POWER TRUST (PROMOTOR OF HIRANMAYE ENERGY LTD.) v. BHUVAN MADAN (INTERIM RESOLUTION PROFESSIONAL OF HIRANMAYE ENERGY LTD.)
Limits of Section 10A Protection, Finality of CoC's Commercial Wisdom, and the Superiority of "Innoventive Industries" over "Vidarbha Industries" regarding Section 7 IBC Admission.
Court: Supreme Court of India
Citation: 2026 INSC 166
Decision Date: 18-02-2026
List of Laws
Insolvency and Bankruptcy Code, 2016; Section 10A, IBC (Suspension of initiation of CIRP); Section 7, IBC (Initiation of CIRP by financial creditor); Section 12A, IBC (Withdrawal of application); Indian Contract Act, 1872 (Novation under Section 62); Constitution of India, Article 142; Commercial Wisdom of the Committee of Creditors
- Facts: The Corporate Debtor, Hiranmaye Energy Ltd., availed term loans exceeding Rs. 2,300 crore from REC Ltd. but was classified as a Non-Performing Asset on 30.06.2018. Subsequent restructuring proposals in 2020 were initiated but remained subject to strict pre-implementation conditions, including a favorable tariff order and the creation of a Debt Service Revenue Account. The Corporate Debtor failed to meet these conditions. Consequently, the Financial Creditor filed a Section 7 application under the IBC. During the pendency of the Corporate Insolvency Resolution Process (CIRP), the Appellant (promoter) offered several settlement proposals, which were rejected by the Committee of Creditors (CoC) in favor of a resolution plan by Damodar Valley Corporation. The Appellant challenged the admission of CIRP on grounds of a Section 10A bar and the alleged commercial viability of the company.
- Procedural Posture: The NCLT admitted the Section 7 application, a decision upheld by the NCLAT. The Appellant then moved the Supreme Court under Section 62 of the IBC. During the appeal, the Court temporarily stayed the CIRP on the condition of a Rs. 125 crore deposit.
- Issue: Whether the initiation of CIRP was barred by Section 10A of the IBC; whether the restructuring proposals constituted a novation of the original debt; and whether the Adjudicating Authority must consider business viability before admitting a Section 7 application.
- Holding: The Supreme Court dismissed the appeal, holding that the Section 10A bar was inapplicable as the default occurred prior to the protected period; the restructuring proposals did not result in novation due to non-fulfillment of pre-conditions; and the commercial wisdom of the CoC is non-justiciable.
- Reasoning: The Court reasoned that Section 10A only protects defaults arising between 25.03.2020 and 24.03.2021; here, the original default was in 2018. Since pre-implementation conditions of the restructuring were never met, no new binding agreement replaced the original loan. Regarding viability, the Court clarified that the ratio in "Vidarbha Industries" was fact-specific and did not overrule "Innoventive Industries", which dictates that the NCLT only needs to verify the existence of debt and default. Finally, under Section 12A, a settlement requires 90% CoC approval; the Court cannot compel the CoC to accept a promoter’s settlement over a resolution plan.
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