IDBI Bank Limited vs M/s GVK Energy Limited

Per : Sanjay Puri, Member (Technical)

This application, filed by IDBI Bank Ltd., the Financial Creditor (Applicant FC), seeks initiation of the Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), against M/s GVK Energy Limited, the Corporate Guarantor (Respondent CG) of M/s GVK Power (Goindwal Sahib) Ltd (GVK-Goindwal), the Principal Borrower.

The Applicant Financial Creditor had granted financial assistance to GVK-Goindwal towards its share in the consortium financing arrangement, by way of a Rupee Term Loan of Rs 733.85 crore for the purpose of setting up a coal-based thermal power plant at Goindwal Sahib, District Tarn Taran, Punjab, India. Additionally, working capital limits aggregating to Rs 153.75 crore, comprising fund-based limits, were sanctioned to meet the working capital requirements of GVK-Goindwal.

The Principal Borrower, GVK-Goindwal, executed various security documents, including Loan/Facility Agreements, Consortium Agreements, Deeds of Assignment, and Deeds of Hypothecation over all movable assets, and created mortgages over all immovable properties, in favour of the Financial Creditor and other consortium lenders to secure the repayment of the loan and credit facilities^{11.Page 2111 to 2810 of the Application}.

It is submitted that M/s GVK Energy Limited, the Respondent CG, acted as the Corporate Guarantor to secure the repayment of the financial assistance extended to GVK-Goindwal, and, in that capacity, executed a Deed of Corporate Guarantee^{22.Page 2811 to 2837 of the Application} dated 21.07.2017.

It is further submitted that the Principal Borrower, GVK-Goindwal, defaulted in the repayment of its debt obligations along with interest, resulting in its account being classified as a Non-Performing Asset (NPA) by the Financial Creditor on 28.02.2018, with effect from 31.07.2016 onwards.

The Applicant FC then recalled the credit facility and thereafter issued a notice dated 08.02.2019, calling upon the Respondent CG to pay by 15.02.2019 the outstanding amounts being a sum of Rs 989.66 crores as on 31.12.2018 with further interest and charges at contractual rates.

GVK-Goindwal is stated to have continued to default in meeting its loan obligations, and as of 01.03.2023, it is claimed that a sum of Rs. 1,494.94 crore remained outstanding^{33.Axis Bank, one of the consortium banks, filed a Section 7 Application against the Corporate Debtor/Borrower and the same was admitted by this Tribunal vide its Order dated 10.10.2022. It is submitted that an amount of Rs.} and payable to the Applicant FC. Despite having the contractual right to demand repayment, it is asserted that the Financial Creditor has not been repaid by the Corporate Guarantor upon demand. In view of non-payment by the Respondent CG pursuant thereon, this application has been filed^{44.The Application is dated 28.03.2023, whereas it was e-filed on 08.04.2023 and physical copy filed on 11.04.2023} on 11.04.2023, seeking initiation of the CIRP against the Corporate Guarantor under Section 7 of the IBC.

In response, on behalf of the Respondent, a counter reply^{55.Another counter-Reply was filed on 31.10.2023, with materially same contents. The counter-reply filed later on} was filed on 03.11.2023. The preliminary objection was that of bland denial of the default and the liability to pay to the FC the amount of Rs 1494.94 Crores as on 01.03.2023. Additionally, the Corporate Guarantor filed Interlocutory Applications IA No. 1988/2023 and IA No. 192/2025 (including rejoinders to the counters filed by Applicant FC), raising further objections to the Section 7 application filed by the FC. All these contentions are considered in the following paragraphs.

The first principal objection raised in the counter reply is that the application, having been filed in April 2023, is barred by limitation, as the

has been realised by the FC as per the waterfall mechanism under the approved Resolution Plan of the

CD, the Principal Borrower.

03.11.2023 is being considered without ignoring the earlier one. demand for payment was made by the Financial Creditor on 08.02.2019, with a requirement to pay within seven days (i.e., by 15.02.2019).

Next, the Respondent has contended that the provisions of IBC are not intended to be used as a tool for debt recovery. It is asserted that an application to commence CIRP can be denied where the creditor is seeking to invoke the insolvency process as an inappropriate substitute for recovery proceedings.

In relation to the present proceedings, it is alleged that the application has been initiated with the intent to coerce and arm-twist the Respondent into paying sums which are neither due nor payable to the Financial Creditor. It is also submitted that, in any event, the claims of the Financial Creditor are presently under consideration in the ongoing CIRP of the Principal Borrower, GVK-Goindwal.

Elaborating on the CIRP of GVK-Goindwal, it is asserted that on 16.12.2022, a detailed resolution plan was submitted, wherein the claims of all its Financial Creditors, including the alleged claim of the Financial Creditor herein, have been categorically dealt with. It is contended that, in view thereof, no alleged debt and/or default can be said to exist between the Financial Creditor and the Respondent herein, and accordingly, the basic ingredients of Section 7 application are not satisfied.

It is further claimed that once the claims of the Financial Creditor have been admitted and dealt-with under the resolution plan of the Principal Borrower, the Financial Creditor cannot seek to re-agitate the same claims against the Corporate Guarantor when the claims against the Principal Borrower are already under consideration in the said resolution plan.

In connected proceeding arising from an Interlocutory Application^{66.IA No. 192 of 2025}, the Respondent CG has placed before this Tribunal the Resolution Plan of GVK-Goindwal, approved by the Adjudicating Authority vide order^{77.ΙΑ ΝΟ. 1986 OF 2023 in CP No. (IB) 43/7/HDB/2020: NCLT Hyderabad Bench-1} dated 22.12.2023. Referring to the said Resolution Plan, it is contended that, following its approval, no 'debt' and/or 'financial debt' exists in relation to the Financial Creditor, and consequently, no 'default' can be attributed to the Respondent CG. It is therefore argued that the present proceedings under Section 7 IBC are not maintainable and ought to be dismissed.

