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Discretion Of NCLT Under Section 7(5) IBC - Observations In 'Vidarbha Industries' Made In Context Of Case : Supreme Court Refuses Review

LIVELAW NEWS NETWORK
4 Oct 2022 6:14 AM GMT
Discretion Of NCLT Under Section 7(5) IBC - Observations In Vidarbha Industries Made In Context Of Case : Supreme Court Refuses Review
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The apprehension that the judgment will undermine the IBC is misconceived, the Court stated while disposing of the review.

The Supreme Court recently held that there is no ground to review the the judgment in Vidarbha Industries Power Ltd. vs Axis Bank Limited which held that the National Company Law Tribunal has discretion to not admit the insolvency application filed by a financial creditor even if the corporate debtor is in default.Disposing of the review petition filed by Axis Bank, the Court stated that...

The Supreme Court recently held that there is no ground to review the the judgment in Vidarbha Industries Power Ltd. vs Axis Bank Limited which held that the National Company Law Tribunal has discretion to not admit the insolvency application filed by a financial creditor even if the corporate debtor is in default.

Disposing of the review petition filed by Axis Bank, the Court stated that the observations in the judgment were made in the context of the facts of the case. The Court refused to accept the argument of Solicitor General of India that certain observations made in the judgment could be interpreted in a manner that might be contrary to the aims and objects of the IBC and render the law infructuous.

"The apprehension appears to be misconceived", the  bench comprising Justices Indira Banerjee and JK Maheshwari observed in the review.

The bench further stated :

"The elucidation in paragraph 90 and other paragraphs were made in the context of the case at hand. 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.

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".

SG Tushar Mehta, appearing for Axis Bank, placed reliance on the judgment in E.S. Krishnamurthy & Ors. vs. Bharath Hi-Tech Builders Pvt. Ltd to argue that the adjudicating authority has no discretion available with it while acting under Section 7 IBC.

The Court rejected the argument by observing that ES Krishnamurthy was not considering the issue whether the adjudicating authority has discretion or not.

"The question of whether Section 7 sub-section (5) was mandatory or discretionary was not in issue in any of the judgments cited on behalf of the Review applicant. What was in issue in Krishnamurthy's case (supra) was whether the adjudicating authority could foist a settlement on unwilling parties. That issue was answered in the negative".

The bench had earlier allowed open court hearing for the review on September 19.

The judgment delivered on July 12, 2022 by a bench comprising Justices Indira Banerjee and JK Maheshwari held that it is not mandatory for the Adjudicating Authority to admit an application to initiate Corporate Insolvency Resolution Process even if a debt existed and the Corporate debtor is in default.

The court observed that, ordinarily, the Adjudicating Authority (NCLT) would have to exercise its discretion to admit and initiate CIRP on satisfaction of the existence of a financial debt and default on the part of the Corporate Debtor in payment of the debt, unless there are good reasons not to admit the petition.

"Ordinarily, the Adjudicating Authority (NCLT) would have to exercise its discretion to admit an application under Section 7 of the IBC of the IBC and initiate CIRP on satisfaction of the existence of a financial debt and default on the part of the Corporate Debtor in payment of the debt, unless there are good reasons not to admit the petition.. The Adjudicating Authority (NCLT) has to consider the grounds made out by the Corporate Debtor against admission, on its own merits", the impugned judgment had observed.

Case Title : Axis Bank Ltd versus Vidarbha Industries Power Ltd | RP(Civil) 1043/2022 

Citation : 2022 LiveLaw (SC) 817

Headnotes

Summary - Supreme Court holds that there is no ground to review the the judgment in Vidarbha Industries Power Ltd. vs Axis Bank Limited 2022 LiveLaw (SC) 587 which held that the National Company Law Tribunal has discretion to not admit the insolvency application filed by a financial creditor even if the corporate debtor is in default.

Insolvency and Bankruptcy Code 2016 - Section 7(5) - No ground to review judgment in Vidarbha Industries Power Ltd. vs Axis Bank Limited which held that adjudicating authority has discretion under Section 7(5)- Apprehension that the judgment will undermine the objectives of IBC is misconceived- Observations were made in the context of the case at hand

Judgments - 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-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

 Click here to read/download the order



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