Mandatory Section 7 Admission Reaffirmed: NCLAT

The National Company Law Appellate Tribunal (NCLAT) in the case of Vikram Bhawanishankar Sharma v. Union Bank of India & Anr. (2025 SCC OnLine NCLAT 1460), dated September 11, 2025, reaffirmed that once debt and default are established, admission of an application under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, is mandatory and cannot be defeated by speculative or contingent recoveries.

The case arose out of the insolvency petition filed by the corporate creditor, Union Bank of India (UBI), as lead lender of a consortium, against the corporate debtor, Supreme Manor Wada Bhiwandi Infrastructure Pvt. Ltd., a special purpose vehicle promoted by Supreme Infrastructure India Ltd. The company was awarded a road project by the Government of Maharashtra on a Build-Operate-Transfer (BOT) basis and, to finance the project, availed substantial loan facilities under consortium arrangements. 

The account was declared non-performing on November 24, 2016, and the debt was acknowledged by the corporate debtor through a revival letter in January 2018 as well as in its financial statements. Upon failure to discharge its liabilities, the financial creditor recalled the facilities and sought initiation of corporate insolvency resolution proceedings (CIRP) before the National Company Law Tribunal (NCLT), which admitted the petition and appointed an Interim Resolution Professional (IRP). Aggrieved, the corporate debtor approached the NCLAT.

In appeal, the suspended director contended that under the concession agreement and substitution agreement executed with the Government of Maharashtra, the liability to make termination payments stood with the State upon termination of the concession, which occurred in 2019, and that arbitral proceedings had been initiated where claims exceeding ₹456 crore were pending. Reliance was placed on Vidarbha Industries Power Ltd. v. Axis Bank Ltd., [(2022) 8 SCC 352], dated July 12, 2022, to argue that, since substantial sums were recoverable from the Government and a settlement proposal of ₹174 crore had been made, the petition ought not to have been admitted. 

The financial creditor, however, stressed that the only inquiry under Section 7 of IBC is the existence of a financial debt and default, both of which stood proved beyond dispute. It was further argued that the alleged termination payments or arbitral recoveries could not alter the admitted liability of the debtor and that the Vidarbha (supra) ruling was distinguishable, as no adjudicated award existed in the present case.

The NCLAT accepted the reasoning of the NCLT and held that the disbursement of financial facilities and default in repayment were admitted by the corporate debtor and evidenced by contemporaneous documents. The contention that liability had shifted to the Government of Maharashtra was rejected, the Tribunal holding that contractual arrangements under the concession agreement did not extinguish the corporate debtor’s obligations to its lenders. Equally, the alleged settlement offer of ₹174 crore was found unsubstantiated and, even if assumed, grossly insufficient in light of the total outstanding debt of more than ₹824 crore, including ₹249 crore owed to the UBI. 

The Tribunal clarified that the Vidarbha (supra) decision was inapplicable as it was predicated on the existence of a crystallised award in favour of the debtor, whereas here the arbitral proceedings were still pending and incapable of displacing the requirement of admission once debt and default were shown. Consistent with Innoventive Industries Ltd. v. ICICI Bank and E.S. Krishnamurthy v. Bharath Hi-Tech (P) Ltd., (2018 1 SCC 407), dated December 14, 2021, the NCLAT reiterated that Section 7 confers no discretion upon the adjudicating authority to refuse admission where the jurisdictional facts of debt and default are proved.

In conclusion, this judgment reaffirmed the settled principle that insolvency proceedings under Section 7 of the IBC must be admitted once debt and default are established, irrespective of pending claims, proposed settlements, or anticipated recoveries.