The National Company Law Tribunal, Chennai Bench has held that the bar on initiation of insolvency proceedings under Section 10A IBC shall even apply to pending cases in relation to defaults that have arisen on or after March 25. The order was passed by a two-member Bench of R Varadharajan, Member (Judicial) and Anil Kumar B, Member (Technical).
“The date of filing cannot determine the rights of the parties in view of the prevalent extraordinary situation which will wholly defeat the object of the promulgation of the Ordinance in protecting the interest of the corporate persons.”
While proceedings under Section 9 IBC, at the behest of operational creditor Ramesh Kymal, were pending against the Corporate Debtor, Siemens Gamesa Renewable Pvt Ltd, on June 5, the Central Government promulgated Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 to suspend Sections 7, 9 and 10 of the Insolvency and Bankruptcy Code, 2016 on account of COVID-19.
The Corporate Debtor was represented by Senior Advocate Gopal Jain and Advocates Samudra Sarangi, Shruti Raina, Shrishti Khare and Law Offices of Panag & Babu.
Operational Creditor was represented by Senior Advocate Arvindh Pandian with Advocates Jeevanandham Rajagopal, S Aravindan, Varsha Raghavan & Fox Mandal & Associates.
In view of the insertion of Section 10A IBC , the Corporate Debtor moved an application before the NCLT to dispose of the insolvency proceedings as the date of the alleged default was April 30.
The Operational Creditor sought to draw a distinction between the already filed insolvency petitions under IBC from the ones that are yet to be filed and argued that Section 10A IBC was not applicable to pending proceedings.
It was also stated that as in the present case, if there was no financial distress arising out of COVID-19, the protection of Section 10A IBC could not be claimed.
NCLT discussed at length the power of the Executive to promulgate an Ordinance and the emergent reasons to introduce the Ordinance at hand.
“The Executive, as manifest from the Objects and reasons, seems to have also been concerned about proper suitors being available for resolution of insolvency of corporate persons if pushed into insolvency in relation to defaults, arising on or after 25th March 2020.. object of I&B Code is for the resolution of insolvency of corporate persons in a time bound manner by maximizing the value of the assets available with the Corporate Debtor by balancing the interest of all the stakeholders concerned, which may not happen; this seems to be apprehension of the Executive under the prevailing situation prompting it to exclude the default arising on or after 25.03.2020 as a ‘default’ itself giving rise to the filing of an application seeking initiation of the CIRP.”
Further, laying emphasis on the term “ever” as contained in the proviso to Section 10A, the NCLT added the pending application filed in relation to defaults which have occurred on or after March 25 have been removed from the ambit of Sections 7, 9 and 10A IBC.
“..the proviso to main provision of Section 10A IBC makes it abundantly clear that the hands of the clock were not required to be temporarily frozen for a period of six months or such further period not exceeding one year but are required to be permanently interdicted..”
Consequently, since the alleged default in the case at hand had arisen on April 30, the NCLT held that the instant case was hit under Section 10A IBC.
The main insolvency plea was accordingly rejected.
Read the order here: