Once Debt And Default Satisfied, Petition U/S 7 Of IBC Has To Be Admitted, Vidharbha Ruling Cannot Be Applied Mechanically: NCLAT

The NCLAT Delhi Bench ruled that a petition under Section 7 of the IBC must be admitted once debt and default are established, and the Vidarbha ruling cannot be applied mechanically. The case involved an appeal by Canara Bank against the NCLT Mumbai’s dismissal of its Section 7 application. The NCLT had dismissed the application, citing potential recovery from other proceedings. The NCLAT, led by Justices Rakesh Kumar Jain, Naresh Salecha, and Indevar Pandey, held that the existence of debt and default mandates the admission of the petition under Section 7. The tribunal emphasized that the Vidarbha ruling, which allows discretion in admitting Section 7 petitions, should not be applied without ensuring that the debt will be recovered from other proceedings. This ruling clarifies the conditions under which Section 7 petitions should be admitted and reinforces the mandatory nature of admitting petitions when debt and default are established.