The Supreme Court admitted a review petition by Axis Bank against CIRP Order for Vidarbha Industries Power Ltd.
The appeal under Section 62 of the Insolvency and Bankruptcy Code 2016, is against a judgment and order passed by the National Company Law Appellate Tribunal (NCLAT), New Delhi in Company Appeal (AT) (Insolvency) whereby the Tribunal refused to stay the proceedings initiated by the Respondent, Axis Bank Limited against the Appellant for initiation of the Corporate Insolvency Resolution Process (CIRP) under Section 7 of the IBC.
Senior Advocate Jaideep Gupta, appearing on behalf of the Appellant, submitted that the Appellant had applied for stay of the proceedings before NCLT, Mumbai in extraordinary circumstances, where the Appellant had not been able to pay the dues of the Respondent, only because an appeal filed by MERC, against an order passed by APTEL in favour of the Appellant, was pending in the Court.
He contended that considering the special nature of the business of the Appellant of production of electricity, tariff whereof is regulated by MERC and APTEL, the application under Section 7 of the IBC should not have been admitted against the Appellant.
Senior Advocate Dhruv Mehta, appearing for the Respondent Financial Creditor, contended that the Appellant Corporate Debtor had admittedly defaulted in payment of its dues to the Respondent Financial Creditor.
He argued that the Appellant being in admitted default, the Adjudicating Authority (NCLT) rightly declined stay of proceedings initiated by the Respondent Financial Creditor under Section 7(5) of the IBC.
He argued that the application under Section 7 of the IBC was filed by the Respondent Financial Creditor before the NCLT, Mumbai on 15th January 2020.
He submitted that the Appellant Corporate Debtor has, on one pretext or the other, attempted to delay the insolvency proceedings, notwithstanding the concurrent findings of NCLT and NCLAT that occurrence of default is not disputed.
The division bench of Justice Indira Banerjee and Justice J.K. Maheshwari said that the Legislature has, in its wisdom, made a distinction between the date of filing an application under Section 7 of the IBC and the date of admission of such application for the purpose of computation of timelines.
The court added that CIRP commences on the date of admission of the application for initiation of CIRP and not the date of filing thereof. There is no fixed time limit within which an application under Section 7 of the IBC has to be admitted.
The bench observed that even though Section 7 (5) (a) of the IBC may confer discretionary power on the Adjudicating Authority, such discretionary power cannot be exercised arbitrarily or capriciously. If the facts and circumstances warrant exercise of discretion in a particular manner, discretion would have to be exercised in that manner.
The court said that the Adjudicating Authority (NCLT) has to consider the grounds made out by the Corporate Debtor against admission, on its own merits.
The court added that the Adjudicating Authority (NCLT) has simply brushed aside the case of the Appellant that an amount of Rs.1,730 Crores was realizable by the Appellant in terms of the order passed by APTEL in favour of the Appellant, with the cursory observation that disputes if any between the Appellant and the recipient of electricity or between the Appellant and the Electricity Regulatory Commission were inconsequential.
The bench viewed that the Adjudicating Authority (NCLT) as also the Appellate Tribunal (NCLAT) fell in error in holding that once it was found that a debt existed and a Corporate Debtor was in default in payment of the debt there would be no option to the Adjudicating Authority (NCLT) but to admit the petition under Section 7 of the IBC.
Case title: Vidarbha Industries Power Limited v/s Axis Bank Limited
Citation: CIVIL APPEAL NO. 4633 OF 2021