The Discretion Dilemma: Revisiting Vidarbha Industries Power Ltd. V. Axis Bank Ltd. And The Uncertain Contours Of Adjudicatory Power Under Section 7 Of The Insolvency And Bankruptcy Code, 2016
- IJLLR Journal
- 8 minutes ago
- 1 min read
Neha Thakur, B.A. LL.B. (Hons.), Kirit P. Mehta School of Law, NMIMS, Mumbai
ABSTRACT
The Supreme Court's decision in Vidarbha Industries Power Ltd. v. Axis Bank Ltd. marks one of the most consequential and most contested interventions in the jurisprudence surrounding the Insolvency and Bankruptcy Code, 2016 ("IBC" or "the Code"). By reading the word "may" in Section 7(5)(a) of the Code as conferring genuine discretion on the Adjudicating Authority, the Court departed from nearly five years of settled precedent that had treated the existence of a financial debt and default as a virtually mechanical trigger for admission of a corporate debtor into the Corporate Insolvency Resolution Process. This article undertakes a doctrinal case study of Vidarbha Industries, tracing its factual matrix, its reasoning, and the considerable disruption it caused to the creditor-in-control philosophy that underlies the Code. It examines the divergent responses of the National Company Law Tribunal and the National Company Law Appellate Tribunal in the ten months that followed the judgment, and evaluates the Supreme Court's subsequent attempt at course correction in M. Suresh Kumar Reddy v. Canara Bank. The article argues that while Suresh Kumar Reddy has substantially restored the pre-2022 position, it has not and, given the doctrine of precedent, perhaps cannot formally overrule Vidarbha Industries, leaving open an interpretive fault line that continues to be litigated. The article closes with recommendations for legislative clarification of Section 7(5)(a) to prevent recurrence of the uncertainty that this case study documents.
Keywords: Insolvency and Bankruptcy Code, 2016; Section 7; Corporate Insolvency Resolution Process; Adjudicating Authority; discretion; creditor- in-control model; Vidarbha Industries; NCLT.
