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The basis of the case before the NCLAT was that the corporate debtor had entered into an irrevocable deed of guarantee in favor of the financial creditor for a celebrity cricket match in Dubai
The National Company Law Appellate Tribunal has recently observed that Corporate Insolvency Resolution Process (CIRP) cannot be initiated against a corporate debtor for the period excluded under Section 10A of the Insolvency and Bankruptcy Code of 2016.
"The AA has rightly held that the default falls within the specified period in Section 10-A of the IBC, 2016 and the Application U/s 7 of IBC, 2016 is non maintainable," the order reads.
The National Company Law Appellate Tribunal (NCLAT) was hearing an appeal challenging the decision of the National Company Law Tribunal (NCLT) in Mumbai, which had rejected an application for initiating Corporate Insolvency Resolution Process (CIRP) against the corporate debtor during the period specified under Section 10A.
The basis of the case before the NCLAT was that the corporate debtor had entered into an irrevocable deed of guarantee in favor of the financial creditor for a celebrity cricket match in Dubai.
When the corporate debtor defaulted on its obligations, the financial creditor approached the NCLT Mumbai seeking the initiation of CIRP.
The financial creditor's counsel argued that the guarantee was invoked in July 2019 and, therefore, should not be excluded from Section 10A.
On the other hand, the corporate debtor's counsel contended that the creditor's own submission indicated that the guarantee was invoked in August 2020, which falls within the excluded period according to Section 10A.
He also added that a letter sent by the creditor to certain individuals who were not directors of the company couldn't be considered a valid invocation of the guarantee.
The NCLAT agreed with the contentions of the corporate debtor and said,
"Since the Deed of Guarantee was invoked on 25.08.2020, CIRP cannot be initiated for default in repayment as the default arises in the period excluded by provisions of Section 10A of IBC, 2016," the order reads.
Advocates Dilip Kumar Niranjan, Amandeep Singh and Karmveer appeared for the financial creditor.
Senior Advocate Krishnendu Datta, Advocates Dhiraj Mehtre, Manpreet Lamba, Shivani Sharma and Neha Aggarwal appeared for the corporate debtor.
Case title: Vikram Kumar vs Aranca (Mumbai) Private Limited
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