It is reiterated that, since the Corporate Guarantee was issued by GVK Energy to secure the debt obligations of GVK-Goindwal under the Financing Documents, the approval of the resolution plan of GVK-Goindwal has resulted in the discharge and extinguishment of the entire alleged debt. Accordingly, no payment obligation survives under the said Financing Documents, and the liability under the Corporate Guarantee Agreement also stood discharged/extinguished discharged.

Specific reference has been made to Clause 7.8(iii) of the resolution plan of GVK-Goindwal to contend that “all guarantees issued on behalf of the Company, i.e., the Principal Borrower, stand discharged pursuant to the approval of the resolution plan, and as such, the guarantees issued in favour of the Principal Borrower stand extinguished.” In the same vein, it is further contended that “the liability of the guarantor is coextensive with that of the principal borrower, and accordingly, once the liability of the principal borrower stands extinguished and the claims of the lenders have been included and dealt with under the resolution plan, there can be no surviving liability of the Corporate Guarantor towards the Financial Creditor.”

Alluding to the demand notice dated 08.02.2019 referred to earlier, it is argued that through the said notice, the Financial Creditor had sought an amount of Rs. 989.66 crore, as against Rs. 1,494.94 crore mentioned in Part IV of the present application filed under Section 7 of the IBC. Continuing with the contention regarding inconsistency in the amounts claimed, it is further submitted that, during the CIRP of GVK-Goindwal, the Financial Creditor had submitted its claim for Rs. 1,412.80 crore, as against Rs. 1,494.94 crore claimed in the present application, and that after receipt of Rs. 306.02 crore under the resolution plan, the admitted claim stood reduced to Rs. 1,106.78 crore.

It is also claimed that the date of default mentioned in Part IV would necessarily stand altered upon receipt of amounts under the resolution plan of GVK-Goindwal. Since no amendment application has been filed by the Financial Creditor to reflect these developments, it is contended that the present application under Section 7 is not maintainable.

Another argument raised against the maintainability of the present application is that the Corporate Guarantee was invoked by issuance of a demand notice dated 08.02.2019 by IDBI Trusteeship Services Ltd., and not by the Applicant FC. It is contended that, since no financial debt was owed to IDBI Trusteeship Services Ltd.—as no disbursement or advance of funds was made by the said entity to either GVK-Goindwal or GVK Energy—the invocation of the Corporate Guarantee was invalid. On this ground as well, it is contended that the present application under Section 7 of the IBC is untenable.

Yet another argument advanced by the Respondent CG is that, as per the definition of "financial debt" under Section 5(8) of the IBC, a "debt" must be one "disbursed against the consideration for the time value of money." It is, therefore, contended that, since no debt was disbursed to the CG, there exists no "debt" and/or "default" attributable to the Respondent.

Finally, the Respondent CG has placed reliance on the Vidarbha^{88.Vidarbha Industries Power Ltd. v. Axis Bank Ltd., (2022) 8 SCC 352} judgment of the Hon’ble Supreme Court to contend that, since it is a going concern and possesses sufficient assets to honour its repayment obligations, this Tribunal ought to exercise its discretion in deciding whether this is a fit case for initiation of the CIRP.

The Applicant FC has responded to the contentions raised by the Respondent CG both in the rejoinder filed in the main petition and in the counter filed to Interlocutory Application IA No. 1988/2023 and IA No. 192/2025. The arguments advanced in the rejoinder and the counter are addressed below.

The Applicant FC has refuted the contention that the present application is barred by limitation under Article 137 of the Limitation Act, 1963, on the ground that it was filed more than three years after the date of cause of action. It is submitted that the application, filed on 28.03.2023, is well within the limitation period, as the date of default is 31.05.2022.

Notwithstanding the same, it is further submitted that even if the date of default is considered as 15.02.2019, the application would nevertheless be within limitation by virtue of the Revival Letter^{1010.Copy of the letter dated 30.01.2020 at Page 36 to 40 of the Rejoinder in CP(IB)/104/HYD/2023} dated 30.01.2020, wherein GVK-Goindwal, the Principal Borrower, expressly acknowledged its liability towards the indebtedness owed to the consortium of lenders, of which the Financial Creditor was a part. This Revival Letter also records a similar acknowledgment of liability by GVK Energy, the Corporate Guarantor, under the Deed of Guarantee dated 21.07.2017.

In addition, reliance is placed on the Suo-Motu^{1111.Suo-Motu WP (C) No. 3 of 2020: Cognizance for Extension of Limitation, In re, (2022) 3 SCC 117} orders passed by the Hon’ble Supreme Court extending the period of limitation on account of the COVID-19 pandemic, wherein the period from 15.03.2020 to 28.02.2022 is directed to be excluded for the purposes of computing limitation. Accordingly, it is submitted that the present application, filed on 28.03.2023, remains well within the prescribed limitation period.

Further, reference is made to another Revival Letter^{1212.Page 2959 to 2961 of the Application} dated 06.07.2022, wherein both the Principal Borrower and the Corporate Guarantor have again acknowledged their liability towards the lenders’ consortium, thereby precluding any question regarding limitation. It is submitted that this Revival Letter would also amount to a promise to pay a time-barred debt, thus satisfying the requirements of Section 25(3) of the Indian Contract Act, 1872.

It is also pointed out that the Balance Sheet of GVK-Goindwal for the financial year 2021–2022 reflects an acknowledgment of liability as on 31.03.2022 in favour of the Financial Creditor, thereby constituting a fresh acknowledgment under Section 18 of the Limitation Act, 1963. Based on this acknowledgment, it is contended that the application is not barred by limitation.

Furthermore, it is submitted that the Principal Borrower continued to make remittances towards the debt until September 2022. As per Section 19 of the Limitation Act, 1963, each such payment gives rise to a fresh period of limitation from the date of the corresponding payment. It is argued that the liability of the Corporate Guarantor is co-extensive with that of the Principal Borrower and that the guarantee in question is a continuing guarantee. Consequently, acknowledgments of debt and remittances made by the Principal Borrower are binding upon the Corporate Guarantor. Thus, the aforesaid acknowledgments and remittances satisfy the conditions of Sections 18 and 19 of the Limitation Act, 1963, and are equally enforceable against the Corporate Guarantor.

