CIRP Plea Filed u/s 7 Against a Default That Occurred During the Period Excluded u/s 10A Wasn’t Maintainable | NCLAT

Case Details: Vikram Kumar v. Aranca (Mumbai) (P.) Ltd. - [2023] 155 taxmann.com 419 (NCLAT-New Delhi)

Judiciary and Counsel Details

• • Anant Bijay Singh, Judicial Member & Ajai Das Mehrotra, Technical Member
  • Dilip Kumar Niranjan, Amandeep Singh, Karmveer, Advs., Krishnendu Datta, Sr. Adv., Dhiraj Mehtre, Manpreet Lamba, Ms Shivani Sharma, Ms Neha Aggarwal, Anuj Tiwari & Swankit Nanda, Advs. for the Appearing Parties.

Facts of the Case

In the instant case, the appellant (i.e. financial creditor) granted loan facilities to the principal borrower, which were secured by corporate guarantees issued by the respondent-corporate guarantor.

Since the principal borrower had not repaid the loan amount, the appellant had invoked the guarantee and filed an application under section 7 of the IBC for initiation of the CIRP against the corporate guarantor.

The Adjudicating Authority (NCLT) dismissed the said application as not maintainable on the ground that the appellant had invoked corporate guarantee on 25-8-2020, which fell under the period specified under section 10A of the IBC and, therefore, the CIRP could not be initiated.

Thereafter, an appeal was made to the National Company Law Appellate Tribunal (NCLAT) against the order passed by the NCLT.

NCLAT Held

The NCLAT held that since the deed of guarantee was invoked on 25-8-2020, the CIRP could not have been initiated for default in repayment as default arose in a period excluded by provisions of section 10A.

Therefore, the NCLT had rightly held that the default fell within the specified period under section 10A of the IBC and an application filed under section 7 was non-maintainable. Accordingly, the appeal was dismissed.

List of Cases Reviewed

• • Vikram Kumar v. Aranca (Mumbai) (P.) Ltd. [2023] 155 taxmann.com 418 (NCLT – Mum.) (para 10) affirmed [See Annex].