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Synopsis

The National Company Law Appellate Tribunal has recently set aside the order of the National Company Law Tribunal at Delhi while noting that the view of the NCLT that the liability of interest accrued during the Section 10A period should be ignored or should not be computed for triggering CIRP is misconceived.

“Further, since the default was committed prior to Section 10A period and the liability to pay interest having clocked prior to Section 10A period, we are of the considered opinion that the view taken by the Adjudicating Authority that the liability of interest which accrued during Section 10A period should be ignored or should not be computed for triggering CIRP is misconceived,” the NCLAT said.

The NCLAT bench comprising Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra was hearing an appeal filed under Section 9 of the Insolvency and Bankruptcy Code 2016 by an operational creditor against the order of NCLT rejecting its application to initiate CIRP against the corporate debtor.

The corporate debtor had placed a purchase order with the operational creditor which was due for payment on 29 February 2020. On default being made, the operational creditor sent a notice to the corporate debtor which was neither replied to nor disputed by the corporate debtor.

Therefore, the operational creditor filed an application under Section 9 of IBC before NCLT Delhi.

The NCLT rejected the application of the operational creditor on the ground that the threshold of 1 crore was not met as interest was claimed by the operational creditor falls during the period 25.03.2020 to 24.03.2021 for which no CIRP could have been initiated in terms of Section 10A of the IBC.

Before the NCLAT, the operational creditor contended that the default in payment having arisen before 25.03.2020, the interest that accrued on the principal amount so defaulted is also liable to be treated as part of the operational debt and taken into account while computing the minimum threshold limit.

The NCLAT agreed with the contentions of the operational creditors and said that Section 10A was never intended to cover any default which occurred before the Section 10A period and continuing thereafter.

“Thus, the aim and objective of Section 10A was to protect a Corporate Debtor from the filing of any insolvency application against it for any default committed during the period when Covid-19 pandemic was prevailing. It was never intended to cover any default which occurred before Section 10A period and continuing thereafter,” the order reads.

Advocate KP Singh appeared for the operational creditor-appellant.

Case title: Beetel Teletech Ltd vs Arcelia IT Services Pvt. Ltd.