NCLT Initiates Insolvency Process Against GVK Energy On IDBI Bank’s Plea

NCLT Initiates Insolvency Process Against GVK Energy On IDBI Bank’s Plea

Appoints Venkata Chalam Varanasi as an interim resolution professional

The Hyderabad bench of the National Company Law Tribunal (NCLT) has initiated Corporate Insolvency Resolution Process (CIRP) against GVK Energy Limited on a plea by IDBI Bank for a Rs.1,106 crore debt.

GVK Energy was a guarantor for loans taken by its group company, GVK Power (Goindwal Sahib) Ltd.

The tribunal appointed Venkata Chalam Varanasi as an interim resolution professional (IRP) while ordering the insolvency.

IDBI Bank (part of a group of lenders) provided a term loan of Rs.733.85 crore and working capital limits of Rs.153.75 crore to GVK Power for a coal-based thermal power plant in Punjab.

GVK Energy gave a corporate guarantee in July 2017 to secure the loan extended to GVK-Goindwal. However, the latter defaulted on its repayments.

On 28 February 2018 (effective from 31 July 2016), the account was declared a Non-Performing Asset (NPA).

On 8 February 2019, IDBI Bank issued a recall notice to GVK Energy demanding Rs.989.66 crore by 15 February 2019.

Though a resolution plan for GVK Power was approved in December 2023, the bank stated recovering only Rs.306 crore.

It approached the NCLT to recover the balance from GVK Energy.

However, GVK Energy contended that no dues existed after the resolution plan of GVK-Goindwal was approved in December 2023. The guarantee ended under the resolution plan, and it was invoked by the IDBI Trusteeship, not the actual creditor.

The NCLT rejected GVK Energy’s argument that the debt was cleared after the resolution of GVK Power.

The tribunal cited the ruling of the Supreme Court stating that a guarantor remains liable even if the main borrower settles its dues under insolvency.

The NCLT held that the case was filed within the limitation period and dismissed GVK Energy’s claim that it was filed late.