Case Law Details
GVK Energy Ltd Vs Axis Bank Limited (NCLAT Chennai)
In the case of M/s. GVK Energy Ltd Vs. Axis Bank Limited, adjudicated by the NCLAT Chennai, the fundamental question of hierarchy between the Insolvency and Bankruptcy Code (IBC) and the RBI directions was examined. The court was tasked with determining whether RBI guidelines or the IBC would hold precedence when discrepancies arose in their directives.
Axis Bank, along with other lenders, had sanctioned loans to GVK Energy. An inter-creditor agreement (ICA) was formed following RBI directions, wherein GVK Energy committed to quarterly repayments. However, upon default by GVK Energy, Axis Bank filed an application under section 7 of the IBC, which was accepted. GVK Energy contested this decision, arguing that as per the ICA, sanctioned under RBI directions, premature legal action by any lender was impermissible. In a significant ruling, the NCLAT emphasized that the IBC would have an overriding effect, and an RBI circular could not obstruct a financial creditor from pursuing their claims.
The verdict of the NCLAT Chennai in the case of GVK Energy Vs. Axis Bank Limited establishes an essential legal precedent, solidifying the paramountcy of the IBC over RBI directions. The ruling unequivocally communicates that in the event of conflicts, the IBC provisions would take precedence, ensuring the protection of financial creditors’ interests. This judgment provides valuable clarity for financial creditors in their pursuit of remedies under the IBC in the face of default by a corporate debtor.
FULL TEXT OF THE NCLAT JUDGMENT/ORDER
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