Supreme Court: CIRP Cannot Be Stalled for Settlement Proposals Rejected by CoC; Commercial Wisdom Remains Paramount
The Supreme Court of India has reinforced the sanctity of the Corporate Insolvency Resolution Process (CIRP) timelines and the supremacy of the Committee of Creditors (CoC) in its recent judgment in the matter of Power Trust Vs Bhuvan Madan. The Apex Court dismissed an appeal seeking to delay the insolvency process based on settlement offers that had already been rejected by the CoC. The Court firmly held that the commercial wisdom of the CoC is non-justiciable and that proceedings cannot be kept in abeyance merely because a promoter submits a revised settlement proposal.
Factual Background of the Dispute
The case originated from a financial arrangement involving Hiranmaye Energy Ltd. (the Corporate Debtor) and REC Ltd. (the Financial Creditor). The Corporate Debtor had entered into a Common Loan Agreement on June 19, 2013, to secure a term loan of Rs. 1859 crore for establishing a thermal power plant in Haldia, West Bengal. Due to escalating costs, an additional facility of Rs. 446.97 crore was availed in 2015.
The account was classified as a Non-Performing Asset (NPA) on June 30, 2018, following payment defaults. Subsequently, the parties attempted to restructure the debt. A restructuring plan was proposed on February 21, 2020, and later revised on September 29, 2020. These proposals were contingent upon specific "pre-implementation conditions," which included:
- Obtaining a favorable tariff order from the West Bengal Electricity Regulatory Commission (WBERC).
- Creating a Debt Service Revenue Account (DSRA).
- Demonstrating the power plant's operation at installed capacity for 72 continuous hours.
- Infusing priority debt of Rs. 83 crore and working capital of Rs. 125 crore.