National Company Law Appellate Tribunal, Principal Bench, New Delhi: In an appeal filed by Siddharth Satish Katariya, ex-director of Superfine Metals Private Limited (Corporate Debtor), under Section 61 of the Insolvency and Financial bankruptcy Code, 2016 (IBC) against the order dated 16-7-2026 (Impugned order) passed by NCLT, Mumbai Bench-II (Adjudicating authority) admitting a Section 7 IBC application filed by Central Bank of India (Financial Creditor), the Bench of Justice Mohammad Faiz Alam Khan (Judicial Member) and Naresh Salecha (Technical Member), allowed the appeal and set aside the admission order, holding that the Cash Credit and Ad Hoc facility defaults relied upon by the Financial Creditor fell within the period protected under Section 10-A IBC.
Background:
The Financial Creditor had extended various credit facilities to the Corporate Debtor, including a Cash Credit facility of Rs. 52 crores and an Ad Hoc Cash Credit facility of Rs. 3.70 crores. The Financial Creditor had originally filed its Section 7 application in February 2023, wherein Form-1 recorded 29 November 2020 as the date of default, corresponding with the date on which the Corporate Debtor’s account had been classified as a non-performing asset.
The Corporate Debtor, in its reply dated 29 August 2023, had raised the statutory bar under Section 10-A IBC, contending that 29 November 2020 had fallen within the protected period of 25 March 2020 to 24 March 2021. Thereafter, the Financial Creditor sought amendment in the Section 7 IBC application. The amendment was allowed on 6 May 2024, with the applicability of Section 10-A expressly kept open for final determination. In the amended Form-1, the Financial Creditor substituted the dates of default with 10 March 2020 for the Cash Credit facility and 24 March 2020 for the Ad Hoc facility.
For the Cash Credit facility, the financial creditor relied upon interest of approximately Rs. 48.11 lakhs debited on 29 February 2020 and the sanction terms requiring monthly interest to be serviced by the 10th day of the succeeding month and it therefore claimed that the first default had occurred on 10 March 2020.
For the Ad Hoc facility, which was availed on 26 December 2019 for 90 days, the financial creditor claimed that the repayment period expired on 24 March 2020. However, its contemporaneous letter dated 21 March 2020 had indicated 26 March 2020 as the closure date. An earlier NCLT order dated 3-7-2025 had also recorded that the financial creditor’s date of 24 March 2020 was incorrect and that the 90-day period ended during the prohibited period. The adjudicating authority had admitted the Section 7 IBC application in the impugned order, resulting in the present appeal.
Issues
1. Whether the default with respect to the Cash Credit facility had occurred within or outside the period protected under Section 10-A IBC.
2. Whether the default with respect to the Ad Hoc Cash Credit facility occurred within or outside the Section 10-A IBC period.
3. Whether the amended dates of default and other ancillary material could sustain the Section 7 IBC application notwithstanding the statutory bar under Section 10-A IBC.
Analysis, Law, and Decision:
The Tribunal noted that, in respect of the Cash Credit facility, the statutory definition under Section 3(12) IBC made it clear that the expression “due and payable” comprises two cumulative requirements. The use of the word “and”, rather than “or”, “or/and” between “due” and “payable” was significant. Thus, for a default to have occurred, the debt had to have become legally due and had, at the relevant point in time, also to have been presently payable and recoverable. Mere accrual of an amount or its reflection in the books of account, without the debt having become due and payable, would not, by itself, have constituted a “default” within the meaning of Section 3(12) IBC.
The Tribunal noted that, because deferment postpones the due date, the interest that was deferred under the RBI COVID-19 Circulars was simply not “due and payable” under Section 3(12) IBC during 1 March 2020 to 31 August 2020. Thus, the financial creditor could not have pleaded a default during the deferment window itself on the deferred interest as there had been no debt due to default on. This had been a factual and contractual point about whether debt-and default even existed on that date. The consequence that followed was that, once the deferment period ended on 31 August 2020 and the accumulated interest had become payable, non-payment then gave rise to a fresh default. The period from 31 August 2020 to 24 March 2021 fell squarely within the Section 10A IBC window. Thus, for the Cash credit facilities that had taken deferment, the resulting default would have fallen within the Section 10A IBC protected period because of when the default occurred, and not because deferment was availed.
The Tribunal examined the distinction between the ‘moratorium’ granted to term loans and the ‘deferment’ granted to CC/OD facilities under RBI Circulars dated 27-3-2020 and 23-5-2020. It held that, although the distinction was functionally relevant in the financial creditor relationship, it had not, by itself, determined whether a default had occurred for the purposes of Section 3(12) IBC. For determining the applicability of Section 10-A, the relevant enquiry had remained when the debt had actually become “due and payable”.
