient to prevent initiation of resolution proceedings for a defaulting debtor.

Conclusion: The challenge to the admission of the Section 7 application failed. The appeal was dismissed, while leaving it open to the appellant to pursue any lawful settlement before the creditor and the Committee of Creditors.

Final Conclusion: The order admitting insolvency proceedings was sustained, and the insolvency process was allowed to continue.

Ratio Decidendi: A Section 7 proceeding is maintainable on proof of default and cannot be defeated by characterising it as a mere recovery action or by relying on unapproved settlement proposals after constitution of the Committee of Creditors.

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