Under Section 7(5)(a) of the Code, the Adjudicating Authority “may” admit an application if it is satisfied that a default has occurred and the application is complete. In Innoventive Industries Ltd. v. ICICI Bank (2017), the Supreme Court held that the inquiry at this stage is confined to the existence of a financial debt and its default.
In Vidarbha Industries Power Ltd. v. Axis Bank Ltd. (2022), the Court read Section 7(5) as conferring a discretion. On review, the Court clarified that those observations were confined to the facts of that case. In M. Suresh Kumar Reddy v. Canara Bank (2023), the Court reaffirmed that once the Adjudicating Authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete.
Limitation remains a frequent ground of contest. Applications under Section 7 are governed by Article 137 of the Limitation Act, and the period runs from the date of default, subject to acknowledgements of liability under Section 18, which the Supreme Court in Laxmi Pat Surana v. Union Bank of India (2021) held to be applicable to such applications.
This note is for general information on the law as stated in the decisions cited and is not legal advice on any specific matter.