01Facts
The Appellant, an ex-director of Frost International Ltd. ("Corporate Debtor"), challenged the NCLT Mumbai’s order dated 09.02.2023, which admitted a Section 7 IBC application filed by Bank of India ("Financial Creditor").
p. 2The Corporate Debtor had failed to repay credit facilities aggregating to ₹756.75 Crores, leading to its account being classified as a Non-Performing Asset (NPA) on 30.06.2018.
pp. 9-10A previous Section 7 petition (CP 3608/2018) had been dismissed following the Supreme Court’s quashing of the RBI Circular dated 12.02.2018 in *Dharani Sugars*.
p. 6The Financial Creditor subsequently filed a second petition (CP 973/2020) claiming a total default of ₹872,58,08,402.27.
p. 7During the pendency of this appeal, the Committee of Creditors (CoC) approved a Resolution Plan by Greensward Enterprise Pvt. Ltd. with a 69.26% majority and rejected the promoter’s Section 12A withdrawal proposal.
pp. 13-1402Issues
i.Whether the second Section 7 application was barred by the principle of *res judicata* due to the dismissal of the first petition.
p. 7, 27ii.Whether the Adjudicating Authority was bound to reject the application based on the "viability" of the Corporate Debtor as per the ratio in *Vidarbha Industries Power Ltd. v. Axis Bank Ltd.*
pp. 8, 17-18iii.Whether the initiation of CIRP was void due to alleged violations of the RBI Stressed Assets Framework dated 07.06.2019.
p. 8, 2603Law Applied
The Court applied Section 7 of the Insolvency and Bankruptcy Code, 2016, which mandates admission of an insolvency plea upon satisfaction of a debt and default.
p. 12, 16It relied on the landmark precedent in *Innoventive Industries Ltd. v. ICICI Bank*, establishing that the NCLT must only verify the existence of debt and default for Section 7 admission.
p. 12, 31Regarding judicial discretion, the Court followed *M. Suresh Kumar Reddy v. Canara Bank* and the recent *Power Trust v. Bhuvan Madan* (2026), which clarified that the discretionary "viability" rule in *Vidarbha Industries* is restricted to its specific facts and does not override the mandatory nature of Section 7.
pp. 30-35The principle of *res judicata* was found inapplicable where a previous dismissal was based on a technical/legal shift (quashing of a circular) rather than merits.
p. 2704Reasoning
The Tribunal found that the debt and default were undisputed and reflected in NeSL reports and balance sheets.
p. 10, 27It rejected the *res judicata* plea because the first dismissal was due to the *Dharani Sugars* judgment rendering the then-RBI circular *ultra vires*, meaning the merits of the default were never adjudicated.
p. 27On the issue of viability, the Tribunal noted that the Appellant failed to provide concrete financial evidence to prove that the Corporate Debtor’s assets could imminently cover its debts, distinguishing it from the exceptional facts in *Vidarbha*.
pp. 19-20The Tribunal further observed that the RBI Circular of 07.06.2019 provides lenders the flexibility to choose between restructuring or insolvency, and the NCLT cannot interfere with such commercial decisions.
pp. 26-27Finally, it noted that once the CoC approves a Resolution Plan, ex-promoters have no vested right to stall the process, especially given the statutory objective of timely resolution.
p. 15, 3605Holding
The Appellate Tribunal held that the admission of the Section 7 application was lawful as the Financial Creditor proved the existence of debt and default.
p. 31, 35The Court answered that *res judicata* did not apply as the prior dismissal was not on merits, and the "viability" argument was meritless as the Appellant could not establish the company's financial strength to pay overdues.
p. 20, 27The Appeal was dismissed, and all interim applications were closed.
p. 36Original Court PDF
Uday J. Desai v. Bank of India & Anr. Comp. App. (AT) (Ins) No. 187 of 2023
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