Case Note & Summary
The Supreme Court dismissed an appeal challenging the initiation of corporate insolvency resolution process (CIRP) against Hiranmaye Energy Ltd. under the Insolvency and Bankruptcy Code, 2016 (IBC). The Court upheld the NCLAT order which had affirmed the NCLT decision admitting the Section 7 application filed by REC Ltd. (financial creditor). The Court found that the Corporate Debtor had defaulted on loan repayments and failed to satisfy key pre-implementation conditions of restructuring agreements, particularly the creation of Debt Service Revenue Account (DSRA), maintenance of priority debt, and demonstration of power plant operational capacity. The Appellant's settlement proposals were rejected by the Committee of Creditors (CoC), which instead approved the resolution plan of Damodar Valley Corporation (DVC). The Court imposed costs of Rs. 5 lakhs on the Appellant for frivolous litigation.
Headnote
The Supreme Court dismissed the appeal filed by Power Trust (promoter of Hiranmaye Energy Ltd.) challenging the NCLAT order dated 25.01.2024 which upheld the NCLT order dated 02.01.2024 admitting Section 7 application under Insolvency and Bankruptcy Code, 2016 (IBC) filed by REC Ltd. -- The Court held that the Corporate Debtor had committed default in repayment of loans and failed to comply with pre-implementation conditions of restructuring proposals -- The financial creditor validly initiated CIRP proceedings as the default was established and restructuring conditions remained unfulfilled -- The Court found no merit in the Appellant's contention that the date of default fell within the period covered under Section 10A IBC -- Settlement proposals made by the Appellant during proceedings were rejected by the Committee of Creditors (CoC) which approved the resolution plan of Damodar Valley Corporation (DVC) -- The appeal was dismissed with costs quantified at Rs. 5 lakhs to be paid to the Supreme Court Legal Services Committee
Issue of Consideration
The Issue of consideration was whether the National Company Law Appellate Tribunal (NCLAT) erred in upholding the admission of Section 7 application under Insolvency and Bankruptcy Code, 2016 (IBC) and initiation of corporate insolvency resolution process (CIRP) against Hiranmaye Energy Ltd.
Final Decision
The Supreme Court dismissed the appeal with costs quantified at Rs. 5 lakhs to be paid to the Supreme Court Legal Services Committee within four weeks -- The Court upheld the NCLAT order dated 25.01.2024 which affirmed the NCLT order admitting Section 7 application and initiating CIRP against Hiranmaye Energy Ltd.
Law Points
- Insolvency and Bankruptcy Code
- 2016 (IBC) provisions for corporate insolvency resolution process (CIRP) initiation
- Section 7 application requirements for financial creditors
- interpretation of default and restructuring agreements
- judicial review of NCLT/NCLAT orders under Section 62 IBC
- principles of corporate insolvency and creditor rights
Case Details
2026 LawText (SC) (02) 46
Civil Appeal No. 2211/2024
SURYA KANT CJI. J , JOYMALYA BAGCHI J. VIPUL M. PANCHOLI J.
Power Trust (Promoter of Hiranmaye Energy Ltd.)
Bhuvan Madan (Interim Resolution Professional of Hiranmaye Energy Ltd.) & Ors.
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Nature of Litigation
Civil appeal challenging corporate insolvency resolution process (CIRP) initiation under Insolvency and Bankruptcy Code, 2016 (IBC)
Remedy Sought
Appellant sought setting aside of NCLAT order dated 25.01.2024 which upheld NCLT order admitting Section 7 application and initiating CIRP against Corporate Debtor
Filing Reason
Appellant challenged admission of Section 7 application filed by REC Ltd. under IBC alleging default in loan repayment
Previous Decisions
NCLT Kolkata Bench admitted Section 7 application on 02.01.2024 -- NCLAT Principal Bench upheld NCLT order on 25.01.2024 -- Calcutta High Court Single Judge dismissed writ petition on 02.07.2021 -- Division Bench modified order on 07.10.2021 directing reconsideration of tariff order
Issues
Whether NCLAT erred in upholding admission of Section 7 application under IBC and initiation of CIRP against Corporate Debtor
Whether the Corporate Debtor's default fell within the period covered under Section 10A IBC
Whether settlement proposals by Appellant should have been accepted by Committee of Creditors
Submissions/Arguments
Appellant contended that restructuring proposals were valid and binding and date of default fell under Section 10A IBC period
Appellant argued that settlement proposals should have been considered by Committee of Creditors
Respondents maintained that Corporate Debtor committed default and failed to comply with restructuring conditions justifying CIRP initiation
Ratio Decidendi
Where a Corporate Debtor commits default in loan repayment and fails to comply with pre-implementation conditions of restructuring agreements, the financial creditor is entitled to initiate corporate insolvency resolution process (CIRP) under Section 7 of Insolvency and Bankruptcy Code, 2016 (IBC) -- Settlement proposals by promoters may be rejected by Committee of Creditors (CoC) when there is history of non-compliance and doubts about payment capacity -- The date of default for CIRP initiation is determined based on actual default occurrence rather than restructuring agreement timelines
Judgment Excerpts
Present appeal has been instituted by Power Trust, a promoter of Hiranmaye Energy Ltd. under Section 62, Insolvency and Bankruptcy Code, 2016 (IBC), challenging order dated 25.01.2024 by National Company Law Appellate Tribunal
The Corporate Debtor 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
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
Procedural History
19.06.2013: Common loan agreement executed -- 30.10.2015: Additional term loan facility availed -- 30.06.2018: Accounts classified as NPA -- 21.02.2020: First restructuring proposal approved -- 29.09.2020: Second restructuring proposal -- 05.06.2021: Section 7 application filed before NCLT -- 02.07.2021: Calcutta High Court Single Judge dismissed writ petition -- 07.10.2021: Division Bench modified order -- 11.11.2021: Lenders' meeting rejected restructuring revival -- 02.01.2024: NCLT admitted Section 7 application -- 25.01.2024: NCLAT upheld NCLT order -- 2024: Appeal filed before Supreme Court
Acts & Sections
- Insolvency and Bankruptcy Code, 2016: Section 7, Section 10A, Section 31, Section 62