Denying the allegation that the Financial Creditor is using insolvency process as a tool of recovery, it is submitted that the Corporate Debtor “has not repaid the dues of the Financial Creditor and the Financial Creditor is rightfully exercising the rights provided by the IBC for initiating the Corporate resolution process against the Corporate Debtor”. Relying on the law laid down by the Hon’ble Supreme Court in the case of Lalit Kumar Jain^{1313.Lalit Kumar Jain v. Union of India, (2021) 9 SCC 321}, it is contended that “the liability of the Guarantor is co-extensive with the liability of the Corporate Debtor/Borrower and the Financial Creditor has the power to file claims against either or both simultaneously”. Also referred to are the provisions of section 60(2) of IBC, and it is claimed that during the pendency of CIRP of the principal borrower before NCLT, “an application relating to the insolvency of the Corporate Guarantor may be filed before such NCLT”. It is the position of the Applicant FC that the “Corporate Debtor without putting forward any proof, frivolously charged the Financial Creditor for defeating the spirit of IBC”.

Rebutting the contention that, following the culmination of the CIRP of the principal borrower—wherein a resolution plan was approved by the CoC and subsequently by the NCLT—no "debt" or "financial debt" remains due to the Financial Creditor and, therefore, no "default" can be attributed to the Corporate Guarantor, the Applicant FC has submitted as follows.

It is argued that the Guarantee Agreement constitutes an independent contract, and the obligations of the Guarantor must be determined based on its terms. Accordingly, the Guarantor remains liable under the Guarantee Agreement, irrespective of the insolvency proceedings or the Resolution Plan of the Principal Borrower.

It is pointed out that, under the approved Resolution Plan of the Principal Borrower, GVK-Goindwal, the Financial Creditor has recovered only Rs 306.02 crores against its admitted claim of Rs 1412.80 crores. Consequently, the FC retains the right to proceed against the CG for the unrecovered balance of Rs 1106.78 crores. It is further contended that, since the debt owed by the Principal Borrower to the Financial Creditor has not been fully discharged, a default continues to subsist, and the Respondent CG, being jointly and severally liable under the Guarantee Agreement, remains equally responsible for the outstanding amount.

Reference is made to Clause 6.5(ii) of the Resolution Plan in the case of GVK-Goindwal which provided that “..the settlement of Admitted Financial Debt … shall in no way affect the validity and enforceability of ….the corporate guarantees executed by third parties” and that the “Financial Creditors shall be entitled to take all steps and remedies and recourses available to them in Applicable Laws for the recovery of the unrecovered portion of their respective Admitted Financial Debt (if any) from such guarantors …under their respective guarantee”. It is thus submitted that the debt against the CG does not stand extinguished, and the Financial Creditor retains the right to proceed against it for the recovery of the unrecovered dues in accordance with applicable law.

In support of this submission, reliance is placed on the judgment of the Hon’ble Supreme Court in Essar Steel India Ltd^{1414.Essar Steel India Ltd. Committee of Creditors v. Satish Kumar Gupta, (2020) 8 SCC 531}., wherein, reaffirming its earlier decision in SBI v. V. Ramakrishna^{1515.SBI v. V. Ramakrishnan, (2018) 17 SCC 394}, the Court held that a guarantor cannot evade liability by invoking the protection of Section 31 of the IBC, and that the liability of the guarantor does not stand discharged merely by virtue of the approval of a resolution plan.

With respect to the differing amounts of debt, the Applicant FC submits that it had extended a Rupee Term Loan of Rs 733.85 crores and a Working Capital Loan of Rs 153.75 crores to the Principal Borrower. The Principal Borrower defaulted on repayment of the debt along with accrued interest, leading to the account being classified as a Non-Performing Asset (NPA) on 28.02.2018. Pursuant to the default, a demand letter dated 08.02.2019 was issued on behalf of the Applicant FC to the Respondent CG, calling upon it to pay a sum of Rs 989.66 crores within seven days. Thereafter, following the initiation of CIRP on 10.10.2022 against the Principal Borrower, GVK-Goindwal, a claim for the default amounting to Rs 1412.80 crores as on that date was filed. At the time of filing the present application, the outstanding amount had further increased to Rs 1494.94 crores as of 01.03.2023. Then after resolution of GVK-Goindwal where the FC realised 306.02 crores, the debt claim remaining was accordingly adjusted to the lower amount of Rs 1106.78 crores.

It is submitted that the difference in the amounts claimed is attributable to the delay caused by the Principal Debtor and the Corporate Guarantor in fulfilling their respective obligations. However, it is contended that for the purposes of the present application, this Tribunal is only required to ascertain whether the debt owed exceeds the minimum threshold of Rs 1 crore, which is evident from the record.

In response to the argument that the invocation of the Corporate Guarantee by notice dated 08.02.2019 was made by IDBI Trusteeship Services Ltd. and not by the Applicant Financial Creditor, and that therefore the present application is untenable, the Applicant has drawn attention to the SECURITY TRUSTEE AGREEMENT^{1616.Page 2756 to 2810 of the Application} dated 21.07.2017, executed on the same date as the Corporate Guarantee Agreement.

Under the said Security Trustee Agreement, IDBI Trusteeship Services Ltd. was appointed as the Security Trustee for the benefit of all lenders to GVK-Goindwal, including the Applicant FC herein. The Respondent CG had executed the Deed of Corporate Guarantee^{1717.Page 2811 to 2937 of the Application} in favour of IDBI Trusteeship Services Ltd., acting in its capacity as Security Trustee. It was this Corporate Guarantee that was invoked by IDBI Trusteeship Services Ltd. through its letter^{1818.Page 2968 to 2970 of the Application} dated 08.02.2019, acting on behalf of all lenders, including the Applicant, IDBI Bank Ltd, while clearly specifying that it was acting;

Moreover, it is pointed out that the Deed of Corporate Guarantee executed by the Respondent CG expressly stipulates that “all obligations of the Guarantor under this Guarantee shall automatically stand extended without any further act or deed on the part of the Guarantor for the benefit of all lenders”^{1919.Clause 27 of the Deed of Corporate Guarantee: Page 2834 of the Application}, including the Applicant FC, IDBI Bank Ltd. Therefore, it is argued that not only was the notice dated 08.02.2019 issued by IDBI Trusteeship Services Ltd was in order, but the present application filed by IDBI Bank Ltd is also valid and in accordance with law.

For rebutting the contention, that no debt was disbursed to the Corporate Guarantor and therefore no "debt" or "default" can be attributed to the Respondent, it is submitted that Section 60(2) of IBC expressly provides for the initiation of CIRP against a Corporate Guarantor. Further reliance is placed on the judgment of the Hon’ble Supreme Court in K. Parmasivam v. The Karur Vysya Bank Ltd^{2020.K. Parmasivam v. The Karur Vysya Bank Ltd : (2022) SCC Online SC 1163}, wherein it was held that a financial creditor is entitled to proceed against both the principal borrower and the guarantor, jointly and severally, in the event of default. The Hon'ble Court observed that, upon such default, the guarantor assumes the status of a debtor, or if it is a corporate entity, a corporate debtor within the meaning of Section 3(8) of the IBC.

In response to the argument that, since the Respondent CG is a going concern with sufficient assets to meet its repayment obligations, this Tribunal should exercise its discretion under the Vidarbha (supra) judgment to determine whether initiation of CIRP is warranted, the Applicant Financial Creditor submits that such reliance is misplaced. It is pointed out that in a subsequent review petition, the Hon’ble Supreme Court clarified that the observations made in Vidarbha were specific to the facts of that particular case and must be understood in that context.

Further, reliance is placed on the decision of the Hon’ble Supreme Court in M. Suresh Reddy v. Canara Bank^{2121.M. Suresh Reddy v. Canara Bank : (2023) 8 SCC 387}, wherein the Court reaffirmed the settled position laid down in Innoventive^{2222.Innoventive Industries Ltd. v. ICICI Bank : (2018) 1 SCC 407}, stating that once the Adjudicating Authority is satisfied that a default has occurred, it is bound to admit the application under Section 7 of the IBC, unless it is incomplete—in which case, the applicant may be given an opportunity to rectify the defect within seven days. Thus according to the Applicant the law as laid down in Innoventive continues to hold, and the Vidarbha ruling does not dilute this settled principle in a general context, and that the Respondent has not been able to show how that ruling is applicable in the present case.

We have heard the parties at length and perused the records, including the main Company Petition No. 104/2023, the pending Interlocutory Applications IA No. 1988/2023 and IA No. 192/2025, as well as the written submissions filed by both sides.

The first issue to be settled is the outstanding debt that has remained unpaid, and for which the Respondent had stood as Guarantor for the principal borrower GVK-Goindwal. It is undeniable that GVK-Goindwal, the Principal Borrower, was extended financial assistance from time to time between 2009 and 2017 by a consortium of lenders, including the Applicant FC.

However, the Principal Borrower began defaulting^{2323.From the bank statements annexed to the Application, it is seen that in one of the six loan accounts, Loan Account no. 1632, maintained in IDBI Bank (the Applicant) last payment was made on 21.11.2017. In other five loan accounts repayments/recoveries were made upto August-September 2022. No repayments/recoveries are seen in these loan accounts thereafter.} on the repayment of the loans availed from the Applicant FC, and no repayments or recoveries are reflected in the six loan accounts of GVK-Goindwal maintained with IDBI Bank after 19.09.2022, as evidenced by the bank statements^{2424.Page 2970 to 3036 of the Application} filed along with the Application.

It is also a fact that, on 08.02.2019 two letters^{2525.Page 2965 to 2967 and Page 2968 to 2970 of the Application} were sent by IDBI Trusteeship Services Ltd, on behalf of the Applicant FC to the Respondent CG. Both letters were about the default by the principal borrower GVK-Goindwal in making payment of Rs 989.66 crores comprising of Rupee Term Loan (RTL) of Rs 850.02 crores^{2626.Principal Amount being 733.85 crores as on 31.08.2018 which increased by 117.13 crores by the time letter dated 08.02.2019 was issued – adding to 850.02 crores} and Working Capital credit facility of Rs 139.64 crores. The first letter called upon the Respondent CG, in its capacity as “as the Pledgor to pay (or procure the payment) to the lender a sum of Rs 989.66 crores” due as on 31.12.2018, together with accrued interest etc amounts due along with the Trusteeship fee within 7 days. The second letter reiterated the due amount of Rs 989.66 crores and asked the Respondent CG to “pay such amount” as the principal Borrower for whom the Respondent CG had stood Guarantee had “not fulfilled its obligation…and the amount of Rs 989.66 [was] due and payable by the Guarantor on 31.12.2018 together with all amounts outstanding including interest, default interest, liquidated damages, costs, charges, expenses and all other amounts due under the aforesaid facilities till realization”.

It is also an undisputed fact, evidenced by the Revival Letter^{2727.Page 2958 to 2961 of the Application} dated 06.07.2022 jointly issued by the Principal Borrower, GVK-Goindwal, and the Respondent CG, GVK Energy Ltd, and addressed to the Applicant FC, that as on 31.03.2022, the outstanding debt payable to the Applicant FC amounted to Rs 1379.68 crores, comprising Rs 707.00 crores^{2828.Some amounts having been repaid/recovered in the intervening period out of Rs 989.66 crores demanded earlier, as seen from the bank statements} as principal and Rs 672.68 crores as accrued interest.

