Full Judgment Text
REPORTABLE
2026 INSC 166
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(s).2211/2024
Power Trust
(Promoter of Hiranmaye Energy Ltd.) ….Appellant(s)
Versus
Bhuvan Madan
(Interim Resolution Professional
of Hiranmaye Energy Ltd.) & Ors. …Respondent(s)
J U D G M E N T
Joymalya Bagchi, J.
1
1. Present appeal has been instituted by Power Trust, a promoter of
2
Hiranmaye Energy Ltd. under Section 62, Insolvency and
3
Bankruptcy Code, 2016 , challenging order dated 25.01.2024 by
National Company Law Appellate Tribunal, Principal Bench, New
4
Delhi . By the impugned order, NCLAT has upheld order dated
5
02.01.2024 by National Company Law Tribunal, Kolkata Bench ,
Signature Not Verified
Digitally signed by
SATISH KUMAR YADAV
Date: 2026.02.18
16:20:12 IST
Reason:
1
Hereinafter “Appellant”.
2
Hereinafter “Corporate Debtor”.
3
Hereinafter “IBC/The Code”.
4
Hereinafter “NCLAT”.
5
Hereinafter “NCLT/Adjudicating Authority”.
Page 1 of 27
6
whereby the NCLT admitted an application filed under Section 7, IBC
7
by REC Ltd. and initiated the corporate insolvency resolution
8
process against the Corporate Debtor.
FACTS GIVING RISE TO THE APPEAL
2. A common loan agreement dated 19.06.2013 was entered into
nd
between the Corporate Debtor and 2 Respondent to avail a term
loan of Rs. 1859 crore for setting up of a thermal power plant at
Haldia, West Bengal. Due to cost overruns, on 30.10.2015, the
Corporate Debtor availed an additional term loan facility of Rs.
446.97 crore. Subsequently, the Corporate Debtor entered into a
9
power purchase agreement with the West Bengal State Electricity
10
Distribution Company Ltd.
nd
3. On 30.06.2018, 2 Respondent classified the accounts of Corporate
Debtor as non-performing assets due to alleged default committed by
the Corporate Debtor in making due payments.
nd
4. Pursuant to negotiations, on 21.02.2020, 2 Respondent approved a
loan restructuring plan (restructuring without change in ownership)
wherein the Corporate Debtor was to commence repayment from
6
Hereinafter “Section 7 application”.
7 nd
Hereinafter “2 Respondent/Financial Creditor”.
8
Hereinafter “CIRP”.
9
Hereinafter “PPA”.
10
Hereinafter “WBSEDCL”.
Page 2 of 27
31.12.2020 and interest payment on monthly basis was to commence
from 30.06.2020. Further revisions led to a second restructuring
proposal dated 29.09.2020 which envisaged repayment of loan in
instalments from 31.03.2021 till 31.12.2042.
5. Implementation of the restructuring proposals was subject to certain
pre-implementation conditions to be fulfilled by the Corporate Debtor.
Such conditions inter alia included obtaining a favourable tariff order
11
from West Bengal Electricity Regulatory Commission by
12
28.02.2021, creating an initial Debt Service Revenue Account ,
demonstrating Corporate Debtor’s power plant successfully running
at installed capacity continuously for 72 hours, making available a
priority debt of Rs. 83 crore and working capital of Rs.125 crore.
However, the tariff order was not approved by WBERC by the
stipulated date. Further, the Corporate Debtor also failed to comply
with other vital pre-implementation conditions within the agreed
deadline, i.e., 28.02.2021 as recorded in the consortium meeting
dated 17.02.2021.
6. Consequently, financial creditor filed the Section 7 application before
the NCLT recording the date of default as 31.03.2018 on an
outstanding claim of Rs. 21,83,19,16,896 as on 05.06.2021. The
11
Hereinafter “WBERC”.
12
Hereinafter “DSRA”.
Page 3 of 27
proceedings were assailed before the High Court at Calcutta and
Single Judge vide order dated 02.07.2021 dismissed the writ petition
inter alia holding that there was no arbitrary or unfair cancellation of
the restructuring offer and that initiation of proceedings under the
IBC before the Adjudicating Authority could not be faulted.
7. Matter was carried in appeal to the Division Bench. The Division
Bench took note of the tariff order dated 31.05.2021 and partly
13
modified the order passed by Single Judge. The Bench directed the
financial creditors of the Corporate Debtor to consider the afore-
mentioned tariff order with regard to fulfilment of pre-implementation
conditions of the restructuring proposal.
8. However, in the lenders’ meeting on 11.11.2021 pursuant to such
directions of the Division Bench, the request to revive the
restructuring proposal was rejected as the Corporate Debtor had
repeatedly failed to satisfy key pre-implementation conditions,
including creation of a DSRA, maintenance of priority debt of Rs. 83
crore, and demonstration of Corporate Debtor’s power plant
successfully running at installed capacity continuously for 72 hours.
9. Thereafter, the Corporate Debtor took out IA No. 1020/2022 inter alia
for a declaration that the restructuring proposals dated 29.09.2020
13
MAT 626/2021, order dated 07.10.2021.
Page 4 of 27
14
and 14.01.2021 were valid and binding inter se parties and
dismissal of the Section 7 application. During the pendency of the
said IA, Corporate Debtor claimed various sums had been accepted
nd
by 2 Respondent in repayment of the debt which was to be
nd
liquidated by 2042 as per the 2 restructuring proposal. The
Corporate Debtor also filed IA No. 828/2023, praying that
inter alia
the date of default as per restructuring agreement dated 21.02.2020
squarely fell in the period covered under Section 10A, IBC. After
hearing the parties, by order dated 02.01.2024, the Adjudicating
Authority dismissed IA No. 1020/2022 and IA No. 828/2023, and
admitted the Section 7 application initiating CIRP.
10. Being aggrieved by the admission order, Appellant preferred appeal
before NCLAT which came to be dismissed vide the impugned order
and has been challenged before this Court.
PROCEEDINGS PENDING THE APPEAL
11. During the proceedings before this Court, Appellant took out IA No.
15
84962/2024 seeking directions to the Committee of Creditors to
consider its settlement proposal and for stay of CIRP. On 03.05.2024,
liberty was granted to Appellant to submit a settlement proposal for
14 nd
On 14.01.2021, the 2 restructuring proposal was approved by Power Finance
Corporation Ltd., which is another financial creditor of the Corporate Debtor.
15
Hereinafter “CoC”.
Page 5 of 27
consideration in accordance with law. Thereafter, Appellant made
three settlement proposals of Rs. 1,101.56 crore, Rs. 1,450 crore, and
Rs. 1,601.29 crore, all of which were rejected by the CoC by
overwhelming majorities. CoC rejected the settlement proposal citing
the Corporate Debtor’s repeated failure to implement earlier
restructuring plans and expressing doubts about the Appellant’s
ability to pay, particularly in light of letter dated 13.08.2024 by SREI
16
Equipment Finance Ltd.’s alleging loan dues of Rs. 633 crore
payable by the Appellant. The CoC also noted that the settlement
proposals were being made by Appellant, the erstwhile promoter
responsible for the Corporate Debtor’s default in the first place.
12. On 29.10.2024, when the CoC rejected the Appellant’s third
settlement proposal, it simultaneously approved the resolution plan
17 st 18
of Damodar Valley Corporation. 1 Respondent moved an
application under Section 31, IBC before the Adjudicating Authority
seeking final approval of DVC’s resolution plan. Appellant filed
objections challenging both the CoC’s approval of DVC’s plan and
rejection of the Appellant’s third settlement proposal, and these
issues are still pending before the Adjudicating Authority.
16
Hereinafter “SEFL”, which is the sole secured financial creditor of Power Trust, the
Appellant.
17
Hereinafter “DVC/successful Resolution Applicant”
18
Hereinafter “Interim Resolution Professional”.
Page 6 of 27
13. Thereafter, the Appellant placed fourth (Rs.1,606.86 crore) and fifth
(Rs.1,671.86 crore) settlement proposals before the CoC on
08.07.2025 and 20.07.2025 respectively, and both were rejected.
14. On 12.09.2025, this Court stayed the CIRP on the condition that the
Appellant deposit Rs. 25 crore and furnish a bank guarantee of Rs.
