New Delhi, Feb. 26 -- The Supreme Court has reiterated that while considering a plea under Section 7 of the Insolvency and Bankruptcy Code (IBC), the Adjudicating Authority must only examine whether a financial debt exists and whether there has been a default. It cannot refuse admission based on the corporate debtor's ability or inability to pay.

A Bench of Chief Justice Surya Kant and Justices Joymalya Bagchi and Vipul M. Pancholi dismissed an appeal by Power Trust, promoter of Hiranmaye Energy Ltd., holding that the IBC marks a clear departure from the winding-up regime under Section 433(e) of the Companies Act, 1956.

Under the Code, the inquiry at admission is limited to debt and default.

Background

The case concerned loans exceedi...