Section 7 CIRP admission follows established debt and default unless a realisable adjudicated claim justifies refusal.

Section 7 insolvency proceedings remain valid where they were initiated independently of an invalidated RBI circular, including where the financial creditor had recalled the loan and commenced recovery action before the circular. The article states that admission to CIRP ordinarily follows once financial debt and default are established. The narrow Vidharbha exception applies only where an adjudicated and realisable claim exceeding the debt owed justifies withholding admission; alleged government dues without that character do not suffice. In the absence of an approved settlement proposal, CIRP admission was upheld, while the Resolution Professional was directed to consider farmers' claims in accordance with law.

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Issues: (i) Whether the insolvency proceedings initiated under Section 7 of the Insolvency and Bankruptcy Code, 2016 were rendered non-est by the invalidated RBI circular dated 12.02.2018. (ii) Whether the existence of alleged dues from the Uttar Pradesh Government and the principle in Vidharbha Industries Power Ltd. justified refusal to admit the Corporate Debtor into CIRP despite established debt and default.

Issue (i): Whether the insolvency proceedings initiated under Section 7 of the Insolvency and Bankruptcy Code, 2016 were rendered non-est by the invalidated RBI circular dated 12.02.2018.

Analysis: Proceedings initiated solely because of the RBI circular dated 12.02.2018 would be non-est in view of its invalidation. However, the financial creditor had recalled the loan, issued a legal notice and commenced recovery proceedings before the circular was issued. The Section 7 application was not based on the circular, the debt was below the circular's specified threshold, and no approved restructuring or one-time settlement existed. The insolvency proceedings were therefore independent of the circular.

Conclusion: The proceedings under Section 7 were not rendered non-est and the challenge based on the RBI circular fails.

Issue (ii): Whether the existence of alleged dues from the Uttar Pradesh Government and the principle in Vidharbha Industries Power Ltd. justified refusal to admit the Corporate Debtor into CIRP despite established debt and default.

Analysis: The alleged governmental dues did not constitute an adjudicated and realisable claim exceeding the debt owed. The exception recognised in Vidharbha Industries Power Ltd. is narrow and does not dilute the rule that admission under Section 7 follows once debt and default are established. In the absence of an approved settlement proposal, the Adjudicating Authority was justified in admitting the Corporate Debtor into CIRP.

Conclusion: The existence of alleged governmental dues did not justify refusal of admission, and the admission of the Corporate Debtor into CIRP was upheld.

Final Conclusion: The challenge to the CIRP admission failed, while the connected farmers' appeal was disposed of with the Resolution Professional directed to consider the farmers' claims in accordance with law.

Ratio Decidendi: Once debt and default are established, admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 is mandatory unless the narrow exception based on an adjudicated and realisable claim exceeding the debt owed is satisfied; proceedings are not rendered non-est where they were initiated independently of an invalidated regulatory circular.

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