100 crore, and the Appellant deposited Rs. 25 crore with the Registry
of this Court. By order dated 23.09.2025, the stay was continued and
the bank guarantee requirement was substituted by a further deposit
of Rs.100 crore, which was also deposited, taking the total deposit to
19
Rs.125 crore. During these proceedings, DVC was impleaded and
20
sought vacatur of the stay citing serious prejudice and economic
hardship due to stalling of the CIRP. Additionally, SEFL’s application
21
to intervene was allowed whereby they sought release of the Rs.125
crore deposit towards the Appellant’s alleged dues, contending that
the Appellant must first clear liabilities to SEFL before seeking to fund
settlement plans for the Corporate Debtor.
ARGUMENTS AT THE BAR
15. The Appellant argues that the CIRP is barred by Section 10A, IBC
which prohibits initiation of CIRP for defaults occurring between
25.03.2020 and 24.03.2021. Although the Section 7 application
19
IA No. 240917/2025.
20
IA No. 240982/2025.
21
IA No. 260460/2025.
Page 7 of 27
attributes a default date of 31.03.2018 under the Common Loan
Agreement dated 19.06.2013, Appellant submits that the first
restructuring agreement dated 21.02.2020 reset the repayment
schedule. As per the revised terms, interest payments were to
commence on 30.06.2020 and the first instalment was due on
31.12.2020, thereby rendering the default date within the period
envisaged in the Section 10A window.
16. It is also argued that the restructuring proposals dated 21.02.2020
and 29.09.2020 were final and binding between the parties and had
nd
novated the earlier common loan agreement dated 19.06.2013. 2
Respondent had received a sum of Rs. 50 crore in December, 2021
without demur and had not controverted the Corporate Debtor’s letter
dated 24.12.2021 stating “your receipt of the payment of the said sum
of Rs. 50 Crore will be deemed and constructed by us to be an
This amounted
acceptance by you of the proposal contained herein”.
nd
to a deemed approval of the 2 restructuring proposal dated
29.09.2020. No letter of termination of the restructuring proposal due
to non-fulfilment of pre-implementation conditions was issued. The
restructuring proposals envisaged repayment of loan in instalments
till 2042 and there is no provision in these agreements that on failure
of payment of any instalment the entire liability would stand revived.
Notwithstanding these facts, both the Adjudicating Authority and
NCLAT incorrectly held the restructuring proposals dated 21.02.2020
Page 8 of 27
and 29.09.2020 were not final and binding and the debt had become
due and payable.
17. It is further contended that the Corporate Debtor is a running and
viable power project which cannot be treated as insolvent. The
Corporate Debtor has a subsisting PPA for 25 years with WBSEDCL
and has raised bills of about Rs. 906 crore between 01.11.2024 to
31.03.2025. It has a continuing fuel supply arrangement with
Mahanadi Coalfields Ltd. under the SHAKTI Scheme, and had earned
an EBIDTA of Rs. 20 crore per month during the CIRP. In this factual
22
matrix, relying on Vidarbha Industries Power Ltd. v. Axis Bank Ltd.,
it is contended that the Section 7 application ought not to have been
admitted.
18. Finally, it is argued that the settlement plan submitted by the
Appellant is more viable and about Rs. 177 crore higher than that of
the successful Resolution Applicant. Given this situation, CIRP may
be kept in abeyance and CoC be directed to consider the settlement
plan proposed by the Appellant.
19. To the contrary, the Respondents submit that the Appellant’s reliance
on Section 10A is misconceived. According to the Respondents, the
restructuring proposals dated 21.02.2020 and 29.09.2020 never
22
(2022) 8 SCC 352.
Page 9 of 27
ripened into binding arrangements because the Corporate Debtor
failed to satisfy the pre-implementation conditions. Once the
restructuring failed at that threshold stage, the date of default cannot
be shifted by referring to repayment schedules contemplated under
those unimplemented proposals. Even otherwise as per the
st
Appellant’s case, the 1 restructuring proposal had been subsumed
nd
in the 2 restructuring proposal, wherein the first instalment fell due
on 31.03.2021 beyond the Section 10A window.
20. The Respondents further contend that the Appellant’s case of
novation is unsustainable for the same reason. As the pre-
implementation conditions were not fulfilled, the proposals did not
crystallise into enforceable agreements, and there was no novation of
the original financing terms. The Respondents submit that
subsequent part payments made towards an existing debt do not
revive a failed restructuring nor do they satisfy the debt in full
justifying the dismissal of the Section 7 application.
21. The Respondents also submit that the Appellant’s emphasis on the
Corporate Debtor’s alleged viability is legally misplaced at the
admission stage under Section 7, IBC. They contend that the
Adjudicating Authority’s role at that stage is limited to examining
whether a financial debt exists and whether a default has occurred,
and once those requirements are met, the Adjudicating Authority has
Page 10 of 27
scarcely any discretion to refuse admission. Proceedings under
Section 7 cannot be expanded into a broad inquiry on business
viability, equities, or surrounding circumstances. Reliance is placed
23
on Innoventive Industries Ltd. v. ICICI Bank and M. Suresh Kumar
24
Reddy v. Canara Bank & Ors.
22. The Respondents submit that the Appellant’s settlement proposal
cannot interdict the CIRP unless such proposal secures approval of
90% of the CoC. In the present case, at the CoC meeting on
29.10.2024, the successful Resolution Applicant’s plan was approved
by 99.92% voting, while the Appellant’s settlement proposals have
been repeatedly rejected by overwhelming majority. It is well settled
that the commercial wisdom of the CoC is non-justiciable. They assert
that the settlement proposals pressed by the Appellant after
29.10.2024 are merely opportunistic attempts to disrupt CIRP, and
therefore do not warrant any consideration.
ANALYSIS
23. Analysing the submissions of the parties, it appears the Appellant
has assailed the admission of Section 7 application on the following
issues:
23
(2018) 1 SCC 407.
24
(2023) 8 SCC 387.
Page 11 of 27
i. Whether date of default fell between 25.03.2020 to 24.03.2021,
and was thereby barred under Section 10A, IBC?
st
ii. Whether common loan agreement had been novated by 1
restructuring agreement dated 21.02.2020, which was followed
nd
by the 2 restructuring agreement dated 29.09.2020, envisaging
the repayment of debt in monthly instalments till 31.12.2042
and there was no existing debt due and payable by the Corporate
Debtor at the time of admission of the Section 7 application?
iii. Whether the Adjudicating Authority ought not to have admitted
the Section 7 application mechanically without assessing the
viability of the Corporate Debtor as an ongoing concern and its
ability to repay the debts, in view of Vidarbha (supra)?
24. Without prejudice to the aforesaid, it has also been contended that
the settlement proposals given by the Appellant are more viable than
that of the successful Resolution Applicant and accordingly, the CIRP
ought to be kept in abeyance and such settlement proposal be
favourably considered by the CoC.
A. Bar under Section 10A, IBC
25. Firstly, we take up the issue with regard to admission of the Section
7 application. In our considered view, the plea of bar under Section
10A, IBC is a non-starter. In the backdrop of outbreak of COVID-19
Page 12 of 27
pandemic, as an ameliorative measure, Section 10A was incorporated
in the IBC. The provision barred initiation of CIRP against a corporate
debtor in the event the default arose on or after 25.03.2020, for a
period of 6 months or such period not exceeding one year as may be
notified. It may be noted that by notification the government extended
25
the embargo till 24.03.2021. Explanation to the Section, however,
clarified that the bar will not apply to any default committed before
25.03.2020.
nd
26. In the Section 7 application, 2 Respondent’s case is that the
Corporate Debtor had defaulted under the common loan agreement
dated 19.06.2013 on 31.03.2018, much prior to the commencement
of the Section 10A bar. Controverting this stance, Appellant would
argue that the common loan agreement had been subsequently
st
restructured vide the 1 restructuring proposal dated 21.02.2020,
whereby the first instalment became payable on 31.12.2020,
attracting the prohibition under Section 10A. This argument is wholly
st
misconceived. Even if the Appellant’s case is assumed that the 1
restructuring plan had been accepted, the same was subsumed in
nd
the 2 restructuring plan dated 29.09.2020 whereby the first
instalment fell due on 31.03.2021, beyond the Section 10A period
which operated from 25.03.2020 to 24.03.2021.
25
Notification S.O. 4638(E) dated December 22, 2020, Ministry of Corporate Affairs.
