In Brief
Vidarbha Industries Power Limited, a coal-fired thermal power generating company, challenged the admission of its corporate insolvency resolution process (CIRP) initiated by Axis Bank after the company defaulted on loans. The company argued that an appeal by the Electricity Regulatory Commission (MERC) was pending in the Supreme Court, and if decided in its favour, it would receive Rs.1,730 crores—far exceeding its debt. The Supreme Court held that Section 7(5)(a) of the IBC grants discretionary (not mandatory) power to admit CIRP applications by financial creditors. The Court distinguished financial creditors from operational creditors, reasoning that regulatory bodies' decisions and pending awards favouring the debtor are relevant to whether admission should be granted. The Court emphasized that viability and financial health are not extraneous matters and cannot be ignored by adjudicating authorities. The judgment was set aside and remitted for reconsideration on merits."
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