This principal amount of Rs 707.00 crores outstanding as on 01.03.2023 in the name of GVK-Goindwal is further certified in the Banker’s Certificate^{2929.Page 2971 & 3037-8 of the Application} issued by the General Manager, IDBI Bank. With the interest amount as on 01.03.2023 standing at Rs 787.94^{3030.Interest amount increased in 11 months from admitted amount of Rs 672.68 crores as on 31.03.2022 to Rs} crores, brought the total dues to Rs 1494.94 crores. This was the amount of Rs 1494.94 crores claimed in the Application that was filed in March/April 2023 by the Applicant FC.

Another relevant fact is that the Principal Borrower, GVK-Goindwal, was admitted into the CIRP on 10.10.2022, and the Applicant Financial

crores as on 01.03.2023 Creditor had filed its claim for Rs 1412.80 crores as on that date. Pursuant to the Resolution Plan approved by the Adjudicating Authority on 22.12.2023, the Applicant Financial Creditor realised Rs 306.02 crores, thereby reducing its outstanding debt claim to that extent.

The progression of debt claims by the Applicant FC and acceptance by the Respondent CG over the years can be discerned from the following table

*Principal Debt and Interest due as admitted by the Respondent CG

Accordingly, and contrary to the contentions advanced by the Respondent CG, the debt claim of Rs 1,494.94 crores (as on 01.03.2023) made in the present application is entirely consistent with the outstanding principal and interest amounts that the Respondent Corporate Guarantor has itself admitted. Even after deducting the amount of Rs 306.02 crores realised under the Resolution Plan of GVK-Goindwal, the outstanding debt claim remains well above the threshold of Rs 1 crore as prescribed under Section 4 of the IBC, thereby meeting the requirement for initiating proceedings under Section 7 of the Code.

In view of the foregoing findings, the argument advanced on behalf of the Respondent Corporate Guarantor—that the demand notices dated 08.02.2019 pertained to the entire outstanding debt of Rs. 989.66 crores owed to all lenders, and that the Applicant Financial Creditor, holding only a 21.6% voting share in the Committee of Creditors (CoC) of GVK Goindwal’s CIRP, was entitled to merely Rs. 213.75 crores, which stood fully recovered under the resolution plan—is wholly misconceived, misleading, and a deliberate attempt to obfuscate the core issue. Accordingly, this contention is rejected.

The next issue for consideration is whether the present application under Section 7 of the IBC has been filed within the prescribed limitation period of three years, as mandated under Section 238A of the IBC read with the Limitation Act, 1963. In Part IV of the Application, the date of default is stated as 31.05.2022.

The Respondent, however, disputes this and seeks to treat 15.02.2019 as the date of default—being the date on which seven days expired from 08.02.2019 when the demand notice was issued by IDBI Trusteeship Services Ltd, on behalf of the Applicant Bank, seeking repayment of Rs 989.66 crores.

On the other hand, the Applicant has drawn attention to two revival letters issued by the Respondent Corporate Guarantor on 30.01.2020 and 06.07.2022, wherein the outstanding debt was expressly acknowledged its indebtedness, and also declared that;

Additionally, it is significant to note that the last payment credited to any of the loan accounts of the Principal Borrower was on 19.09.2022, thereby further reinforcing the Applicant’s contention that the date of default could even be reckoned from that day, insofar as the Principal Borrower is concerned, for whom the Respondent stands as the Corporate Guarantor

Be that as it may, considering the date of default as 31.05.2022, as stated in the application, the application e-filed on 08.04.2023 has been made within limitation period. Even if the date of default is taken as 15.02.2019, as claimed by the Respondent, the application is still within limitation period, after taking into account the extension of limitation granted by the Hon’ble Supreme Court during the COVID-19 pandemic in its Suo-motu order of 10.01.2022.

As per the order^{3131.Suo-Motu WP (C) No. 3 of 2020: Cognizance for Extension of Limitation, In re, (2022) 3 SCC 117} of Hon’ble Supreme Court the period of limitation was extended in all proceedings, and it was directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purposes of limitation in respect of all judicial or quasi-judicial proceedings. The balance period of limitation, as per the order of the Hon’ble Supreme Court, was to become available with effect from 01.03.2022. Further, it was ordered that

In the present case, even if the date of default is taken as 15.02.2019, the limitation period— sans the order of the Hon’ble Supreme Court—would have expired on 14.02.2022. However, since this date falls within the exclusion period from 15.03.2020 to 28.02.2022, as directed by the Supreme Court in its Suo-motu orders relating to COVID-19, the benefit of the extended limitation period would apply.

To compute the extended limitation, it is necessary to determine the unexpired balance of the original limitation period as of 15.03.2020. From 15.02.2019 (the commencement of the limitation period as per the Respondent) to 15.03.2020, a total of 394 days had elapsed out of the statutory period of 3 year or 1095 days, leaving a balance of 701 days. In accordance with the Supreme Court’s directions, this remaining period of 701 days (being longer than 90 days) recommenced from 01.03.2022, thereby extending the limitation up to 30.01.2024. Since the present application was filed well before that date, i.e., on 08.04.2023, it is clearly within the period of limitation.

Be that as it may, the Revival Letters dated 30.01.2020 and 06.07.2022 constitute a clear novation of debt and acknowledgment of liability, result in extending the limitation period, thereby rendering the present application dated 08.04.2023 well within time.

Furthermore, the covenant contained in these letters, executed by the Principal Borrower and confirmed by the Respondent CG, expressly affirms that, notwithstanding the provisions of the Limitation Act, they continue to remain liable to the Applicant for the outstanding dues—including interest, charges, and other sums—under the loan and security agreements, and that all related obligations and securities shall remain valid and in full force. This affirmation clearly amounts to a promise to pay even the time-barred debt, which as seen in earlier paras, is not.

Additionally, the Principal Borrower continued to disclose the outstanding debt payable to the Applicant Financial Creditor in its audited financial statements^{3232.Page 3203 to 3243 of the Application (page 3228 & 3229)} for the financial years up to 2021–22. This constitutes a clear and unequivocal acknowledgment of liability by the Principal Borrower as on 31.03.2022. By necessary implication, and in view of the continuing and subsisting nature of the corporate guarantee, such acknowledgment also amounts to an acknowledgment of debt by the Respondent Corporate Guarantor. This is further corroborated by the financial statements^{3333.Page 3178 to 3202 of the Application (page3194)} of the Respondent CG for the financial year 2021-22, wherein the corporate guarantees issued on behalf of GVK Goindwal have been disclosed to the extent of Rs 6,598.47 crores.

