Case: Vidarbha Power Industries Limited Vs. Axis Bank Limited
Court: Supreme Court of India
Case Citation: (2020) 15 SCC 463
Brief Facts of the Case
Vidarbha Power Industries Limited (VPIL) had approached the National Company Law Tribunal (NCLT) under Section 7 of the Insolvency and Bankruptcy Code (IBC) to initiate insolvency proceedings against Axis Bank Limited, based on an alleged default in repayment of a loan. VPIL argued that Axis Bank had failed to pay the loan as per the agreed terms, thus leading to a financial default.
However, Axis Bank contested the petition, stating that there was no default on their part and that the loan was by the terms of the agreement. Axis Bank also argued that there was a lack of sufficient documentation to support the claims of default and that the petition filed by VPIL was not maintainable.
The NCLT had ruled in favor of VPIL, initiating insolvency proceedings against Axis Bank. Axis Bank challenged this decision by filing an appeal with the National Company Law Appellate Tribunal (NCLAT), which upheld the NCLT’s decision. The case was then escalated to the Supreme Court.
Final Judgment
The Supreme Court, after analyzing the case, concluded that the initiation of insolvency proceedings under Section 7 of the IBC must be based on a clear and substantiated default by the corporate debtor. The Court emphasized that the application for initiation of insolvency proceedings must be supported by clear evidence of a default in repayment, and the presence of such a default is a crucial prerequisite for proceeding with insolvency proceedings under the IBC.
In the final judgment, the Supreme Court dismissed the appeal filed by Axis Bank, affirming the NCLT and NCLAT’s decision to initiate insolvency proceedings against the bank. The Court held that the application by VPIL was maintainable and that the default was substantiated by sufficient documentation. The Supreme Court ruled that insolvency proceedings could be initiated in cases where there is clear evidence of default and where the claim is made by the provisions of the IBC.
Thus, the Supreme Court upheld the insolvency proceedings initiated against Axis Bank and affirmed the earlier rulings by the lower tribunals.