Valid service and revived loan liability supported section 7 insolvency admission after withdrawal of a conditional settlement.

Service of a section 7 petition at the corporate debtor's MCA-registered email address, with attempts at service on the registered office and publication, was treated as valid service; the natural justice challenge therefore failed. A section 7 petition remained maintainable because default on outstanding interest can also constitute default if the admitted liability exceeds the statutory threshold. Breach and withdrawal of a conditional one-time settlement revived the original loan liability, and post-withdrawal payments were to be adjusted against that revived debt. On these grounds, the insolvency admission was sustained and the appeal found unmeritorious.

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Issues: (i) whether service of the section 7 petition on the corporate debtor through its MCA-registered email address and attempted service at the registered office constituted valid service and justified ex parte proceedings; (ii) whether a section 7 petition was maintainable where the appellant contended that only interest remained outstanding after payments under the settlement arrangement; (iii) whether breach and withdrawal of the conditional one-time settlement revived the original loan liability and enabled admission of the section 7 petition.

Issue (i): whether service of the section 7 petition on the corporate debtor through its MCA-registered email address and attempted service at the registered office constituted valid service and justified ex parte proceedings.

Analysis: Service of the petition was effected at the email address reflected in the MCA records, and attempts were also made at the registered office. The applicable tribunal rules and the Companies Act regime recognise service at the registered email address maintained in the statutory records as valid and sufficient service. Where the company fails to keep a functional registered office or update its records, it cannot successfully challenge service on the ground of lack of notice. The record also showed further steps by publication before the matter was set ex parte.

Conclusion: Valid service was established, and the challenge based on denial of natural justice failed.

Issue (ii): whether a section 7 petition was maintainable where the appellant contended that only interest remained outstanding after payments under the settlement arrangement.

Analysis: Admission under section 7 depends on existence of debt and default above the statutory threshold. A default in payment of interest is also capable of constituting default for the purposes of the Code if the outstanding amount crosses the threshold. The material on record, including the ledger and other financial documents, showed an admitted outstanding liability exceeding the threshold.

Conclusion: The petition remained maintainable notwithstanding the appellant's plea that the balance related only to interest.

Issue (iii): whether breach and withdrawal of the conditional one-time settlement revived the original loan liability and enabled admission of the section 7 petition.

Analysis: The settlement was conditional, and the terms provided for withdrawal on default. Once the settlement was withdrawn, the debtor could not insist on its continuation or limit liability only to the balance claimed under the settlement. The original dues under the loan arrangement stood revived, and post-withdrawal payments were to be adjusted against the revived liability.

Conclusion: The withdrawal of the settlement revived the original debt, supporting admission of the insolvency application.

Final Conclusion: The appeal was held to be without merit, and the admission of the corporate debtor into CIRP was sustained.

Ratio Decidendi: Service of a section 7 petition at the corporate debtor's MCA-registered email address is valid service, and upon breach and withdrawal of a conditional one-time settlement, the original financial debt revives for the purpose of establishing default under the Insolvency and Bankruptcy Code, 2016.

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