Adv. Bharath Nair Raghu
The title of this article is a quote from Benjamin Franklin who said, “Take time for all things; great haste makes great waste.” Although speed is of the essence in insolvency proceedings, speed should not lead to haste. This is an aspect considered in the Vidarbha Industries case[1]
Facts
The Appellant is a power generating company in Maharashtra, that operates a 600MW coal-fired thermal power plant. According to the Electricity Act, the State Electricity Regulatory Commission determines the tariffs charged by electricity-generating companies. The Appellant entered into a Power Procurement Agreement (PPA) with Reliance Industries Limited, but the rise in fuel costs led to an increase in coal procurement costs. In response, the Appellant applied to the Maharashtra Electricity Regulatory Commission (MERC) for a redetermination of tariffs. The application was disallowed by MERC, but the Appellant successfully appealed to the Appellate Tribunal for Electricity (APTEL) for an amount of 1730 Crores. MERC then appealed to the Supreme Court, where the case remains pending. In the meantime, Axis Bank filed an application under Section 7 of the Insolvency and Bankruptcy Code (IBC) for the initiation of a Corporate Insolvency Resolution Process for an amount of Rs. 533 crores from the Appellant.
The Respondent, on the other hand, claims that the Appellant is in default and the National Company Law Tribunal (NCLT) was right to decline the stay of proceedings under Section 7(5). The Respondent cites the Swiss Ribbons case[2], which holds that the trigger for a financial creditor's application is the non-payment of dues, and therefore, the Adjudicating Authority must accept the application once a default has been proven.
