IBC & SC in Vidarbha Industries: NCLT May or Should Admit a Financial Creditor’s Application?

INTRODUCTION The Insolvency and Bankruptcy Code, 2016 (“the Code”) provides for the insolvency resolution process of corporate debtors. The Code gets triggered when a corporate debtor commits a default in payment of a debt, which could be financial or operational. The initiation (or starting) of the corporate insolvency resolution process under the Code, may be done by a financial creditor (in respect of default in respect of financial debt) or an operational creditor (in respect of default in respect of an operational debt) or by the corporate itself (in respect of any default). An interesting question has arisen as to whether the National Company Law Tribunal (NCLT) is bound to admit a plea for a Corporate Insolvency Resolution Process (“CIRP”) filed by a financial creditor against a corporate debtor or does it have the discretion to refuse to admit it, if the debtor is otherwise financially healthy? The Supreme Court in the case of Vidarbha Industries Power Ltd vs. Axis Bank Ltd, [2022] 140 taxmann.com 252 (SC) has given a very interesting reply to this very crucial question. A subsequent review petition has upheld the earlier decision of the Apex Court. Now, once again in an appeal filed before the Supreme Court, this decision has been questioned. This shows the importance of this decision to matters under the Code. Let us examine the issue at hand. Read More