CIRP plea filed u/s 9 during the moratorium period wasn’t maintainable as per provision of sec. 10A: NCLAT

Case Details: B. Sreekala v. Al Sadiq Sweets - [2022] 139 taxmann.com 501 (NCLAT-Chennai)

Judiciary and Counsel Details

• • M. Venugopal, Judicial Member & Kanthi Narahari, Technical Member
  • Avinash Krishnan Ravi, Sankar P. Pankcker & Jerin Asher Sojan, Advs. for the Appellant.
  • Maninder Singh, Sr. Adv., Vikram Kalra, B. Divakaran & Mrs. J. Parimalam, Advs. for the Respondent.

Facts of the Case

In the instant case, the Respondent-operational creditor entered into an agreement with the corporate debtor for the export of cashew kernels. The corporate debtor raised a pro forma invoice to the respondent and was paid Rs. 1 lakh. The respondent issued a demand notice u/s 8 of the IBC demanding amount paid to the corporate debtor.

Thereafter, the respondent filed an application dated 16.09.2020 u/s 9 of the IBC for initiation of the CIRP against the corporate debtor. The National Company Law Tribunal (NCLT) by impugned order admitted the said application holding that the corporate debtor was in default of debt due and payable and default was in excess of the minimum amount of Rs. 1 lakh rupees stipulated under section 4(1) of the IBC.

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

On an appeal, the appellant-promoter/director of the corporate debtor contended that the jurisdiction threshold to file an application under IBC was Rs. 1 crore and the same was notified by the CG in Notification No. S.O 1205 (E), dated 24.03.2020 issued under section 4 of the IBC.

Further, the appellant stated that when the date of default was after 25.03.2020, an application filed u/s 9 of the IBC would be barred by section 10A. Thus, it was found that the contract was terminated on 30.04.2020 and there was a dispute in regard to the contract for delivery of goods between the parties.

NCLAT Held

The NCLAT observed that the threshold limit u/s 10A for initiation of the CIRP was Rs. 1 Crore vide Notification dated 24.04.2020, but in the instant case, ‘Default’ claimed from corporate debtor was Rs. 1 Lakh and an ‘interest’ amount, which was denied by the corporate debtor.

The NCLAT held that under contract, the amount was due and payable on 25.04..2020, as per provision of Section 10A, an application filed by the operational creditor/respondent No. 1 u/s 9 was not maintainable as no application for initiation of CIRP of the corporate debtor would be filed for any default arising on or after 25.04.2020 for a period of six months or such further period not exceeding one year from such date as may be notified in this behalf etc.

Further, the NCLAT held that admitting the application and declaring a moratorium was clearly unsustainable in the eyes of law. Therefore, the impugned order passed by the NCLT in admitting section 9 application was to be set aside.

List of Cases Reviewed

• • Al Sadiq Sweets v. Krisenter Impex (P.) Ltd. [IBA/35/KOB/2020, dated 26-2-2021] (para 81) reversed.

List of Cases Referred to

• • Ramesh Kymal v. Siemens Gamesa Renewable Power (P.) Ltd. [2021] 124 taxmann.com 226/164 SCL 455 (SC) (para 11)
  • Andal Bonumalla v. Tomato Trading LLP [Company Appeal (AT) (Ins.) No. 752 of 2019] (para 12)
  • Madhusudan Tantia v. Amit Choraia [2021] 131 taxmann.com 144 (NCL – AT) (para 13)
  • Pankaj Aggarwal v. Union of India [2020] 117 taxmann.com 494/160 SCL 624 (Delhi) (para 25)
  • Kay Bouvet Engg. Ltd. v. Overseas Infrastructure Alliance (India) (P.) Ltd. [2021] 129 taxmann.com 133 (SC) (para 29)
  • Jumbo Paper Products v. Hansraj Agrofresh (P.) Ltd. [Comp. App. (AT) (Ins.) No. 813 of 2021, dated 25-10-2021] (para 30)
  • Alka Bose v. Parmatma Devi [Civil Appeal No. 6197 of 2020, dated 17-12-2008] (para 38)
  • Nanak Builders & Investors (P.) Ltd. v. Vinod Kumar Alag AIR 1991 Delhi 315 (para 38)
  • Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd. [2017] 85 taxmann.com 292/144 SCL 37 (SC) (para 45)
  • Unistill Alcoblends (P.) Ltd. v. India Brewery & Distillery (P.) Ltd. [Comp. App. (AT) (Ins.) No. 162 of 2019, dated 16-1-2020] (para 46)
  • Kaushalya Devi v. Baijnath Sayal [1961] 3 SCR 769 (para 47)
  • Krishan Kumar v. Union of India [1990] 4 SCC 207 (para 49)
  • Fida Hussain v. Moradabad Development Authority [2011] 12 SCC 615 (para 50)
  • Bakul Cashew Co. v. STO 1986 taxmann.com 901 (SC) (para 51)
  • S.L. Srinivasa Jute Twine Mills (P.) Ltd. v. Union of India [2006] 2 SCC 740 (para 52)
  • Directorate General of Foreign Trade v. Kanak Exports [2015] 62 taxmann.com 328 (SC) (para 53)
  • State of Punjab v. Devans Modern Brewaries Ltd. [2004] 11 SCC 26 (para 55)
  • S. Kasi v. State [Criminal Appeal No. 452 of 2020, dated 19-6-2020] (para 56).