Page 13 of 27
27. That apart, we are in wholesome agreement with the NCLAT’s finding
that the restructuring proposals had not fructified into valid
agreements novating the original contract. Both the restructuring
proposals were underpinned on pre-implementation conditions inter
alia,
a. obtaining a favourable tariff order from WBERC by 28.02.2021;
b. creating an initial DSRA;
c. demonstrating Corporate Debtor’s power plant successfully
running at installed capacity continuously for 72 hours;
d. making available a priority debt of Rs. 83 crore and working
capital of Rs.125 crore.
These pre-conditions had not been complied with and even the
subsequent tariff order dated 31.05.2021 did not provide adequate
leverage to persuade the lenders to accept the restructuring proposals
in their meeting convened on 11.11.2021 pursuant to High Court’s
direction vide order dated 07.10.2021. In such view of the matter, the
date of default would relate to 31.03.2018 as per the Section 7
application, and the proceeding cannot be held to be barred in light
of the Explanation to Section 10A, IBC.
Page 14 of 27
B. Validity of CIRP Admission
28. The other aspect on which the Appellant has heavily relied is the
acceptance of various sums of money paid by the Corporate Debtor
st nd
purportedly under the 1 and 2 restructuring proposals, which
according to them amounts to deemed approval of such proposal. As
discussed earlier, such argument flies in the face of the fact that the
nd
2 Respondent had resolutely maintained and rightly so, that the
restructuring proposals were underpinned on pre-implementation
conditions which the Corporate Debtor had failed to fulfil. Under such
circumstances, receipt of various sums of money would not amount
to acceptance of the restructuring proposals, thereby novating the
earlier loan agreement. Neither would such part payments constitute
full satisfaction of the existing debt so as to render the Section 7
application inadmissible.
29. It has also been vociferously contended that the Corporate Debtor is
an ongoing concern and does not lack the ability to repay the debt. It
has a subsisting PPA for 25 years with WBSEDCL, and has raised
bills of Rs. 906 crore from 01.11.2024 to 31.03.2025. It also has a
continuous fuel supply arrangement with Mahanadi Coalfields Ltd.
under the SHAKTI scheme and had earned EBIDTA of Rs. 20 crore
per month during the CIRP. These facts though attractive at first
Page 15 of 27
blush, do not yield either legal or factual justification to rebut the
admission of the Section 7 application.
30. On the legal score, one must bear in mind the scope and purpose for
which IBC was promulgated. The main objective of its enactment was
to create a complete code for easy, prompt and seamless resolution
of insolvency process and thereby ensure that the net worth of the
corporate debtor is not dissipated and the entity is salvaged from
corporate death through a viable resolution plan accepted by its CoC.
The Code prescribes whenever a corporate debtor defaults on a debt
that is due and payable, an insolvency process may be initiated.
Section 3(12) defines “default” as non-payment of a debt which has
become due and payable, and includes default in respect of a part or
instalment thereof. Such insolvency process may be initiated either
by the corporate debtor itself, or by its creditors who are classified as
financial creditor or operational creditor. “Financial creditor” is
defined as any person to whom a financial debt is owed and includes
26
a person to whom such debt has been legally assigned. A “financial
debt” means a debt along with interest if any, which is disbursed
against the consideration for time value of money and includes money
27
borrowed against payment of interest. “Operational creditor” is
defined as a person to whom an operational debt is owed and includes
26
Section 5(7), IBC.
27
Section 5(8), IBC.
Page 16 of 27
28
any person to whom such debt has been legally assigned.
“Operational debt” is a claim in respect of the provision of goods or
services including employment or a debt in respect of payment of
dues arising under any law for the time being in force and payable to
29
the Central or State government, or any local authority.
30
31. In Swiss Ribbons (P) Ltd. v. Union of India , such classification of
creditors as financial creditors and operational creditors has been
held to be constitutionally valid. The Bench underscored the essential
differences between a financial creditor and operational creditor and
held that financial creditors were mostly secured creditors like banks
and financial institutions who extended finance to enable a corporate
debtor to set up and/or operate its business. Such credit is extended
to a corporate debtor under well-defined loan agreements having
specified repayment schedules and reserving rights to recall the loan
in case of default or restructure the same enabling a corporate debtor
to tide over unforeseen financial stress. On the contrary, operational
creditors are mostly unsecured creditors and their claims are
relatable to supply of goods and services in the operation of the
business. Ordinarily, operational debts are not based on admitted
documents and the possibility of genuine disputes with regard to
such debts is much higher compared to financial debts.
28
Section 5(20), IBC.
29
Section 5(21), IBC.
30
(2019) 4 SCC 17, Para 50-51.
Page 17 of 27
32. In light of such classification, the Code makes a distinction in the
manner in which an insolvency process may be initiated by a financial
creditor under Section 7, IBC in contradistinction to an operational
creditor under Section 8 and 9, IBC. Unlike an operational creditor,
a financial creditor may trigger an insolvency process under Section
7 in respect of default of any financial debt, whether owed to itself or
to any other financial creditor. While the financial creditor may
directly file an application under Section 7 setting out the particulars
31
of the financial debt and evidence of default, the operational
creditor, on the occurrence of a default, is to first deliver a demand
notice of the unpaid debt to a corporate debtor and the latter may
within 10 days of receipt of such demand notice bring to the notice of
the operational creditor the existence of a dispute or record the
pendency of a pre-existing suit or arbitration proceeding in respect of
such debt. Once a corporate debtor demonstrates a dispute regarding
the existence of the debt, the insolvency process stands aborted vis-
à-vis the operational creditor. But when the financial creditor initiates
the insolvency process for the purposes of admission, the
Adjudicating Authority is only to ascertain the existence of a default
31
Rule 4, Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules,
2016, read with Section 7(2), IBC prescribes the manner an application under Section
7, IBC, must be made. A financial creditor must make an application as in Form 1,
which consists five parts. Part I, II and III requires the particulars of the applicant, the
corporate debtor and the proposed resolution applicant respectively. Part IV requires
the particulars of the financial debt. Part V requires documents, records and evidence
of default.
Page 18 of 27
from the records of the information utility or the evidence furnished
by the financial creditor within fourteen days from the receipt of such
application. At this stage, neither is a corporate debtor entitled nor is
the Adjudicating Authority required to examine any dispute regarding
the existence of such debt. This significantly reduces the scope of
enquiry at the stage of a time-bound admission of an insolvency
process by a financial creditor which has been succinctly summed up
in Innoventive (supra):-
“ 30 …… in the case of a corporate debtor who commits
a default of a financial debt, the adjudicating
authority has merely to see the records of the
information utility or other evidence produced by the
financial creditor to satisfy itself that a default has
occurred. It is of no matter that the debt is disputed so
long as the debt is “due” i.e. payable unless
interdicted by some law or has not yet become due in
the sense that it is payable at some future date. It is
only when this is proved to the satisfaction of the
adjudicating authority that the adjudicating authority
may reject an application and not otherwise.”
33. Reiterating the ratio in Innoventive (supra), this Court in ES
32
Krishnamurthy v. Bharath Hi-Tech Builders (P) Ltd. held as follows:
“ 34. The adjudicating authority has clearly acted
outside the terms of its jurisdiction under Section 7(5)
32
(2022) 3 SCC 161.
Page 19 of 27
IBC. The adjudicating authority is empowered only to
verify whether a default has occurred or if a default
has not occurred. Based upon its decision, the
adjudicating authority must then either admit or reject
an application, respectively. These are the only two
courses of action which are open to the adjudicating
authority in accordance with Section 7(5). The
adjudicating authority cannot compel a party to the
proceedings before it to settle a dispute.”
34. In a similar vein, the Adjudicating Authority is not required to go into
the inability of a corporate debtor to pay its debt. This is a clear
departure from the scheme of winding up envisaged under Section
433(e) of the erstwhile Companies Act, 1956 which required the
Adjudicating Authority to come to a finding with regard to the inability
of the company to pay the debt and thereby arrive at a requisite
satisfaction whether it is just and equitable to wind up the company.
The Code restricts the scope of enquiry for admission of an insolvency
process by a financial creditor merely to the existence of default of a
debt due and payable and nothing more. The legislative intent behind
such prompt and summary intervention is “
to ensure revival and
continuation of the corporate debtor by protecting the corporate debtor
33
from its own management and from a corporate death by liquidation.”
33
Swiss Ribbons (supra), Para 28.
Page 20 of 27
35. The Appellant has heavily relied on Vidarbha (supra) to argue that the
Adjudicating Authority has ample discretion to apply its mind to
relevant factors including the feasibility of initiation of insolvency
process notwithstanding the existence of default on a debt due and
payable by the Corporate Debtor. In Vidarbha (supra), this Court
observed:-
“ 61. In our view, the Appellate Authority (NCLAT)
erred in holding that the adjudicating authority (NCLT)
was only required to see whether there had been a
debt and the corporate debtor had defaulted in
making repayment of the debt, and that these two
aspects, if satisfied, would trigger the CIRP. The
existence of a financial debt and default in payment
thereof only gave the financial creditor the right to
apply for initiation of CIRP. The adjudicating authority
(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 MERC's appeal,
pending in this Court, order of Aptel referred to above
and the overall financial health and viability of the
corporate debtor under its existing management.
… …………………………………………………………… …
90. We are clearly of the view 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
Page 21 of 27
option to the adjudicating authority (NCLT) but to
admit the petition under Section 7 IBC .”
36. However, in review, this Court clarified that observations made in
Paragraph 90 are restricted to the facts of Vidarbha (supra):-
“ 6. The elucidation in para 90 and other paragraphs
[of the judgment under review] 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
34
of a particular case.”
37. Finally, the apparent dichotomy between Innoventive (supra) and
Vidarbha (supra) was set at rest in M. Suresh Kumar Reddy (supra),
wherein this Court observed:-
“ 14. Thus, it was clarified by the order in review that
the decision in Vidarbha Industries was in the setting
of facts of the case before this Court. Hence, the
decision in Vidarbha Industries cannot be read and
understood as taking a view which is contrary to the
view taken in Innoventive Industries and E.S.
Krishnamurthy. The view taken in Innoventive
Industries still holds good.” (emphasis supplied)
34
Axis Bank Ltd. v. Vidarbha Industries Power Ltd . (2023) 7 SCC 321.
Page 22 of 27
38. In light of the ratio in M. Suresh Kumar Reddy (supra) there is no cavil
that the ratio in (supra) lays down the correct proposition
Innoventive
of law and the observations in Vidarbha (supra) were made in the
facts of the case and do not operate as binding precedent.
39. Even otherwise on facts, Vidarbha (supra) does not come to the aid
of the Appellant. In Vidarbha (supra), this Court had taken note of an
35
award passed by APTEL in favour of the corporate debtor which far
exceeded the claim of the financial creditor, and held in the setting of
such facts, initiation of CIRP was unwarranted. In the present case,
Appellant’s contention regarding Corporate Debtor’s viability is highly
dubious. Though the Corporate Debtor strenuously demonstrates its
commercial viability, the NCLAT has noted that the extent of
outstanding liability as on 02.01.2024 was Rs. 3103.31 crore, which
far exceeds the bills raised on WBSEDCL to the tune of Rs 906 crore
and EBITDA of Rs. 20 crore per month during the CIRP.
40. For these reasons, we are of the opinion the admission of the Section
7 application was lawful and does not call for interference.
C. Settlement Proposals
41. Finally, the Appellant in a last-ditch effort, has prayed that the
settlement proposal offered by them is more viable than that of the
35
Appellate Tribunal for Electricity.
Page 23 of 27
successful Resolution Applicant, and on such score the CIRP may be
stayed as per Section 12A. During the pendency of the appeal, the
CIRP had continued and by order dated 03.05.2024, this Court gave
liberty to the Appellant to submit settlement proposal to the CoC.
Appellant made three settlement proposals, of Rs. 1,101.56 crore, Rs.
1,450 crore, and Rs. 1,601.29 crore, all of which were rejected by
CoC. Such rejection had been prompted due to repeated failure on
part of the Corporate Debtor to implement earlier restructuring plans
and the viability of the Appellant’s proposal in light of letter written
by SEFL alleging a loan liability payable by the Appellant.
rd
42. On 29.10.2024, while rejecting Appellant’s 3 settlement proposal,
the CoC approved the resolution plan of DVC. Thereafter, Appellant’s
th th
4 and 5 settlement proposals worth Rs. 1,606.86 crore and Rs.
1,671.86 crore respectively were also rejected by the CoC. Appellant
th
argues its 5 settlement plan is offering to pay Rs. 1,671.86 crore and
is more viable than the accepted resolution plan submitted by DVC.
It is trite law that the commercial wisdom of the CoC to accept one
resolution plan over another cannot be second-guessed by the
36
Court.
36
Committee of Creditors of Essar Steel India Ltd v. Satish Kumar Gupta and Others,
(2020) 8 SCC 531, Para 62-64; Ebix Singapore (P) Ltd. v. Educomp Solutions Ltd. (CoC) ,
(2022) 2 SCC 401, Para 157-158.
Page 24 of 27
37
43. Prior to the introduction of Section 12A and Regulation 30A, there
was no express provision in the IBC to withdraw the insolvency
process once the CIRP was admitted. In such situations, this Court
invoked Article 142 to do complete justice and arrive at just and
38
equitable outcome by withdrawing CIRP. Taking note of such
lacuna, the legislature introduced Section 12A in the Code providing
the statutory framework for withdrawal and settlement of claims post
constitution of CoC when 90% of the voting share in the CoC approves
such plan. Similarly, Regulation 30A was amended to provide for a
detailed procedure for withdrawal/ settlement of claims after
admission but prior to appointment of CoC. In light of such statutory
architecture in place, this Court in GLAS Trust Co. LLC v. BYJU
39
Raveendran , held reference to inherent powers under Rule 11,
40
NCLT/NCLAT Rules, or under Article 142 to direct post-admission
withdrawal/settlement of claims no longer arises. However, we
hasten to add that our observation may not be construed as a
complete bar on the plenary powers under Article 142 to pass
directions during CIRP in appropriate cases to do complete justice.
37
IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
38
Uttara Foods & Feeds (P) Ltd. v. Mona Pharmachem , (2018) 15 SCC 587; Lokhandwala
, (2018) 15
Kataria Construction (P) Ltd. v. Nisus Finance and Investment Managers LLP
SCC 589.
39
(2025) 3 SCC 625, Para 64.
40
National Company Law Tribunal Rules, 2016, and National Company Law Appellate
Tribunal Rules, 2016.
Page 25 of 27
44. Notwithstanding the above stated statutory scheme and merely as a
concessionary measure, this Court stalled the CIRP vide order dated
12.09.2025 subject to the Appellant depositing Rs. 25 crore and
furnishing a bank guarantee of Rs. 100 crore. At this stage, DVC
intervened and vehemently opposed delay in final approval of its
resolution plan. Having considered these concerns of the successful
Resolution Applicant, we are in agreement with the Respondents that
any further direction to stall the CIRP on the plea of further
settlement proposals at the behest of the Appellant would be
prejudicial to the interest of a swift and timely resolution of insolvency
process.
CONCLUSION
45. In light of the aforesaid discussion, the appeal is dismissed and the
stay on CIRP vide order dated 12.09.2025 is vacated.
IA NO. 260460/2025
46. SEFL, a secured creditor of the Appellant, has prayed for release of
deposits amounting to Rs.125 crore made by the Appellant as a
condition of the stay granted by this Court. SEFL contends that an
order restraining the alienation of shares of Corporate Debtor held by
Appellant was passed by the High Court at Calcutta in an application
Page 26 of 27
41
under Section 9, Arbitration & Conciliation Act, 1996. We are
unwilling to accede to such plea as no award, final or interim,
crystallising SEFL’s claim against the Appellant has been placed on
record and the aforesaid deposit was made as a condition to stay the
CIRP of the Corporate Debtor and not to secure any claim against the
Appellant. Given these circumstances, SEFL’s application stands
rejected. Registry is directed to refund the amount of Rs.125 crore
kept as fixed deposit along with interest accrued thereon to the
Appellant.
47. Pending application(s), if any, also shall stand disposed of.
………………………………………., CJI
(SURYA KANT)
………………………………………, J
(JOYMALYA BAGCHI)
………………………………………, J
(VIPUL M. PANCHOLI)
NEW DELHI,
FEBRUARY 18, 2026.
41
Arbitration Petition (Commercial) No. 857/2024, order dated 16.12.2024.