Clearly, the present application e-filed on 08.04.2023 was within limitation. We reject all contentions of the Respondents in this regard.

Another key issue for consideration is the impact of the resolution of GVK-Goindwal, the Principal Borrower, on the liability of the Respondent Corporate Guarantor (CG). Specifically, the question is whether the Corporate Guarantor is released from its obligations in respect of the unpaid debt that remains after the resolution of the Principal Borrower and the extinguishment of its pre-CIRP debts. This issue has been conclusively settled by the Hon’ble Supreme Court in Lalit Kumar Jain^{3434.Lalit Kumar Jain v. Union of India [(2021) 9 SCC 321} where the Court held:

The Respondent CG, however, places reliance on specific clauses of the resolution plan of GVK-Goindwal to assert that its liability stands expressly extinguished under the said plan. It is contended that the Committee of Creditors (CoC)—of which the Applicant Financial Creditor (FC) was a part—and the Adjudicating Authority both approved the resolution plan, including provisions that allegedly discharged the CG from further liability. In particular, Clause 7.8 (iii) of the resolution plan is cited, which purportedly provides that:

In the context of the present case, the above clause only implies that any invocation of a corporate guarantee issued in respect of debts of the Company (i.e., GVK-Goindwal), excluding those forming part of the Third Party Security, prior to the Resolution Applicant acquiring control of the Company under the Resolution Plan, shall stand automatically revoked and cancelled, and the corresponding obligations shall be deemed permanently extinguished upon the approval of the Resolution Plan by the NCLT.

However, this clause explicitly carves out guarantees or securities forming part of the ‘Third Party Security’, which is defined in Clause 6.5(ii) of the Resolution Plan, which states:

In the present context, the relevant portion of Clause 6.5(ii) states that:

A combined reading of Clauses 7.8(iii) and 6.5(ii) of the Resolution Plan makes it evident that the liability of the Corporate Guarantor under the guarantee agreement does not stand extinguished upon approval of the resolution plan by the NCLT. On the contrary, the plan expressly preserves the rights of the Financial Creditors to enforce third-party corporate guarantees for any unrecovered portion of the admitted debt. Therefore, the arguments advanced on behalf of the Respondent CG, claiming that its obligations stand discharged under the resolution plan, are devoid of merit and are hereby rejected.

A contention was raised on behalf of the Respondent Corporate Guarantor (CG) regarding the demand notice dated 08.02.2019 issued by IDBI Trusteeship Services Ltd. It was argued that the said notice was not issued by the Applicant FC, but by IDBI Trusteeship Services Ltd on behalf of the entire consortium of lenders, and therefore, the present application—being based on the default arising from that demand notice—is not maintainable. It was also argued that since no financial debt was owed to IDBI Trusteeship Services Ltd.—as no disbursement or advance of funds was made by the said entity to either GVK-Goindwal or GVK Energy—the invocation of the Corporate Guarantee was invalid.

Another related argument advanced on behalf of the Respondent Corporate Guarantor is that the present application filed by IDBI Bank Ltd. is defective, as the guarantee agreement was executed between the Respondent CG and IDBI Trusteeship Services Ltd., and not with IDBI Bank Ltd., the Applicant herein.

We have already taken note of the response submitted by the Applicant Financial Creditor (FC) on this issue and are in agreement with the same. In view of the agreements executed on 21.07.2017 between the Applicant FC (as a member of the lenders' consortium), the Principal Borrower, and the Respondent CG, we find that the contentions raised by the Respondent CG are devoid of substance and appear to have been made solely to protract the proceedings without just cause. Our reasons are as follows:

Firstly, pursuant to the Security Trustee Agreement^{3535.Page 2756 to 2810 of the Application}, IDBI Trusteeship Services Ltd. was appointed as the Security Trustee for the benefit of all lenders to GVK-Goindwal, including the Applicant Financial Creditor. The Respondent CG had executed the Deed of Corporate Guarantee in favour of IDBI Trusteeship Services Ltd. in its capacity as Security Trustee. It was under this Guarantee that IDBI Trusteeship Services Ltd., acting on behalf of all consortium lenders including the Applicant, IDBI Bank Ltd., invoked the guarantee by issuing the letters^{3636.Page 2965 to 2970 of the Application} dated 08.02.2019.

Accordingly, when IDBI Trusteeship invoked the Corporate Guarantee by issuing letters dated 08.02.2019, it was acting on behalf of the Applicant FC, IDBI Bank Ltd., which is also evident from the language of these letters addressed to the Respondent CG.

In light of the contractual covenants agreed between the parties, we find no infirmity in the actions of IDBI Trusteeship Services Ltd. in issuing the demand letters on behalf of the Applicant FC. The invocation of the Corporate Guarantee, following the Principal Borrower’s default was fully in accordance with the law and the agreements executed by the parties.

Next, the Deed of Corporate Guarantee^{3737.Page 2811 to 2837 of the Application (Page 2834)} of 21.07.2017 executed between IDBI Trusteeship Services Ltd and the Respondent CG expressly provides in clause 27 for the “AUTOMATIC EXTENSION OF GUARANTEE TO ACCEDING LENDERS UNDER THE RUPEE FACILITY AGREEMENT/ WORKING CAPITAL CONSORTIUM AGREEMENT”. This clause stipulated, that:

Therefore, the filing of the present application by the Applicant FC cannot be faulted merely on the ground that the earlier demand notice was issued by IDBI Trusteeship Services Ltd. The said notice was issued pursuant to the Security Trustee Agreement dated 21.07.2017, under which IDBI Trusteeship Services Ltd was authorised to act on behalf of all lenders. The Clause 27 of the Deed of Corporate Guarantee thereafter expressly enabled the automatic extension of the guarantee to all acceding lenders, thereby conferring upon them the right to invoke and enforce the guarantee in the event of default by the Principal Borrower.

