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2022 (9) TMI 1007 - Tri - Insolvency and BankruptcyMaintainability of application - Suspension of initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - Section 10A of IBC - HELD THAT - Going into the legislative intent and the proviso to Section 10A of the code, which stipulates that no application shall ever be filed for the initiation of the CIRP for the said default occurring during the said period, we are of the considered view that the expression shall ever be filed is a clear indicator that the intent of the legislature is to bar the institution of any application for the commencement of the CIRP in respect of a default which has occurred on or after 25 March 2020 for a period of six months, extendable up to one year as notified. On a perusal of the provision of section 10A of the Code, it is apparent that the provision bars the filing of an application in a situation, where the default has occurred during the period from 25.03.2020 to 24.03.2021 - There is no dispute that even a notice for curing the said default and to submit fresh security was also given, but the same was also not complied with or cured on behalf of the respondent. Therefore, there was specific default on the part of the respondent for not providing the security against the loan facility availed. The said default cure notice was given on 20.10.2020, but the said impairment of security was not cured in due time. Thereafter, the recall notice dated 15.12.2020 was issued, calling upon the corporate debtor to repay the loan amount within 7 days of receipt of this notice. Thus, the default on the part of corporate debtor was not only committed on 20.10.2020, but also subsequently, after 7 days of the receipt of the loan recall notice dated 15.12.2020. On a conjoint reading and meticulous perusal of the clause 12.1 (Events of Default) and clause 12.2 (consequences of event of default) of loan agreement dated March 31, 2020, Cure Notice dated October 20, 2020, Loan Recall Notice dated December 15, 2020, Cheques Dishonored Communication from the bank and the Notice dated 08.04.2021 issued to the corporate debtor, the impairment of security comes within the preview of 'Event of Default', which was not cured by the corporate debtor even after the issuance of the cure notice dated 20.10.2020 by the applicant to either perfect the security or provide an alternative security, consequent to which a loan recall notice dated 15.12.2020 was issued by the applicant calling upon the corporate debtor to repay the entire loan amount due as on 12.2.2020 amounting Rs. 224,63,86,228/-. Since, the instant petition is not maintainable in view of the provision of Section 10A of the Code, 2016, this Adjudicating Authority is not willing to go into the merits of the present case - Petition dismissed.
Issues Involved:
1. Maintainability of the petition under Section 10A of the Insolvency and Bankruptcy Code, 2016. 2. Occurrence and implications of the 'Event of Default' under the loan agreement. 3. Validity of the actions taken by the financial creditor post-default, including the issuance of cure and loan recall notices. 4. Impact of the dishonor of post-dated cheques on the determination of the default date. 5. Relevance of ongoing arbitration and writ proceedings on the insolvency proceedings. Issue-wise Detailed Analysis: 1. Maintainability of the Petition under Section 10A of the Insolvency and Bankruptcy Code, 2016: The corporate debtor argued that the petition is not maintainable under Section 10A of the Code, which bars the initiation of Corporate Insolvency Resolution Process (CIRP) for defaults occurring between 25th March 2020 and 24th March 2021. The tribunal examined the legislative intent behind Section 10A, noting the provision's clear language that no application for CIRP shall ever be filed for defaults occurring within the specified period. The tribunal referred to the Supreme Court's interpretation in Ramesh Kymal v. Siemens Gamesa Renewable Power (P) Ltd. (2021) 3 SCC 224, which emphasized the extraordinary circumstances prompting the enactment of Section 10A. The tribunal concluded that the default date, being within the barred period, rendered the petition non-maintainable. 2. Occurrence and Implications of the 'Event of Default' under the Loan Agreement: The applicant contended that the corporate debtor defaulted by failing to maintain adequate security cover, as required under the loan agreement. The tribunal reviewed the loan agreement clauses, particularly Clause 12.1.9(h) and Clause 12.2, which detailed the consequences of an event of default. The tribunal noted that the impairment of security, due to the revocation of mortgage permission by NOIDA authority, constituted an event of default. Despite the issuance of a cure notice on 20.10.2020, the corporate debtor did not rectify the default, leading to a loan recall notice on 15.12.2020. 3. Validity of Actions Taken by the Financial Creditor Post-Default: The applicant issued a loan recall notice on 15.12.2020, demanding repayment within seven days. The tribunal found that the corporate debtor's failure to cure the default and repay the loan validated the actions taken by the financial creditor. The tribunal emphasized that the default date, seven days post-receipt of the loan recall notice, fell within the period barred by Section 10A. 4. Impact of the Dishonor of Post-Dated Cheques on the Determination of the Default Date: The applicant argued that the dishonor of post-dated cheques on 05.04.2021 constituted the default date. However, the tribunal rejected this argument, stating that the default date was determined by the loan recall notice, not the cheque dishonor. The tribunal clarified that the default occurred when the corporate debtor failed to cure the impairment of security and repay the loan as demanded in the recall notice. 5. Relevance of Ongoing Arbitration and Writ Proceedings: The corporate debtor highlighted ongoing arbitration and writ proceedings challenging the actions of NOIDA authority and the financial creditor. The tribunal acknowledged these proceedings but reiterated that they did not impact the determination of default under the insolvency proceedings. The tribunal cited precedents, including Indus Biotech (P) Ltd. vs. Kotak Ventures Offshore Limited (2021) 6 SCC 436, affirming that insolvency proceedings are independent of arbitration and other legal remedies. Conclusion: The tribunal concluded that the petition was not maintainable under Section 10A of the Insolvency and Bankruptcy Code, 2016, as the default occurred within the barred period. Consequently, the tribunal dismissed the petition without delving into the merits of the case, emphasizing the legislative intent to bar CIRP applications for defaults occurring between 25th March 2020 and 24th March 2021.
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