Page 27 of 27
2026 INSC 166
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(s).2211/2024
Power Trust
(Promoter of Hiranmaye Energy Ltd.) ….Appellant(s)
Versus
Bhuvan Madan
(Interim Resolution Professional
of Hiranmaye Energy Ltd.) & Ors. …Respondent(s)
J U D G M E N T
Joymalya Bagchi, J.
1
1. Present appeal has been instituted by Power Trust, a promoter of
2
Hiranmaye Energy Ltd. under Section 62, Insolvency and
3
Bankruptcy Code, 2016 , challenging order dated 25.01.2024 by
National Company Law Appellate Tribunal, Principal Bench, New
4
Delhi . By the impugned order, NCLAT has upheld order dated
5
02.01.2024 by National Company Law Tribunal, Kolkata Bench ,
Signature Not Verified
Digitally signed by
SATISH KUMAR YADAV
Date: 2026.02.18
16:20:12 IST
Reason:
1
Hereinafter “Appellant”.
2
Hereinafter “Corporate Debtor”.
3
Hereinafter “IBC/The Code”.
4
Hereinafter “NCLAT”.
5
Hereinafter “NCLT/Adjudicating Authority”.
Page 1 of 27
6
whereby the NCLT admitted an application filed under Section 7, IBC
7
by REC Ltd. and initiated the corporate insolvency resolution
8
process against the Corporate Debtor.
FACTS GIVING RISE TO THE APPEAL
2. A common loan agreement dated 19.06.2013 was entered into
nd
between the Corporate Debtor and 2 Respondent to avail a term
loan of Rs. 1859 crore for setting up of a thermal power plant at
Haldia, West Bengal. Due to cost overruns, on 30.10.2015, the
Corporate Debtor availed an additional term loan facility of Rs.
446.97 crore. Subsequently, the Corporate Debtor entered into a
9
power purchase agreement with the West Bengal State Electricity
10
Distribution Company Ltd.
nd
3. On 30.06.2018, 2 Respondent classified the accounts of Corporate
Debtor as non-performing assets due to alleged default committed by
the Corporate Debtor in making due payments.
nd
4. Pursuant to negotiations, on 21.02.2020, 2 Respondent approved a
loan restructuring plan (restructuring without change in ownership)
wherein the Corporate Debtor was to commence repayment from
6
Hereinafter “Section 7 application”.
7 nd
Hereinafter “2 Respondent/Financial Creditor”.
8
Hereinafter “CIRP”.
9
Hereinafter “PPA”.
10
Hereinafter “WBSEDCL”.
Page 2 of 27
31.12.2020 and interest payment on monthly basis was to commence
from 30.06.2020. Further revisions led to a second restructuring
proposal dated 29.09.2020 which envisaged repayment of loan in
instalments from 31.03.2021 till 31.12.2042.
5. Implementation of the restructuring proposals was subject to certain
pre-implementation conditions to be fulfilled by the Corporate Debtor.
Such conditions inter alia included obtaining a favourable tariff order
11
from West Bengal Electricity Regulatory Commission by
12
28.02.2021, creating an initial Debt Service Revenue Account ,
demonstrating Corporate Debtor’s power plant successfully running
at installed capacity continuously for 72 hours, making available a
priority debt of Rs. 83 crore and working capital of Rs.125 crore.
However, the tariff order was not approved by WBERC by the
stipulated date. Further, the Corporate Debtor also failed to comply
with other vital pre-implementation conditions within the agreed
deadline, i.e., 28.02.2021 as recorded in the consortium meeting
dated 17.02.2021.
6. Consequently, financial creditor filed the Section 7 application before
the NCLT recording the date of default as 31.03.2018 on an
outstanding claim of Rs. 21,83,19,16,896 as on 05.06.2021. The
11
Hereinafter “WBERC”.
12
Hereinafter “DSRA”.
Page 3 of 27
proceedings were assailed before the High Court at Calcutta and
Single Judge vide order dated 02.07.2021 dismissed the writ petition
inter alia holding that there was no arbitrary or unfair cancellation of
the restructuring offer and that initiation of proceedings under the
IBC before the Adjudicating Authority could not be faulted.
7. Matter was carried in appeal to the Division Bench. The Division
Bench took note of the tariff order dated 31.05.2021 and partly
13
modified the order passed by Single Judge. The Bench directed the
financial creditors of the Corporate Debtor to consider the afore-
mentioned tariff order with regard to fulfilment of pre-implementation
conditions of the restructuring proposal.
8. However, in the lenders’ meeting on 11.11.2021 pursuant to such
directions of the Division Bench, the request to revive the
restructuring proposal was rejected as the Corporate Debtor had
repeatedly failed to satisfy key pre-implementation conditions,
including creation of a DSRA, maintenance of priority debt of Rs. 83
crore, and demonstration of Corporate Debtor’s power plant
successfully running at installed capacity continuously for 72 hours.
9. Thereafter, the Corporate Debtor took out IA No. 1020/2022 inter alia
for a declaration that the restructuring proposals dated 29.09.2020
13
MAT 626/2021, order dated 07.10.2021.
Page 4 of 27
14
and 14.01.2021 were valid and binding inter se parties and
dismissal of the Section 7 application. During the pendency of the
said IA, Corporate Debtor claimed various sums had been accepted
nd
by 2 Respondent in repayment of the debt which was to be
nd
liquidated by 2042 as per the 2 restructuring proposal. The
Corporate Debtor also filed IA No. 828/2023, praying that
inter alia
the date of default as per restructuring agreement dated 21.02.2020
squarely fell in the period covered under Section 10A, IBC. After
hearing the parties, by order dated 02.01.2024, the Adjudicating
Authority dismissed IA No. 1020/2022 and IA No. 828/2023, and
admitted the Section 7 application initiating CIRP.
10. Being aggrieved by the admission order, Appellant preferred appeal
before NCLAT which came to be dismissed vide the impugned order
and has been challenged before this Court.
PROCEEDINGS PENDING THE APPEAL
11. During the proceedings before this Court, Appellant took out IA No.
15
84962/2024 seeking directions to the Committee of Creditors to
consider its settlement proposal and for stay of CIRP. On 03.05.2024,
liberty was granted to Appellant to submit a settlement proposal for
14 nd
On 14.01.2021, the 2 restructuring proposal was approved by Power Finance
Corporation Ltd., which is another financial creditor of the Corporate Debtor.
15
Hereinafter “CoC”.
Page 5 of 27
consideration in accordance with law. Thereafter, Appellant made
three settlement proposals of Rs. 1,101.56 crore, Rs. 1,450 crore, and
Rs. 1,601.29 crore, all of which were rejected by the CoC by
overwhelming majorities. CoC rejected the settlement proposal citing
the Corporate Debtor’s repeated failure to implement earlier
restructuring plans and expressing doubts about the Appellant’s
ability to pay, particularly in light of letter dated 13.08.2024 by SREI
16
Equipment Finance Ltd.’s alleging loan dues of Rs. 633 crore
payable by the Appellant. The CoC also noted that the settlement
proposals were being made by Appellant, the erstwhile promoter
responsible for the Corporate Debtor’s default in the first place.
12. On 29.10.2024, when the CoC rejected the Appellant’s third
settlement proposal, it simultaneously approved the resolution plan
17 st 18
of Damodar Valley Corporation. 1 Respondent moved an
application under Section 31, IBC before the Adjudicating Authority
seeking final approval of DVC’s resolution plan. Appellant filed
objections challenging both the CoC’s approval of DVC’s plan and
rejection of the Appellant’s third settlement proposal, and these
issues are still pending before the Adjudicating Authority.
16
Hereinafter “SEFL”, which is the sole secured financial creditor of Power Trust, the
Appellant.
17
Hereinafter “DVC/successful Resolution Applicant”
18
Hereinafter “Interim Resolution Professional”.
Page 6 of 27
13. Thereafter, the Appellant placed fourth (Rs.1,606.86 crore) and fifth
(Rs.1,671.86 crore) settlement proposals before the CoC on
08.07.2025 and 20.07.2025 respectively, and both were rejected.
14. On 12.09.2025, this Court stayed the CIRP on the condition that the
Appellant deposit Rs. 25 crore and furnish a bank guarantee of Rs.