The Respondent CG has raised a contention that, in terms of the definition of "financial debt" under Section 5(8) of the Insolvency and Bankruptcy Code (IBC), a debt must be one “disbursed against the consideration for the time value of money,” and since no funds were disbursed directly to the CG, there exists no “debt” or “default” attributable to it. This contention is entirely misconceived and devoid of merit.

Acceptance of such an argument would render several provisions of the IBC, particularly those relating to guarantors, wholly otiose. Notably, Section 60(2) of the Code—which confers jurisdiction on the Adjudicating Authority to entertain insolvency proceedings against a corporate guarantor where proceedings are pending against the principal borrower— would be rendered redundant. In cases where the financial debt is disbursed to the principal borrower, and the corporate or personal guarantor undertakes an independent obligation to repay in the event of default, the interpretation advanced by the Respondent CG would defeat the very object and purpose of including guarantors within the IBC framework.

Section 5(8)(i) of the Code addresses this precise situation, when it expressly includes within the definition of "financial debt" the liability in respect of any guarantee or indemnity provided for the debts referred to in sub-clauses (a) to (h). The provision reads as follows:

The judgment of the Hon’ble Supreme Court in K. Parmasivam v. The Karur Vysya Bank Ltd^{3838.K. Parmasivam v. The Karur Vysya Bank Ltd : (2022) SCC OnLine SC 1163}, as relied upon by the Applicant FC, is squarely applicable, where the Court took a view that a financial creditor is entitled to proceed against both the principal borrower and the guarantor, jointly and severally, in the event of a default, as upon such default, the guarantor assumes the status of a debtor, and if the guarantor is a corporate entity, it assumes the status of a “corporate debtor” within the meaning of Section 3(8) of the IBC. Relying on the three judges’ decision in Laxmi Pat Surana^{3939.Laxmi Pat Surana v. Union Bank of India, (2021) 8 SCC 481}, the Hon’ble Court quoted therefrom:

In another submission, though lacking in merit, the Respondent CG has relied upon the Vidarbha (supra) judgment of the Hon’ble Supreme Court to contend that, since it is a going concern and possesses sufficient assets to meet its repayment obligations, this Tribunal ought to exercise its discretion in determining whether the present case warrants initiation of the Corporate Insolvency Resolution Process (CIRP).

The reliance placed by the Respondent CG on Vidarbha judgement is wholly misplaced and inapplicable to the facts of the present case. The Vidarbha decision was rendered in a specific factual context, where the financial creditor’s claim was sub judice in appeal and the Court held that the Adjudicating Authority could exercise discretion in admitting a Section 7 application, particularly where there were exceptional and compelling circumstances.

Hon’ble Supreme Court has since clarified the limited applicability of Vidarbha. In its order passed in the Axis Bank Review Petition^{4040.Axis Bank Ltd. v. Vidarbha Industries Power Ltd., (2023) 7 SCC 321}, the Court observed that its earlier conclusions were made in the factual setting of that particular case and do not constitute a general principle enabling corporate debtors or guarantors to avoid the rigour of Section 7 of the IBC merely on the ground that they are solvent or are a going concern.

Moreover, the law laid down in Innoventive^{4141.Innoventive Industries Ltd. v. ICICI Bank (2018) 1 SCC 407} continues to govern the admission of applications under Section 7. It was categorically held therein that once the Adjudicating Authority is satisfied that a “default” has occurred, the application must be admitted unless it is incomplete. The financial health of the debtor or guarantor is not a relevant consideration at this stage. This principle was reiterated by the Hon’ble Supreme Court in M. Suresh Kumar Reddy^{4242.M. Suresh Kumar Reddy v. Canara Bank (2023) SCC OnLine SC 801}, which also emphasized that “once NCLT is satisfied that the default has occurred, there is hardly a discretion left with NCLT to refuse admission of the application under Section 7”.

In the present case, the occurrence of default is undisputed, as is the liability of the Respondent CG under a binding contract of guarantee. The invocation of Vidarbha is, therefore, no more than a last-ditch attempt to stall proceedings and does not merit consideration.

A contention was also raised on behalf of the Respondent CG regarding the applicability of Section 10A of the IBC. It was argued that the Applicant FC has claimed interest and penal interest, and that each tranche of such interest becoming due constitutes a “default” within the meaning of Section 3(12) of the Code. Accordingly, it was submitted that any default arising from interest or penal interest that became due during the period from March 2020 to March 2021 would fall within the exclusion period under Section 10A, thereby rendering the present application under Section 7 of the Code barred by the embargo imposed under that provision.

In response, the Applicant FC has submitted that the date of default, as stated in the application, is 31.05.2022, and hence the bar under Section 10A of the IBC is not attracted. It is further contended that, even assuming the date of default to be 15.02.2019, as alleged by the Respondent CG, the application would still fall outside the scope of Section 10A.

We concur with the submission of the Applicant FC. The present application is not hit by the embargo under Section 10A of the IBC. Even if one were to consider 08.02.2019—the date on which the corporate guarantee was invoked on behalf of the Applicant FC—and 15.02.2019 as the date on which the Respondent CG failed to discharge its obligations under the guarantee agreement, the default clearly occurred prior to 25.03.2020, the effective commencement date of the Section 10A bar. Accordingly, Section 10A has no application to the facts of the present case.

The Respondent Corporate Guarantor (CG) has alleged that the Applicant Financial Creditor (FC) suppressed certain receipts of the Principal Borrower, specifically amounts of Rs. 49.83 crores and Rs. 88.82 crores. The Applicant has duly responded to these allegations and provided its explanation regarding the said amounts. Upon consideration, we find the accusation of suppression to be entirely baseless and without merit.

