NCLAT Upholds Section 7 Application Against Corporate Guarantor; Insufficient Assets Not a Barrier to Insolvency Process.

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....The NCLAT upheld the admission of Section 7 application against the corporate debtor (corporate guarantor) despite the contention that its sole asset might be insufficient to resolve insolvency. The court ruled that initiation of CIRP is consequent to debt and default by the corporate debtor, which is evident. The corporate debtor's inability to pay debt cannot preclude insolvency proceedings on the ground of insufficient assets. These issues must be addressed during CIRP and cannot justify setting aside the admission order u/s 7, especially since insolvency proceedings have also commenced against the principal borrower. The appeal was dismissed as lacking merit.....