Section 7(5)(a) IBC: Supreme Court rejects review plea against Vidarbha Industries judgment which held NCLT power to admit CIRP discretionary

The Supreme Court recently refused to review its judgment in Vidarbha Industries Power Ltd. v. Axis Bank Ltd. (2022), which had held that power of the National Company Law Tribunal (NCLT) to admit an application for initiation of the corporate insolvency resolution process (CIRP) by a financial creditor under Section 7(5)(a) of the Insolvency and Bankruptcy Code, is discretionary and not mandatory [Axis Bank Ltd. v. Vidarbha Industries Power Ltd.]..A division bench of Justices Indira Banerjee and JK Maheshwari refused to accept the argument made by the Solicitor General (SG) Tushar Mehta that certain observations made in the Vidarbha 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 Court stated that the apprehension of the Solicitor General appears to be 'misconceived' since the observations made in the Vidarbha judgment were in the context of facts of the case.In this regard, the Court underlined that the observations made in a judgment should not be read as provisions of a statute."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," the Court observed while rejecting the review plea. .Judgments and observations in judgments are not to be read as provisions of statute.Supreme Court.SG Tushar Mehta placed reliance on the judgment in ES Krishnamurthy and Others v. Bharath Hi-Tech Builders Pvt. Ltd. (2022) which said that under Section 7(5) the NCLT must either admit or reject an application for CIRP and it cannot compel a party to the proceedings before it to settle a dispute. However, the Court said that in ES Krishnamurthy case the question of whether Section 7(5) was mandatory or discretionary was not under consideration. "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 Court ruled.It, therefore, concluded that no grounds were made out for the review of the judgment and rejected the review petition..In Vidharbha Industries case, the apex court had observed that it is not mandatory for the adjudicating authority to mandatorily admit the insolvency application filed by the financial creditor and to initiate Corporate Insolvency Resolution Process (CIRP) even if corporate debtor is at fault."...when admission is opposed on the ground of existence of an award or a decree in favour of the Corporate Debtor, and the Awarded/decretal amount exceeds the amount of the debt, the Adjudicating Authority would have to exercise its discretion under Section 7(5)(a) of the IBC to keep the admission of the application of the Financial Creditor in abeyance, unless there is good reason not to do so," the Court had observed..Senior Advocate Jaideep Gupta with advocates with Venkatesh, Suhael Buttan, Vikas Maini, and Abhishek Nangia of SKV Law Offices represented VIPL..[Read Order]