New Delhi, Sep 29,2022: The Supreme Court has declined to entertain a review petition by Axis Bank Ltd challenging an order passed in the corporate insolvency resolution process (CIRP) for Vidarbha Industries Power Ltd.

A bench, headed by Justice Indira Banerjee (retired now), upheld the ruling that National Company Law Tribunal (NCLT) has the discretion to admit or reject a valid initiation of the insolvency process by a financial creditor under Section 7 of the Insolvency and Bankruptcy Code (IBC).

“To interpret words and provisions of a statute, it may become necessary for the judges to embark upon lengthy discussions. The words of judges interpreting statutes are not to be interpreted as statutes. There are no grounds for review of the judgment and order. The review petition is, accordingly, disposed of,” said the bench, also comprising Justice J.K. Maheshwari, in the order passed on September 22, but uploaded on Thursday.

Axis Bank had filed a review petition challenging the judgment passed on July 12 by the same bench.

“It is well settled that judgments and observations in judgments are not to be read as provisions of statute. Judicial utterances and/or pronouncements are in the setting of the facts of a particular case,” noted the top court, in its order on the review petition.

Solicitor General Tushar Mehta submitted that certain observations made by the bench in the judgment and order under review could be interpreted in a manner that might be contrary to the aims and objects of the IBC and render the law infructuous. However, the top court said: “The apprehension appears to be misconceived.”

While disposing of the review petition, the top court held that judgments cited by Axis Bank did not adjudicate upon the question so raised in the civil appeal, i.e., whether Section 7 (5) of the code was mandatory or discretionary.

In the July judgment, the top court had noted that the adjudicating authority (NCLT) simply brushed aside the case of the power company that an amount of Rs 1,730 crore was realisable by it in terms of the order passed by the APTEL in its favour. “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,” it said.

It observed that the NCLT has to consider the grounds made out by the corporate debtor against admission, on its own merits. For example, when admission is opposed on the ground of existence of an award or a decree in favour of the corporate debtor, and the awarded/decretal amount exceeds the amount of the debt, the adjudicating authority would have to exercise its discretion under Section 7(5)(a) of the IBC to keep the admission of the application of the financial creditor in abeyance, unless there is good reason not to do so.

“The Adjudicating Authority may, for example, admit the application of the Financial Creditor, notwithstanding any award or decree, if the award/decretal amount is incapable of realisation. The example is only illustrative,” the top court had said in its July judgment.

It had said that the NCLT was required to apply its mind to relevant factors including the feasibility of initiation of CIRP, against an electricity generating company operated under statutory control, the impact of Maharashtra Electricity Regulatory Commission’s (MERC) appeal, pending in the apex court, the order of the APTEL and the overall financial health and viability of the corporate debtor under its existing management.

The Axis Bank counsel had argued that the application under Section 7 of the IBC was filed by the respondent financial creditor before the NCLT, Mumbai. The debt due from the appellant to the respondent financial creditor was approximately Rs 553 crore and the total debt owed by the appellant to the consortium of lenders of which the respondent financial creditor is the lead bank was approximately Rs 2,727 crore.

The power company had set up a 600 MW coal-fired thermal power plant comprising two units each of 300 MW capacity, within the Butibori Industrial Area in the Nagpur district in Maharashtra.

It filed an appeal under Section 62 of the IBC, against a judgment and order passed by the National Company Law Appellate Tribunal (NCLAT), refusing to stay the proceedings initiated by the respondent, Axis Bank Ltd against the appellant for initiation of the CIRP under Section 7 of the IBC.

In July, the top court set aside the orders passed by the NCLT and the NCLAT dismissing the power company’s plea. “The NCLT shall re-consider the application of the appellant for stay of further proceedings on merits in accordance with law,” it said. The power company was represented by advocates Shri Venkatesh and Nitin Saluja.

Talking to IANS, Venkatesh said: “The affirmation of the earlier judgment by the Supreme Court brings some amount of reasonableness into the whole lender-driven CIRP process. The court interpreted Section 7(5) of the IBC and has held that under compelling circumstances, the default itself would not entitle admission of CIRP and the Adjudicating Authority has to apply its mind which admitting such proceedings”.