Section 7 (5) and 7 (6) of the Insolvency and Bankruptcy Code 2016 make it clear that for the purpose of admitting an application under Section 7 of the Code, ‘default’ has to be ascertained as on the date of the decision of the adjudicating authority and not at the time of filing of the application.

The said ratio was delivered by the National Company Law Appellate Tribunal in the matter of Core Hotels Ventures Private Limited and Anr. Vs. Bank of Baroda and Anr., Company Appeal (AT) (Insolvency) No. 84/2018 decided on 06.09.2018.

Challenge

In the present appeal, the issue before this Ld. Tribunal was that whether NCLT Hyderabad was justified in allowing the application of the Respondent under Section 7 of the Insolvency and Bankruptcy Code 2016 (hereinafter I&B Code 2016).

The plea taken by the Appellant herein is that a petition under Section 7 of the I&B Code cannot be admitted if there is no default on the date of decision regardless of whether there was default at the time of filing.

Held

The Ld. Appellate Authority after dismissing the said appeal on lack of evidence observed after placing a reliance upon Innoventive Industries Ltd. Vs. ICICI Bank and Anr. (2018) 1 SCC 407, that the object of I&B Code 2016 is not to send healthy companies into an ‘Corporate Insolvency Resolution Process”.

The Tribunal observed that if there is default as on the date of filing, the adjudicating authority still has to satisfy itself that there is a default on the date of admission/ rejection for the purpose of admitting the application under Section 7 of the I&B Code 2016.