The Tribunal clarified that the RBI COVID guidelines and Section 10-A IBC had to be kept analytically separate, whenever the two had been conflated. The RBI COVID guidelines measures were principally directed at financial creditor regulation amid asset classification and cash-flow relief, whereas Section 10-A IBC imposed an insolvency-law bar aimed at protecting corporate debtors from loss of management control during the pandemic. Accordingly, Section 10A IBC had protected only a default that had arisen within 25 March 2020 to 24 March 2021; a default that arose before this window and merely continued into or past it was not shielded. Where liability had accrued prior to the Section 10A period and continued through and beyond it, the applicant could not have been barred under Section 10A IBC from proceeding under Section 7 IBC. The Section 10A IBC bar could not be extended to a default that had continued beyond the moratorium/Section 10A IBC period, and the proviso had only protected a default confined to that window.
The Tribunal had relied upon J JC Flowers Asset Reconstruction (P) Ltd. v. Laxmi Oil & Vanaspati (P) Ltd., 2024 SCC OnLine NCLAT 532 and reiterated that Section 10A IBC did not extinguish the underlying debt and Section 3(12) IBC required both the elements of the debt having become “due and payable” and its non-payment. The creditor had to establish the occurrence of a default and could not have relied merely upon the existence of a debt. These principles had assumed particular significance where the question had not been whether the debt existed, but whether it had become actionable as a “default” during the period protected by Section 10A IBC. Existence of debt alone was insufficient, and the creditor was required to establish an actual default in respect of a debt that had been due and payable.
The Tribunal further considered Clause 10 of the Working Capital Consortium Agreement, which stipulated that the facility was repayable upon demand. It clarified that, while issuance of a demand notice had not been procedurally mandatory before filing an application under Section 7 IBC, the contractual demand clause had nevertheless remained relevant for determining when the debt had become payable. No demand had been made before the Financial Creditor’s asserted default date of 10-3-2020.
The Tribunal also took into account the financial creditor’s conduct, including conversion of accumulated interest into an FITL, renewal of the Cash Credit facility, execution of a fresh Working Capital Consortium Agreement on 6 November 2020 and contemporaneous banking communications. It therefore rejected 10 March 2020 as the date of default for the Cash Credit facility.
The Tribunal noted, in respect of the Ad Hoc facility, that Rs. 3.70 crores was availed on 26-12-2019 and was required to be adjusted ‘on or before expiry of 90 days from the date of availment’. Applying Section 9 of the General Clauses Act, 1897, it held that the use of ‘from’ required exclusion of 26 December 2019 while computing the period.
Accordingly, the Tribunal held that the 90-day period commenced on 27 December 2019 and expired on25 March 2020. The facility would have become overdue only on 26 March 2020. This conclusion was also supported by the financial creditor’s contemporaneous letter dated 21-3-2020. Thus, the default arose squarely within the Section 10-A IBC protected period and could not have formed the basis of CIRP.
The Tribunal on the amendment of the Section 7 IBC application held that there was no absolute prohibition against amending a Section 7 IBC application or its date of default. However, permissibility of amendment was distinct from the evidentiary value of the substituted date. The original Form-1 and Information Utility/NeSL record had reflected 29 November 2020, whereas 10 March 2020 and 24 March 2020 were introduced only after the Corporate Debtor raised the Section 10-A IBC defense.
The Tribunal held that jurisprudence permitting flexibility concerning the precise date of default in limitation matters could not have mechanically governed Section 10-A IBC cases. Section 10-A IBC contained a non-obstante and permanent prohibition by providing that no application ‘shall ever be filed’ in respect of defaults occurring during the protected period. Therefore, unlike a discrepancy affecting computation of limitation, an incorrect date under Section 10-A IBC could have determined the very maintainability of CIRP proceedings.
The Tribunal further held that, once the specific amended dates of 10 March 2020 and 24 March 2020 had failed scrutiny, the Section 7 IBC application could not be sustained by subsequently relying upon materially different events such as the SARFAESI notice, recall notice or non-payment of FITL, when those events had not been pleaded as the dates of default in the amended Form-1.
Accordingly, the NCLAT held that the dates of default pleaded by the financial creditor in respect of both the Cash Credit and Ad Hoc Cash Credit facilities were incorrect and that the correct defaults fell within the Section 10-A protected period. The appeal was allowed and the impugned order admitting the Corporate Debtor into CIRP was set aside. The Tribunal, however, clarified that the financial creditor remained at liberty to pursue other remedies available in law, including proceedings under the IBC in respect of any fresh default.
[Siddharth Satish Katariya v. Central Bank of India Ltd., 2026 SCC OnLine NCLAT 1075, decided on 1-9-2026]
Advocates who appeared in this case:
For Appellant: Krishnendu Datta, Senior Advocate, with Saurav Agarwal, Akhil Sachan, Lalit Katriya, Arjun Goind, Sunanda Tulysan, Shweta Patnaik, Kashish Maheshwari and Monali Solanki, Advocates
For Respondent No. 1: Kunal Tandon, Senior Advocate, with Tushar Singh, Akshara Arshi, Pratyaksh Bhadoria and Vansikha Dubey, Advocates
For Respondent No. 2/IRP: Vikram Pradeep, Neha Rajpal and Anay Khandelwal, Advocates
