Insolvency admission is mandatory upon proof of debt and default regardless of a corporate debtor’s alleged viability.

The Appellant, an ex-director of Frost International Ltd. (Corporate Debtor/CD), challenged the NCLT Mumbai’s order dated 09.02.2023, which admitted a Section 7 IBC application filed by Bank of India (Respondent No. 1).

The CD defaulted on credit facilities totaling approximately ₹756.75 crores.

The account was classified as NPA on 30.06.2018.

A prior Section 7 petition (2018) had been dismissed following the Supreme Court’s quashing of the RBI’s February 2018 Circular in *Dharani Sugars*.

The Respondent filed a fresh petition in 2022 claiming a default of ₹872.58 crores.

During the pendency of this appeal, the Committee of Creditors (CoC) approved a Resolution Plan with a 69.26% majority and rejected the Appellant's Section 12A withdrawal proposal.

Whether the debt and default were sufficiently established to warrant admission under Section 7 of the IBC.

Whether the Adjudicating Authority erred in not exercising discretion to reject admission based on the CD's alleged financial viability and the ratio in *Vidarbha Industries*.

Whether the second Section 7 petition was barred by the principle of *res judicata* following the dismissal of the first petition.

Whether the initiation of CIRP was vitiated by a violation of the RBI Prudential Framework dated 07.06.2019.

The court primarily applied Section 7 of the Insolvency and Bankruptcy Code, 2016, which mandates the admission of an insolvency plea upon satisfaction of the existence of a "debt" and "default".

It relied on *Innoventive Industries Ltd. v. ICICI Bank*, establishing that the NCLT's role is limited to verifying default.

The court further applied the clarification from *M. Suresh Kumar Reddy v. Canara Bank*, which restricted the discretionary scope of *Vidarbha Industries Power Ltd. v. Axis Bank Ltd.* to its specific facts, reaffirming that insolvency should not be stalled if default is proven.

Regarding *res judicata*, the court held that a petition dismissed on technical grounds (e.g., quashing of a circular) does not bar a fresh filing on merits.

The Appellate Tribunal found that the Appellant admitted the debt and default through revival letters, balance sheets, and OTS proposals.

It rejected the "viability" argument based on *Vidarbha Industries*, noting that the Appellant failed to provide concrete financial evidence of unencumbered assets sufficient to clear the ₹872 crore debt; hence, the NCLT was not required to look beyond the fact of default.

The Tribunal dismissed the *res judicata* plea because the first petition was dismissed due to the *Dharani Sugars* verdict rendering the underlying RBI circular *ultra vires*, not on the merits of the debt itself.

Regarding the 2019 RBI Circular, the Tribunal held that lenders have the commercial discretion to initiate legal proceedings for recovery rather than restructuring, and the NCLT cannot interfere with such commercial decisions.

Finally, it noted that the CIRP had reached an advanced stage with a CoC-approved Resolution Plan.

It affirmed that the *Vidarbha* ratio did not apply as the CD's viability was "highly dubious".

The second Section 7 application was held maintainable and not barred by *res judicata*.

Consequently, the Tribunal upheld the Impugned Order dated 09.02.2023, dismissed the appeal, and allowed the CIRP to proceed toward the approval of the Resolution Plan.