NCLAT Dismisses Stay Against India Power Corporation Insolvency

Authority: National Company Law Appellate Tribunal, Chennai Bench

Order Date: 30 July 2026

Case Overview

The appeals (Company Appeal (AT)(INS)(CH) Nos. 262/2026 and 263/2026) were filed by Debashish Bose and Pragya Jhunjhunwala challenging the NCLT Hyderabad order dated 15.05.2026 that admitted India Power Corporation Ltd (IPCL) into Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code (IBC).

IPCL had executed a corporate guarantee on 23.09.2016 for Meenakshi Energy Pvt Ltd's (MEPL) debt of Rs. 967.21 crore to State Bank of India (SBI) consortium for a 1000 MW coal-based thermal power project. MEPL defaulted on 07.11.2019, and CIRP was initiated against it. SBI invoked the corporate guarantee and filed under Section 7 IBC against IPCL.

The NCLT initially dismissed SBI's petition on 30.10.2023, holding the guarantee void, but the Supreme Court remanded the matter (Civil Appeal No. 8178/2023) on 14.02.2025. The NCLT then reversed its position in the impugned order dated 15.05.2026, admitting IPCL into CIRP.

Appellants argued that: (1) the corporate guarantee required prior permission from West Bengal Electricity Regulatory Commission (WBERC) under Regulation 5.13.2 of Licensing Conditions, which was never obtained; (2) the guarantee was restricted only to non-regulated assets and surplus amounts from regulated assets as per clauses 2.1 and 2.2 of the Deed of Guarantee; (3) IBC should not override the Electricity Act's purpose of ensuring continuous electricity supply.

Respondents (SBI) countered that: (1) IPCL had represented through affidavits that no WBERC permission was needed; (2) IPCL filed and withdrew civil suits (COS No. 266/2017 and Money Suit No. 01/2022) challenging the guarantee without seeking liberty to contest its validity; (3) The Kolkata High Court in FMA 1370/2020 vacated injunctions against recovery, noting IPCL's sophistication and commercial understanding; (4) Debt and default were clearly established through admission against principal borrower MEPL.

Final Outcome

Justice Yogesh Khanna dismissed the stay applications, finding:

  • Debt and default established under Section 7 IBC requirements
  • IPCL's liability as guarantor is co-extensive with principal borrower MEPL
  • Civil court orders had already vacated injunctions against recovery
  • IPCL admitted the guarantee in rejoinder to I.A. No. 648/2021 in MEPL's CIRP
  • IBC has primacy over Electricity Act as established in REC vs. Hiranmay Energy Ltd. (2024) and Paschimanchal Vidyut Vitran Nigam Ltd. vs. Raman Ispat Pvt. Ltd. (2023)
  • No evidence that CIRP would disrupt electricity supply to West Bengal consumers

The appeals will be heard on merit at an early date, but no interim stay was granted against the CIRP proceedings.

Topics: Corporate Guarantee Dispute, IBC vs Sectoral Regulations, Power Sector Insolvency