National Company Law Appellate Tribunal, New Delhi (NCLAT): In an appeal filed against order of National Company Law Tribunal, Mumbai wherein, CIRP application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) was rejected holding it barred by Section 10-A of the IBC, the Division Bench of Ashok Bhushan, J., (Chairperson) and Barun Mitra (Technical member) clarified that application under Section 7 had to confine to the default committed subsequent to the period of Section 10-A of the IBC. Thus, the Tribunal allowed the appeal and held that application under Section 7 of the IBC was not barred by Section 10-A of the IBC and directed the matter to be placed before adjudicating authority for afresh consideration.
Background:
The appeal was filed by financial creditor-appellant challenging the order passed by the adjudicating authority of National Company Law Tribunal, Mumbai by which application filed for Initiation of corporate insolvency resolution process by financial creditor under Section 7 of the IBC by the financial creditor was rejected as was barred by Section 10-A of the IBC. The appellant submitted that in Part IV of application under Section 7 of the IBC date of default was mentioned with respect to both the contracts as 15-4-2021 and even though first default took place on 15-4-2021, default continued after period in accordance with Section 10-A of the IBC was over which was relied on Part IV by the financial creditor. It was submitted that when default was committed subsequent to Section 10-A of the IBC period, the financial creditor was not precluded from initiating application under Section 7 of the IBC. It was further submitted that financial creditor was not supposed to rush and file application under Section 7 of the IBC on first date of default and adjudicating authority had not properly considered Part IV of application under Section 7 of the IBC while deciding that the application was barred under Section 10-A of the IBC.
The respondent submitted that the objection with regard to Section 10-A of the IBC was preliminary objection raised by respondent and adjudicating authority after accepting the said objection had dismissed the application as barred by Section 10-A of the IBC and had not gone into other pleas raised by corporate debtor. It was further submitted that the default admittedly occurred within the period specified in Section 10-A of the IBC.
Analysis, Law and Decision:
The Tribunal noted that the amount claimed in Part IV of application under Section 7 was Rs. 7,28,54, 918 and with respect to two contracts, the dates of default mentioned were 15-1-2021 and 15-2-2021 but default continued on 15-4-2021 and thereafter the date of default was taken by financial creditor was 15-4-2021 with regard to both the contracts. The Financial creditor relied on date of default 15-4-2021 which was subsequent to Section 10-A of the IBC period and default by the corporate debtor has claimed from 15-4-2021 thereafter and the amount which was in default after 15-4-2021 was much beyond the threshold period. The Tribunal relied on Koncentric Investments Ltd. v. Standard Chartered Bank, 2022 SCC OnLine NCLAT 1254 and observed that when the application under Section 7 was based on default committed subsequent to period specified under Section 10-A of the IPC and the amount claimed subsequent to Section 10-A period was beyond threshold, application cannot be rejected on the ground that it was barred by application under Section 10-A of the IBC. The Tribunal clarified that application under Section 7 had to confine to the default committed subsequent to the period of Section 10-A of the IBC.
The Tribunal held that the order of adjudicating authority rejecting the application as barred by Section 10-A of the IBC could not be sustained. The Tribunal set aside the order of adjudicating authority holding that application was not barred by Section 10-A of the IBC. The Tribunal also directed that the matter to be placed before adjudicating authority for fresh consideration in accordance with law.
[SREI Equipment Finance Ltd. v. R.S. Kamthe Infrestrucuture Developers (P) Ltd., Company Appeal (AT) (Insolvency) No. 116 of 2024, Order dt. 28-1-2026]
Advocates who appeared in this case:
For the Appellant(s): Sanjeev Sen Senior Advocate, Priyanka Vora, Prahalad Balaji, Jharna Singh and Simran Gupta, Advocates
For Respondent(s): Ramchandra Madan, Tushar Nigam and Himanshu Yadav, Advocates