Rejection of Section 7 IBC Plea Erroneous as Debt and Default Proven | NCLAT

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  • Last Updated on 4 November, 2025

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Section 7 IBC

Case Details: Edelweiss Asset Reconstruction Company Ltd. vs. Takshashila Heights India (P.) Ltd. - [2025] 179 taxmann.com 530 (NCLAT-New Delhi)

Judiciary and Counsel Details

  • Justice Ashok Bhushan, Chairperson & Arun Baroka, Technical Member
  • Abhijeet Sinha, Sr. Adv., Anmol Bansal & Aditya Vashishth, Advs. for the Appellant.
  • Saurabh Kalia, Avik Sarkar, Arjun Sheth & Rajiv Chawla, Advs. for the Respondent.

Facts of the Case

In the instant case, the appellant, a financial creditor, filed a Section 7 application against the corporate debtor. The NCLT dismissed the said application on the ground that, despite debt and default, the CIRP could not be initiated as the corporate debtor was a going concern, and the applicant’s acts indicated a recovery motive amounting to the misuse of the IBC.

Thereafter, an appeal was made before the National Company Law Appellate Tribunal (NCLAT) against the order passed by the NCLT.

It was noted that the NCLT itself had recorded that there existed a debt and default. Further, the appellant had annexed the NeSL report with the subject section 7 petition, which clearly evidenced the default committed by the corporate debtor.

NCLAT Held

The NCLAT held that there was no bar against a financial creditor proceeding under the Code as well as the SARFAESI Act against a corporate debtor, and the objections of the corporate debtor held no water.

Further, the NCLAT held that the rejection of the application for admission under section 7 when debt and default were clearly established in the facts and circumstances of the case, was an infirmity in the impugned order, which could not be ignored. Consequently, the order of NCLT was to be set aside, and admission of insolvency under section 7 was to be directed.

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied