The NCLAT upheld the admission of the Section 7 application ...

NCLAT Confirms Section 7 Application Validity, Initiates Insolvency Process for Defaulting Corporate Debtor.

September 30, 2024

Case Laws     IBC     AT

The NCLAT upheld the admission of the Section 7 application filed by the Financial Creditor (Respondent No.1) for initiating CIRP against the Corporate Debtor. It held that the Financial Creditor had a financial debt which had become due and payable, and there was an incidence of default. The application was filed within the time limitation as the Corporate Debtor had acknowledged the outstanding debt. The Corporate Debtor was given an opportunity to regularize its loan account but failed to pay the required amount. The declaration of the account as NPA under SARFAESI Act did not obstruct the Financial Creditor from initiating CIRP. The loan disbursement by the Financial Creditor was interest-bearing, satisfying the definition of financial debt u/s 5(8) of the IBC. The acknowledgment of debt and default was clear and unambiguous. As a debt was due and payable by the Corporate Debtor, and a default had occurred, the Financial Creditor was entitled to file the Section 7 application, which was rightly admitted by the Adjudicating Authority.

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