Laxmi Finance has lent money to Saral Textiles Ltd, and Saral Textiles has paid every instalment due to…
The Explanation to section 7(1) says a default "includes a default in respect of a financial debt owed not only to the applicant financial creditor but to any other…
Choose your answer
Laxmi Finance has lent money to Saral Textiles Ltd, and Saral Textiles has paid every instalment due to Laxmi Finance on time. However, Saral Textiles has defaulted on a loan of three crore rupees owed to another bank. Can Laxmi Finance file an application under section 7 of the Insolvency and Bankruptcy Code, 2016?
Answer and explanation
Correct answer C
The Explanation to section 7(1) says a default "includes a default in respect of a financial debt owed not only to the applicant financial creditor but to any other financial creditor of the corporate debtor". So Laxmi Finance can apply even though its own account is regular. The process is collective and is not a recovery action by a single creditor.
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