Specifically on the facts of Vidarbha, the Bench observed that while disputes of the CD with the electricity regulator or the recipient of electricity may not be of much relevance, an award of the APTEL in favour of the CD could not be completely disregarded by the NCLT/NCLAT when it is claimed that, in terms of the award, an amount far exceeding the claim of the FC, is realisable by the CD.
It held that the existence of a financial debt and default in payment of such debt only gave the FC the right to apply for initiation of CIRP. The NCLT is required to “apply its mind to relevant factors” including the feasibility of initiation of CIRP, in this case, against an electricity generating company operated under statutory control, the impact of MERC’s appeal pending before the apex court, the order of APTEL and overall financial health and viability of the CD under its existing management.
Observing that it is not the object of the IBC “to penalize solvent companies, temporarily defaulting in repayment of its financial debts, by initiation of CIRP”, the Court held that Section 7(5)(a) of the IBC confers discretionary power on the NCLT to admit an application of an FC under Section 7 of the IBC. However, it added a note of caution for the NCLTs, observing that such discretionary power cannot be exercised arbitrarily or capriciously. The NCLT would have to consider the grounds made out by the CD against admission, on their own merits.
Source: Barandbench