So far as the amount of Rs 49.83 crores is concerned, this amount was a compensation awarded to GVK Coal Tokisud Pvt. Ltd., a company incorporated for the development of the ‘Tokisud Coal Block’ allotted by the Ministry of Coal to the Principal Borrower. Following the Hon’ble Supreme Court’s cancellation of coal block allotments in August 2014, GVK Coal Tokisud Pvt. Ltd. claimed compensation under the Coal Mines (Special Provisions) Act, 2015. Pursuant to an order of the Nominated Authority dated 16.03.2022, the compensation amount of Rs. 49.83 crore was deposited into the company’s TRA account with IDBI Bank, Hyderabad, on 26.04.2022.

Therefore, the amounts were received by GVK Coal Tokisud Pvt. Ltd. and only the TRA account is being maintained by the Financial Creditor in Mumbai Branch. The Financial Creditor has not received any amounts towards the present debt from the above received amount. Accordingly, the allegation of suppression is without basis and liable to be rejected.

As regards the sum of Rs. 88.83 crores, it represents an amount directed to be deposited into the account of the Respondent Corporate Guarantor under the same order of the Nominated Authority. However, this direction has been challenged by IDBI Bank, Hyderabad Branch—a Financial Creditor—by way of Writ Petition No. 5940/2022 before the High Court of Delhi, in view of the debt disbursed to GVK Coal Tokisud Pvt. Ltd. Pursuant to the writ proceedings, the said amount of Rs. 88.83 crores has been deposited with the Registry of the High Court and remains subject to judicial determination. No part of this amount has been received by the Applicant FC towards outstanding debt, and hence, the allegation of suppression is equally misconceived.

During the pendency of the present application under Section 7 of IBC, Interlocutory Applications (IA) No. 1988 of 2023 and No. 192 of 2025 were filed by the Respondent Corporate Guarantor.

IA No. 1988 of 2023 sought the dismissal of the main Company Petition on the ground that a CIRP was already pending in respect of GVK-Goindwal. In the alternative, the Respondent prayed that the Section 7 proceedings be kept in abeyance until the outcome of the CIRP of GVK-Goindwal. Since the CIRP of GVK-Goindwal has since been concluded, with the resolution plan having been approved on 20.12.2023, and the implications thereof have already been discussed in detail in this order, this IA has now become infructuous and is accordingly disposed of.

So far as IA No. 192 of 2025 is concerned, it primarily relates to the resolution plan in the CIRP of GVK-Goindwal and its alleged impact on the present application under Section 7 of the IBC. Since this issue has already been discussed at length in this order, and the contentions raised therein have been found to be without merit, this application is dismissed and stands disposed of accordingly.

The default by the Principal Borrower, GVK-Goindwal is evident, as it underwent the Corporate Insolvency Resolution Process (CIRP). That certain debts remained unpaid despite the resolution of the GVK-Goindwal is also an admitted fact. The liability of the Respondent CG under the corporate guarantee is equally clear, as the Corporate Guarantor steps into the shoes of the debtor upon the Principal Borrower’s failure to repay its dues, regardless of the Principal Borrower’s separate resolution under CIRP. The fact that a financial debt exceeding Rs. 1 crore remains unpaid is beyond dispute.

In view of the above, the present application for initiation of CIRP against the Respondent CG—having been filed well within the prescribed limitation period and not barred by Section 10A of the IBC—is found to be maintainable and is accordingly admitted.

The Application is admitted and this Adjudicating Authority orders the commencement of the Corporate Insolvency Resolution Process, which shall ordinarily be completed within the timelines stipulated in the Code, 2016 (as amended), reckoning from the date on which this order is passed.

The Applicant has proposed the name of Mr Venkata Chalam Varanasi as the Interim Resolution Professional (IRP), whose Authorization for Assignment (AFA) as per the IBBI website is valid up to 31.12.2025. The proposal to appoint Mr Venkata Chalam Varanasi^{4343.Registration Number: IBBI/IPA-002/IP-N00267/2017-18/10780, R/o. 12-13-205, Street No. 2, Tarnaka, Secunderabad, Telangana - 500017, E-mail ID : [email protected], Mobile No. 8897784174.} as IRP is approved. The IRP is directed to file AFA within three days from the date of this order.

The IRP is directed to take charge of the management of the Corporate Debtor, immediately. He is also directed to cause public announcement as prescribed under Section 15 of the Code, 2016, within three days from the date of receipt of this order, and call for submissions of claim in the manner as prescribed.

Moratorium is, hereby, declared and shall have effect from the date of this order till the completion of the CIRP, for the purposes referred to in Section 14 of the Code, 2016. It is hereby ordered that all of the following are prohibited:

The supply of essential goods or services to the Corporate Debtor shall not be terminated, suspended or interrupted during the moratorium period. Further, if the IRP considers supply of any goods or services critical to protect and preserve the value of the Corporate Debtor and manage the operations of such Corporate Debtor as a going concern, then the supply of such goods or services shall not be terminated, suspended or interrupted during the period of moratorium, except where such Corporate Debtor has not paid dues arising from such supply during the moratorium period. Furthermore, the provisions of Sub-section (1) of Section 14 shall not apply to such transactions, agreements or other arrangement as may be notified by the Central Government in consultation with any financial sector regulator or any other authority.

The IRP shall comply with the provisions of Sections 13(2), 15, 17 & 18 of the Code, 2106. The Directors, Promoters or any other person associated with the management of Corporate Debtor are directed to extend all assistance and co-operation to the IRP as stipulated under Section 19 for discharging his functions under Section 20 of the Code, 2016.

The Corporate Applicant as well as the Registry is directed to send the copy of this Order to the IRP, to enable him to take charge of the assets etc. of the Corporate Debtor, and comply with this order as per the provisions of the Code, 2016.

The Registry is directed to communicate this Order to the Corporate Applicant.

The Registry shall also communicate this Order to the Registrar of Companies, Hyderabad, for updating the status of the Corporate Debtor in the website of the Ministry of Corporate Affairs.

Accordingly, this Company Petition is allowed.