Section 7 insolvency remedy for a consortium lender remains independent where default and completeness are established.
A financial creditor in a consortium may independently invoke section 7 of the Insolvency and Bankruptcy Code, and an inter-se lending arrangement cannot override that statutory right because section 238 gives the Code overriding effect. The application was treated as complete once the required particulars, consent, and disclosures of the proposed interim resolution professional were furnished, and the Tribunal declined to test extraneous selection criteria at admission. On the record of loan sanction, disbursement, security creation, account statements, and persistent non-payment, default was established; pending SARFAESI or DRT proceedings did not bar admission. The application was admitted, the interim resolution professional appointed, and moratorium commenced.
Issues: (i) whether a financial creditor in a consortium arrangement could independently file an application under section 7 of the Insolvency and Bankruptcy Code, 2016; (ii) whether the application was complete and the proposed interim resolution professional was for appointment; and (iii) whether the existence of financial debt and default were established so as to admit the application and impose moratorium.
Issue (i): whether a financial creditor in a consortium arrangement could independently file an application under section 7 of the Insolvency and Bankruptcy Code, 2016.
Analysis: Section 7 permits a financial creditor to initiate corporate insolvency resolution process either by itself or jointly with other financial creditors. The inter-se arrangement among lenders cannot curtail the statutory right conferred by the Code, and the debtor cannot rely on such arrangement to defeat the application. The overriding effect of section 238 of the Code also prevails over any inconsistent contractual arrangement.
Conclusion: The objection was rejected, and the application by the individual financial creditor was held maintainable.
Issue (ii): whether the application was complete and the proposed interim resolution professional was for appointment.
Analysis: The defect in the form concerning the proposed professional's consent and disclosures was cured. The application contained the required particulars, and the proposed professional furnished the necessary declaration that no disciplinary proceeding was pending. The Tribunal found no legal basis to examine extraneous selection criteria at the admission stage.
Conclusion: The application was treated as complete and the proposed interim resolution professional was found eligible for appointment.
Issue (iii): whether the existence of financial debt and default were established so as to admit the application and impose moratorium.
Analysis: The record showed sanction and disbursement of loan facilities, execution of loan documents, creation of charge, certified statements of account, and persistent non-payment. The Tribunal held that at the admission stage it is required only to ascertain default, not adjudicate the precise quantum of debt. Pendency of SARFAESI and DRT proceedings was held not to bar proceedings under the Code. Once default, completeness, and absence of disciplinary proceedings were satisfied, admission followed as a statutory consequence.
Conclusion: Default was established, the application was admitted, an interim resolution professional was appointed, and moratorium was ordered.
Final Conclusion: The application under section 7 was admitted, corporate insolvency resolution process commenced against the corporate debtor, and the statutory moratorium and ancillary insolvency directions became operative.
Ratio Decidendi: A financial creditor may independently invoke section 7 of the Insolvency and Bankruptcy Code, 2016 notwithstanding a consortium arrangement, and upon proof of default, completeness of the application, and absence of disciplinary proceedings against the proposed resolution professional, admission of the application must follow as a statutory mandate.