100 crore, and the Appellant deposited Rs. 25 crore with the Registry
of this Court. By order dated 23.09.2025, the stay was continued and
the bank guarantee requirement was substituted by a further deposit
of Rs.100 crore, which was also deposited, taking the total deposit to
19
Rs.125 crore. During these proceedings, DVC was impleaded and
20
sought vacatur of the stay citing serious prejudice and economic
hardship due to stalling of the CIRP. Additionally, SEFL’s application
21
to intervene was allowed whereby they sought release of the Rs.125
crore deposit towards the Appellant’s alleged dues, contending that
the Appellant must first clear liabilities to SEFL before seeking to fund
settlement plans for the Corporate Debtor.
ARGUMENTS AT THE BAR
15. The Appellant argues that the CIRP is barred by Section 10A, IBC
which prohibits initiation of CIRP for defaults occurring between
25.03.2020 and 24.03.2021. Although the Section 7 application
19
IA No. 240917/2025.
20
IA No. 240982/2025.
21
IA No. 260460/2025.
Page 7 of 27
attributes a default date of 31.03.2018 under the Common Loan
Agreement dated 19.06.2013, Appellant submits that the first
restructuring agreement dated 21.02.2020 reset the repayment
schedule. As per the revised terms, interest payments were to
commence on 30.06.2020 and the first instalment was due on
31.12.2020, thereby rendering the default date within the period
envisaged in the Section 10A window.
16. It is also argued that the restructuring proposals dated 21.02.2020
and 29.09.2020 were final and binding between the parties and had
nd
novated the earlier common loan agreement dated 19.06.2013. 2
Respondent had received a sum of Rs. 50 crore in December, 2021
without demur and had not controverted the Corporate Debtor’s letter
dated 24.12.2021 stating “your receipt of the payment of the said sum
of Rs. 50 Crore will be deemed and constructed by us to be an
This amounted
acceptance by you of the proposal contained herein”.
nd
to a deemed approval of the 2 restructuring proposal dated
29.09.2020. No letter of termination of the restructuring proposal due
to non-fulfilment of pre-implementation conditions was issued. The
restructuring proposals envisaged repayment of loan in instalments
till 2042 and there is no provision in these agreements that on failure
of payment of any instalment the entire liability would stand revived.
Notwithstanding these facts, both the Adjudicating Authority and
NCLAT incorrectly held the restructuring proposals dated 21.02.2020
Page 8 of 27
and 29.09.2020 were not final and binding and the debt had become
due and payable.
17. It is further contended that the Corporate Debtor is a running and
viable power project which cannot be treated as insolvent. The
Corporate Debtor has a subsisting PPA for 25 years with WBSEDCL
and has raised bills of about Rs. 906 crore between 01.11.2024 to
31.03.2025. It has a continuing fuel supply arrangement with
Mahanadi Coalfields Ltd. under the SHAKTI Scheme, and had earned
an EBIDTA of Rs. 20 crore per month during the CIRP. In this factual
22
matrix, relying on Vidarbha Industries Power Ltd. v. Axis Bank Ltd.,
it is contended that the Section 7 application ought not to have been
admitted.
18. Finally, it is argued that the settlement plan submitted by the
Appellant is more viable and about Rs. 177 crore higher than that of
the successful Resolution Applicant. Given this situation, CIRP may
be kept in abeyance and CoC be directed to consider the settlement
plan proposed by the Appellant.
19. To the contrary, the Respondents submit that the Appellant’s reliance
on Section 10A is misconceived. According to the Respondents, the
restructuring proposals dated 21.02.2020 and 29.09.2020 never
22
(2022) 8 SCC 352.
Page 9 of 27
ripened into binding arrangements because the Corporate Debtor
failed to satisfy the pre-implementation conditions. Once the
restructuring failed at that threshold stage, the date of default cannot
be shifted by referring to repayment schedules contemplated under
those unimplemented proposals. Even otherwise as per the
st
Appellant’s case, the 1 restructuring proposal had been subsumed
nd
in the 2 restructuring proposal, wherein the first instalment fell due
on 31.03.2021 beyond the Section 10A window.
20. The Respondents further contend that the Appellant’s case of
novation is unsustainable for the same reason. As the pre-
implementation conditions were not fulfilled, the proposals did not
crystallise into enforceable agreements, and there was no novation of
the original financing terms. The Respondents submit that
subsequent part payments made towards an existing debt do not
revive a failed restructuring nor do they satisfy the debt in full
justifying the dismissal of the Section 7 application.
21. The Respondents also submit that the Appellant’s emphasis on the
Corporate Debtor’s alleged viability is legally misplaced at the
admission stage under Section 7, IBC. They contend that the
Adjudicating Authority’s role at that stage is limited to examining
whether a financial debt exists and whether a default has occurred,
and once those requirements are met, the Adjudicating Authority has
Page 10 of 27
scarcely any discretion to refuse admission. Proceedings under
Section 7 cannot be expanded into a broad inquiry on business
viability, equities, or surrounding circumstances. Reliance is placed
23
on Innoventive Industries Ltd. v. ICICI Bank and M. Suresh Kumar
24
Reddy v. Canara Bank & Ors.
22. The Respondents submit that the Appellant’s settlement proposal
cannot interdict the CIRP unless such proposal secures approval of
90% of the CoC. In the present case, at the CoC meeting on
29.10.2024, the successful Resolution Applicant’s plan was approved
by 99.92% voting, while the Appellant’s settlement proposals have
been repeatedly rejected by overwhelming majority. It is well settled
that the commercial wisdom of the CoC is non-justiciable. They assert
that the settlement proposals pressed by the Appellant after
29.10.2024 are merely opportunistic attempts to disrupt CIRP, and
therefore do not warrant any consideration.
ANALYSIS
23. Analysing the submissions of the parties, it appears the Appellant
has assailed the admission of Section 7 application on the following
issues:
23
(2018) 1 SCC 407.
24
(2023) 8 SCC 387.
Page 11 of 27
i. Whether date of default fell between 25.03.2020 to 24.03.2021,
and was thereby barred under Section 10A, IBC?
st
ii. Whether common loan agreement had been novated by 1
restructuring agreement dated 21.02.2020, which was followed
nd
by the 2 restructuring agreement dated 29.09.2020, envisaging
the repayment of debt in monthly instalments till 31.12.2042
and there was no existing debt due and payable by the Corporate
Debtor at the time of admission of the Section 7 application?
iii. Whether the Adjudicating Authority ought not to have admitted
the Section 7 application mechanically without assessing the
viability of the Corporate Debtor as an ongoing concern and its
ability to repay the debts, in view of Vidarbha (supra)?
24. Without prejudice to the aforesaid, it has also been contended that
the settlement proposals given by the Appellant are more viable than
that of the successful Resolution Applicant and accordingly, the CIRP
ought to be kept in abeyance and such settlement proposal be
favourably considered by the CoC.
A. Bar under Section 10A, IBC
25. Firstly, we take up the issue with regard to admission of the Section
7 application. In our considered view, the plea of bar under Section
10A, IBC is a non-starter. In the backdrop of outbreak of COVID-19
Page 12 of 27
pandemic, as an ameliorative measure, Section 10A was incorporated
in the IBC. The provision barred initiation of CIRP against a corporate
debtor in the event the default arose on or after 25.03.2020, for a
period of 6 months or such period not exceeding one year as may be
notified. It may be noted that by notification the government extended
25
the embargo till 24.03.2021. Explanation to the Section, however,
clarified that the bar will not apply to any default committed before
25.03.2020.
nd
26. In the Section 7 application, 2 Respondent’s case is that the
Corporate Debtor had defaulted under the common loan agreement
dated 19.06.2013 on 31.03.2018, much prior to the commencement
of the Section 10A bar. Controverting this stance, Appellant would
argue that the common loan agreement had been subsequently
st
restructured vide the 1 restructuring proposal dated 21.02.2020,
whereby the first instalment became payable on 31.12.2020,
attracting the prohibition under Section 10A. This argument is wholly
st
misconceived. Even if the Appellant’s case is assumed that the 1
restructuring plan had been accepted, the same was subsumed in
nd
the 2 restructuring plan dated 29.09.2020 whereby the first
instalment fell due on 31.03.2021, beyond the Section 10A period
which operated from 25.03.2020 to 24.03.2021.
25
Notification S.O. 4638(E) dated December 22, 2020, Ministry of Corporate Affairs.
