2023 (8) TMI 1378 - AT - Insolvency and Bankruptcy

Rejection of Section 7 application - threshold limit involved in the appeal - deduction of interest amount - application rejected on the ground that Company Petition was filed below the threshold limit as per the Notification issued by the Ministry of Corporate Affairs vide Notification dated 24.03.2020. Whether if the interest payments accrued during the Section 10A period whether the said interest amount is to be deducted while computing the threshold? HELD THAT - The Section 10 A provides that no application/proceedings under Section 7,9 10 is to be initiated for a default which is committed during Section 10A period. What is bar is initiation of proceedings when Corporate Debtor commits default in Section 10 A period. If the default is committed prior to Section 10A period and continues in the Section 10 A period the initiation of proceeding is not barred. In the Judgment of this Tribunal delivered in RAGHAVENDRA JOSHI VERSUS AXIS BANK LIMITED; MR. AMIT CHANDRASHEKAR PODDAR 2023 (8) TMI 1376 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI it is already held that if default was committed prior to Section 10 A period, Section 10 A shall not be applicable. If the default is committed prior to Section 10 A period and default continues there is no prohibition in initiating proceedings under Section 7 and we are not persuaded to accept the submission of the counsel for the respondent that the liability of interest which accrued during Section 10 A period should be ignored or should not be computed in the amount while finding the threshold. Liability to pay interest which default committed prior to Section 10 A period continues and is not obliviated by Section 10 A - Adjudicating Authority committed error in rejecting the Section 7 application the threshold being complete. The Adjudicating Authority is directed to pass fresh order admitted Section 7 application within 30 days from today - appeal allowed.

Summary

Issues Involved:
- Threshold limit for filing Section 7 application under the Insolvency & Bankruptcy Code, 2016.
- Interpretation of Section 10A regarding the suspension of initiation of corporate insolvency resolution process.

Summary:
The judgment by the National Company Law Appellate Tribunal, New Delhi, involved an appeal against the rejection of a Section 7 application by the Adjudicating Authority. The Appellant claimed to be the Financial Creditor of the Corporate Debtor and filed the application under Section 7 for a debt and default amounting to Rs.1,00,59,922, including principle and interest. The Adjudicating Authority rejected the application citing that it was filed below the threshold limit specified by a Ministry of Corporate Affairs notification.

The Appellant challenged the rejection, arguing that the threshold was met as the total amount was clearly stated in the application. They also provided an interest calculation sheet, showing the amount due as per a settlement agreement with the Corporate Debtor. The Respondent contended that the interest accrued during a specific period covered by Section 10A should not be included in the threshold calculation.

The Tribunal examined the provisions of Section 10A, which suspend the initiation of insolvency resolution processes for defaults during a specified period. It clarified that if a default occurred before the Section 10A period and continued during it, proceedings could still be initiated. Referring to previous judgments, the Tribunal held that the liability of interest accrued during the Section 10A period should not be ignored in determining the threshold for the application.

Ultimately, the Tribunal found that the Adjudicating Authority erred in rejecting the Section 7 application and allowed the appeal. It directed the Authority to reconsider the application within 30 days, providing an opportunity for the parties to settle the matter during this period.