National Company Law Appellate Tribunal, New Delhi: While upholding the order passed by the Adjudicating Authority rejecting appellant’s plea for dismissal of S. 7 application preferred by the respondent, the Division bench of Ashok Bhushan*, J. and Barun Mitra (Technical Member), held that S. 10-A of the Insolvency and Bankruptcy Code, 2016 (IBC) has no application when an action is initiated for default which occurred subsequent to S. 10-A period – “25th March, 2020 to 25th March, 2021”
Factual Matrix
In the instant matter, respondent-Financial Creditor (Axis Trustee Services Ltd.) and appellant-Corporate Debtor (NuFuture Digital (India) Ltd.) entered into a debenture trust cum mortgage deed, thereby providing some time to the Corporate Debtor to make repayment of dues in 2020 to the Financial Creditor. The Financial Creditor further granted 3 months to the Corporate Debtor to make the repayment of the dues. In 2022, the Financial Creditor issued a Legal Notice regarding the same but was in vain.
The respondent preferred an application under S. 7 IBC against the Corporate Debtor to initiate the CIRP. The appellant challenged the S. 7 application on the ground that it was barred by S. 10-A IBC, which provides for a moratorium on insolvency proceedings during the COVID-19 pandemic. The Adjudicating Authority vide order dated 30-03-2023, rejected the appellant’s plea seeking the dismissal of S. 7 application and held that the S. 7 application is not barred by S. 10-A. Aggrieved by the impugned order passed by the Adjudicating Authority, the appellant preferred the present appeal before the NCLAT challenging the same.
Contentions
The appellant contended that the claim of the Financial Creditor is hit by S. 10-A IBC because as per the Financial Creditor default have occurred in October, 2020, whereas the respondent contended that the present application is filed only with respect to the default committed on 31-03-2021 and thereafter which is not covered under S. 10-A IBC.
Law Point
S. 10-A IBC provides as follows:
“10-A. Notwithstanding anything contained in sections 7, 9 and 10, no application for initiation of corporate insolvency resolution process of a corporate debtor shall be filed, for any default arising on or after 25th March, 2020 for a period of six months or such further period, not exceeding one year from such date, as may be notified in this behalf:
Provided that no application shall ever be filed for initiation of corporate insolvency resolution process of a corporate debtor for the said default occurring during the said period.
Explanation.—For the removal of doubts, it is hereby clarified that the provisions of this section shall not apply to any default committed under the said sections before 25th March, 2020.”
Moot Point
Whether an application filed under S. 7 IBC by a Financial Creditor is barred by S. 10-A IBC, which prohibits the initiation of CIRP for defaults that occurred during the period from 25-03- 2020 to 25-03-2021?
Observation and Verdict
The NCLAT relied on Ramesh Kymal v. Siemens Games Renewable Power (P) Ltd., (2021) 3 SCC 224, and observed that S. 10-A provided that no application shall ever be filed for the default which occurred during the period from “25th March, 2020 to 25th March, 2021” whereas the present petition is filed only with respect to the default committed after the S. 10-A period was over i.e. for the default on 31-03-2021 and thereafter.
“Section 10-A has no application when an action is initiated for default which occurred subsequent to 10-A period.”
The NCLAT held that the application preferred by the Financial Creditor under S. 7 IBC was not hit by S. 10-A as the defaulted amount included for the calculation in the S. 7 application did not pertain to the period covered by S. 10-A IBC.
“No defaulted amount included in the Section 7 application is for the period covered by Section 10-A, hence, there is no occasion to hold that Section 7 application is barred by Section 10-A.”
While dismissing the instant appeal, NCLAT upheld the Adjudicating Authority’s order rejecting the appellant’s plea seeking the dismissal of S. 7 application and held that the S. 7 application is not barred by S. 10-A.
[NuFuture Digital (India) Ltd. v. Axis Trustee Services Ltd., Company Appeal (AT) Insolvency No. 444 of 2023, order dated 09-05-2023]
*Judgment by Justice Ashok Bhushan
Advocates who appeared in this case :
Mr. Ritin Rai, Sr. Advocate with Mr. Petrushka Dasgupta, Ms. Pallavi Pratap, Mr. Akshay Singh, Mr. Harsh Moorjani, Ritika Sinha, Krishna Baruah, Counsel for the Appellant;
Mr. Krishnendu Dutta, Sr. Advocate with Ms. Suchitra Valjee, Mr. Kartik Nagarkatti, Ms. Neha Agarwa, Counsel for the Respondents.