Page 13 of 27
27. That apart, we are in wholesome agreement with the NCLAT’s finding
that the restructuring proposals had not fructified into valid
agreements novating the original contract. Both the restructuring
proposals were underpinned on pre-implementation conditions inter
alia,
a. obtaining a favourable tariff order from WBERC by 28.02.2021;
b. creating an initial DSRA;
c. demonstrating Corporate Debtor’s power plant successfully
running at installed capacity continuously for 72 hours;
d. making available a priority debt of Rs. 83 crore and working
capital of Rs.125 crore.
These pre-conditions had not been complied with and even the
subsequent tariff order dated 31.05.2021 did not provide adequate
leverage to persuade the lenders to accept the restructuring proposals
in their meeting convened on 11.11.2021 pursuant to High Court’s
direction vide order dated 07.10.2021. In such view of the matter, the
date of default would relate to 31.03.2018 as per the Section 7
application, and the proceeding cannot be held to be barred in light
of the Explanation to Section 10A, IBC.
Page 14 of 27
B. Validity of CIRP Admission
28. The other aspect on which the Appellant has heavily relied is the
acceptance of various sums of money paid by the Corporate Debtor
st nd
purportedly under the 1 and 2 restructuring proposals, which
according to them amounts to deemed approval of such proposal. As
discussed earlier, such argument flies in the face of the fact that the
nd
2 Respondent had resolutely maintained and rightly so, that the
restructuring proposals were underpinned on pre-implementation
conditions which the Corporate Debtor had failed to fulfil. Under such
circumstances, receipt of various sums of money would not amount
to acceptance of the restructuring proposals, thereby novating the
earlier loan agreement. Neither would such part payments constitute
full satisfaction of the existing debt so as to render the Section 7
application inadmissible.
29. It has also been vociferously contended that the Corporate Debtor is
an ongoing concern and does not lack the ability to repay the debt. It
has a subsisting PPA for 25 years with WBSEDCL, and has raised
bills of Rs. 906 crore from 01.11.2024 to 31.03.2025. It also has a
continuous fuel supply arrangement with Mahanadi Coalfields Ltd.
under the SHAKTI scheme and had earned EBIDTA of Rs. 20 crore
per month during the CIRP. These facts though attractive at first
Page 15 of 27
blush, do not yield either legal or factual justification to rebut the
admission of the Section 7 application.
30. On the legal score, one must bear in mind the scope and purpose for
which IBC was promulgated. The main objective of its enactment was
to create a complete code for easy, prompt and seamless resolution
of insolvency process and thereby ensure that the net worth of the
corporate debtor is not dissipated and the entity is salvaged from
corporate death through a viable resolution plan accepted by its CoC.
The Code prescribes whenever a corporate debtor defaults on a debt
that is due and payable, an insolvency process may be initiated.
Section 3(12) defines “default” as non-payment of a debt which has
become due and payable, and includes default in respect of a part or
instalment thereof. Such insolvency process may be initiated either
by the corporate debtor itself, or by its creditors who are classified as
financial creditor or operational creditor. “Financial creditor” is
defined as any person to whom a financial debt is owed and includes
26
a person to whom such debt has been legally assigned. A “financial
debt” means a debt along with interest if any, which is disbursed
against the consideration for time value of money and includes money
27
borrowed against payment of interest. “Operational creditor” is
defined as a person to whom an operational debt is owed and includes
26
Section 5(7), IBC.
27
Section 5(8), IBC.
Page 16 of 27
28
any person to whom such debt has been legally assigned.
“Operational debt” is a claim in respect of the provision of goods or
services including employment or a debt in respect of payment of
dues arising under any law for the time being in force and payable to
29
the Central or State government, or any local authority.
30
31. In Swiss Ribbons (P) Ltd. v. Union of India , such classification of
creditors as financial creditors and operational creditors has been
held to be constitutionally valid. The Bench underscored the essential
differences between a financial creditor and operational creditor and
held that financial creditors were mostly secured creditors like banks
and financial institutions who extended finance to enable a corporate
debtor to set up and/or operate its business. Such credit is extended
to a corporate debtor under well-defined loan agreements having
specified repayment schedules and reserving rights to recall the loan
in case of default or restructure the same enabling a corporate debtor
to tide over unforeseen financial stress. On the contrary, operational
creditors are mostly unsecured creditors and their claims are
relatable to supply of goods and services in the operation of the
business. Ordinarily, operational debts are not based on admitted
documents and the possibility of genuine disputes with regard to
such debts is much higher compared to financial debts.
28
Section 5(20), IBC.
29
Section 5(21), IBC.
30
(2019) 4 SCC 17, Para 50-51.
Page 17 of 27
32. In light of such classification, the Code makes a distinction in the
manner in which an insolvency process may be initiated by a financial
creditor under Section 7, IBC in contradistinction to an operational
creditor under Section 8 and 9, IBC. Unlike an operational creditor,
a financial creditor may trigger an insolvency process under Section
7 in respect of default of any financial debt, whether owed to itself or
to any other financial creditor. While the financial creditor may
directly file an application under Section 7 setting out the particulars
31
of the financial debt and evidence of default, the operational
creditor, on the occurrence of a default, is to first deliver a demand
notice of the unpaid debt to a corporate debtor and the latter may
within 10 days of receipt of such demand notice bring to the notice of
the operational creditor the existence of a dispute or record the
pendency of a pre-existing suit or arbitration proceeding in respect of
such debt. Once a corporate debtor demonstrates a dispute regarding
the existence of the debt, the insolvency process stands aborted vis-
à-vis the operational creditor. But when the financial creditor initiates
the insolvency process for the purposes of admission, the
Adjudicating Authority is only to ascertain the existence of a default
31
Rule 4, Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules,
2016, read with Section 7(2), IBC prescribes the manner an application under Section
7, IBC, must be made. A financial creditor must make an application as in Form 1,
which consists five parts. Part I, II and III requires the particulars of the applicant, the
corporate debtor and the proposed resolution applicant respectively. Part IV requires
the particulars of the financial debt. Part V requires documents, records and evidence
of default.
Page 18 of 27
from the records of the information utility or the evidence furnished
by the financial creditor within fourteen days from the receipt of such
application. At this stage, neither is a corporate debtor entitled nor is
the Adjudicating Authority required to examine any dispute regarding
the existence of such debt. This significantly reduces the scope of
enquiry at the stage of a time-bound admission of an insolvency
process by a financial creditor which has been succinctly summed up
in Innoventive (supra):-
“ 30 …… in the case of a corporate debtor who commits
a default of a financial debt, the adjudicating
authority has merely to see the records of the
information utility or other evidence produced by the
financial creditor to satisfy itself that a default has
occurred. It is of no matter that the debt is disputed so
long as the debt is “due” i.e. payable unless
interdicted by some law or has not yet become due in
the sense that it is payable at some future date. It is
only when this is proved to the satisfaction of the
adjudicating authority that the adjudicating authority
may reject an application and not otherwise.”
33. Reiterating the ratio in Innoventive (supra), this Court in ES
32
Krishnamurthy v. Bharath Hi-Tech Builders (P) Ltd. held as follows:
“ 34. The adjudicating authority has clearly acted
outside the terms of its jurisdiction under Section 7(5)
32
(2022) 3 SCC 161.
Page 19 of 27
IBC. The adjudicating authority is empowered only to
verify whether a default has occurred or if a default
has not occurred. Based upon its decision, the
adjudicating authority must then either admit or reject
an application, respectively. These are the only two
courses of action which are open to the adjudicating
authority in accordance with Section 7(5). The
adjudicating authority cannot compel a party to the
proceedings before it to settle a dispute.”
34. In a similar vein, the Adjudicating Authority is not required to go into
the inability of a corporate debtor to pay its debt. This is a clear
departure from the scheme of winding up envisaged under Section
433(e) of the erstwhile Companies Act, 1956 which required the
Adjudicating Authority to come to a finding with regard to the inability
of the company to pay the debt and thereby arrive at a requisite
satisfaction whether it is just and equitable to wind up the company.
The Code restricts the scope of enquiry for admission of an insolvency
process by a financial creditor merely to the existence of default of a
debt due and payable and nothing more. The legislative intent behind
such prompt and summary intervention is “
to ensure revival and
continuation of the corporate debtor by protecting the corporate debtor
33
from its own management and from a corporate death by liquidation.”
