Valid invocation of bank guarantees and failed settlement acknowledgment sustained insolvency admission under Section 7.

Invocation of bank guarantees before expiry, already accepted in an unchallenged DRT order, was treated as valid, and the corporate debtor's later one-time settlement amounted to acknowledgment of the liability. The subsequent failure to honour the settlement terms constituted default sufficient to sustain admission of the Section 7 insolvency application. The challenge to maintainability therefore failed, and the insolvency admission was upheld.

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Issues: Whether the Section 7 application was maintainable on account of an operational default arising from invocation of bank guarantees and subsequent non-payment after the corporate debtor entered into a one time settlement.

Analysis: The appeal challenged admission of the insolvency application on the footing that the bank guarantees were not validly invoked before expiry. The record showed that the beneficiary had invoked the guarantees before their expiry, the Debt Recovery Tribunal had already accepted that position in an unchallenged order, and the corporate debtor thereafter entered into a one time settlement, which amounted to an acknowledgment of the outstanding liability. The subsequent failure to honour the settlement terms established default for the purposes of insolvency proceedings.

Conclusion: The challenge to admission failed. The Section 7 application was rightly admitted and the appeal was dismissed.

Ratio Decidendi: Where the invocation of bank guarantees has already been upheld and the corporate debtor later acknowledges the liability through a settlement but fails to perform it, such conduct constitutes debt and default sufficient to sustain admission under Section 7 of the Insolvency and Bankruptcy Code, 2016.

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