33
Swiss Ribbons (supra), Para 28.
Page 20 of 27
35. The Appellant has heavily relied on Vidarbha (supra) to argue that the
Adjudicating Authority has ample discretion to apply its mind to
relevant factors including the feasibility of initiation of insolvency
process notwithstanding the existence of default on a debt due and
payable by the Corporate Debtor. In Vidarbha (supra), this Court
observed:-
“ 61. In our view, the Appellate Authority (NCLAT)
erred in holding that the adjudicating authority (NCLT)
was only required to see whether there had been a
debt and the corporate debtor had defaulted in
making repayment of the debt, and that these two
aspects, if satisfied, would trigger the CIRP. The
existence of a financial debt and default in payment
thereof only gave the financial creditor the right to
apply for initiation of CIRP. The adjudicating authority
(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 MERC's appeal,
pending in this Court, order of Aptel referred to above
and the overall financial health and viability of the
corporate debtor under its existing management.
… …………………………………………………………… …
90. We are clearly of the view 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
Page 21 of 27
option to the adjudicating authority (NCLT) but to
admit the petition under Section 7 IBC .”
36. However, in review, this Court clarified that observations made in
Paragraph 90 are restricted to the facts of Vidarbha (supra):-
“ 6. The elucidation in para 90 and other paragraphs
[of the judgment under review] 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
34
of a particular case.”
37. Finally, the apparent dichotomy between Innoventive (supra) and
Vidarbha (supra) was set at rest in M. Suresh Kumar Reddy (supra),
wherein this Court observed:-
“ 14. Thus, it was clarified by the order in review that
the decision in Vidarbha Industries was in the setting
of facts of the case before this Court. Hence, the
decision in Vidarbha Industries cannot be read and
understood as taking a view which is contrary to the
view taken in Innoventive Industries and E.S.
Krishnamurthy. The view taken in Innoventive
Industries still holds good.” (emphasis supplied)
34
Axis Bank Ltd. v. Vidarbha Industries Power Ltd . (2023) 7 SCC 321.
Page 22 of 27
38. In light of the ratio in M. Suresh Kumar Reddy (supra) there is no cavil
that the ratio in (supra) lays down the correct proposition
Innoventive
of law and the observations in Vidarbha (supra) were made in the
facts of the case and do not operate as binding precedent.
39. Even otherwise on facts, Vidarbha (supra) does not come to the aid
of the Appellant. In Vidarbha (supra), this Court had taken note of an
35
award passed by APTEL in favour of the corporate debtor which far
exceeded the claim of the financial creditor, and held in the setting of
such facts, initiation of CIRP was unwarranted. In the present case,
Appellant’s contention regarding Corporate Debtor’s viability is highly
dubious. Though the Corporate Debtor strenuously demonstrates its
commercial viability, the NCLAT has noted that the extent of
outstanding liability as on 02.01.2024 was Rs. 3103.31 crore, which
far exceeds the bills raised on WBSEDCL to the tune of Rs 906 crore
and EBITDA of Rs. 20 crore per month during the CIRP.
40. For these reasons, we are of the opinion the admission of the Section
7 application was lawful and does not call for interference.
C. Settlement Proposals
41. Finally, the Appellant in a last-ditch effort, has prayed that the
settlement proposal offered by them is more viable than that of the
35
Appellate Tribunal for Electricity.
Page 23 of 27
successful Resolution Applicant, and on such score the CIRP may be
stayed as per Section 12A. During the pendency of the appeal, the
CIRP had continued and by order dated 03.05.2024, this Court gave
liberty to the Appellant to submit settlement proposal to the CoC.
Appellant made three settlement proposals, of Rs. 1,101.56 crore, Rs.
1,450 crore, and Rs. 1,601.29 crore, all of which were rejected by
CoC. Such rejection had been prompted due to repeated failure on
part of the Corporate Debtor to implement earlier restructuring plans
and the viability of the Appellant’s proposal in light of letter written
by SEFL alleging a loan liability payable by the Appellant.
rd
42. On 29.10.2024, while rejecting Appellant’s 3 settlement proposal,
the CoC approved the resolution plan of DVC. Thereafter, Appellant’s
th th
4 and 5 settlement proposals worth Rs. 1,606.86 crore and Rs.
1,671.86 crore respectively were also rejected by the CoC. Appellant
th
argues its 5 settlement plan is offering to pay Rs. 1,671.86 crore and
is more viable than the accepted resolution plan submitted by DVC.
It is trite law that the commercial wisdom of the CoC to accept one
resolution plan over another cannot be second-guessed by the
36
Court.
36
Committee of Creditors of Essar Steel India Ltd v. Satish Kumar Gupta and Others,
(2020) 8 SCC 531, Para 62-64; Ebix Singapore (P) Ltd. v. Educomp Solutions Ltd. (CoC) ,
(2022) 2 SCC 401, Para 157-158.
Page 24 of 27
37
43. Prior to the introduction of Section 12A and Regulation 30A, there
was no express provision in the IBC to withdraw the insolvency
process once the CIRP was admitted. In such situations, this Court
invoked Article 142 to do complete justice and arrive at just and
38
equitable outcome by withdrawing CIRP. Taking note of such
lacuna, the legislature introduced Section 12A in the Code providing
the statutory framework for withdrawal and settlement of claims post
constitution of CoC when 90% of the voting share in the CoC approves
such plan. Similarly, Regulation 30A was amended to provide for a
detailed procedure for withdrawal/ settlement of claims after
admission but prior to appointment of CoC. In light of such statutory
architecture in place, this Court in GLAS Trust Co. LLC v. BYJU
39
Raveendran , held reference to inherent powers under Rule 11,
40
NCLT/NCLAT Rules, or under Article 142 to direct post-admission
withdrawal/settlement of claims no longer arises. However, we
hasten to add that our observation may not be construed as a
complete bar on the plenary powers under Article 142 to pass
directions during CIRP in appropriate cases to do complete justice.
37
IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
38
Uttara Foods & Feeds (P) Ltd. v. Mona Pharmachem , (2018) 15 SCC 587; Lokhandwala
, (2018) 15
Kataria Construction (P) Ltd. v. Nisus Finance and Investment Managers LLP
SCC 589.
39
(2025) 3 SCC 625, Para 64.
40
National Company Law Tribunal Rules, 2016, and National Company Law Appellate
Tribunal Rules, 2016.
Page 25 of 27
44. Notwithstanding the above stated statutory scheme and merely as a
concessionary measure, this Court stalled the CIRP vide order dated
12.09.2025 subject to the Appellant depositing Rs. 25 crore and
furnishing a bank guarantee of Rs. 100 crore. At this stage, DVC
intervened and vehemently opposed delay in final approval of its
resolution plan. Having considered these concerns of the successful
Resolution Applicant, we are in agreement with the Respondents that
any further direction to stall the CIRP on the plea of further
settlement proposals at the behest of the Appellant would be
prejudicial to the interest of a swift and timely resolution of insolvency
process.
CONCLUSION
45. In light of the aforesaid discussion, the appeal is dismissed and the
stay on CIRP vide order dated 12.09.2025 is vacated.
IA NO. 260460/2025
46. SEFL, a secured creditor of the Appellant, has prayed for release of
deposits amounting to Rs.125 crore made by the Appellant as a
condition of the stay granted by this Court. SEFL contends that an
order restraining the alienation of shares of Corporate Debtor held by
Appellant was passed by the High Court at Calcutta in an application
Page 26 of 27
41
under Section 9, Arbitration & Conciliation Act, 1996. We are
unwilling to accede to such plea as no award, final or interim,
crystallising SEFL’s claim against the Appellant has been placed on
record and the aforesaid deposit was made as a condition to stay the
CIRP of the Corporate Debtor and not to secure any claim against the
Appellant. Given these circumstances, SEFL’s application stands
rejected. Registry is directed to refund the amount of Rs.125 crore
kept as fixed deposit along with interest accrued thereon to the
Appellant.
47. Pending application(s), if any, also shall stand disposed of.
………………………………………., CJI
(SURYA KANT)
………………………………………, J
(JOYMALYA BAGCHI)
………………………………………, J
(VIPUL M. PANCHOLI)
NEW DELHI,
FEBRUARY 18, 2026.
41
Arbitration Petition (Commercial) No. 857/2024, order dated 16.12.2024.
Page 27 of 27