2022 (11) TMI 1151 - AT - Insolvency and Bankruptcy

Maintainability of petition - initiation of CIRP - time limitation - Adjudicating Authority choose not to issue notice on the application and dismissed the application holding it to be barred under Section 10A of IBC - HELD THAT - A perusal of the materials brought on the record indicates that there was settlement agreement dated 24.07.2020 between the parties. It is submitted that in the settlement there was table prescribed for payment and the part IV gives the details of payments. The default which is referred to in Part IV were default also of the period subsequent to prohibited period i.e. of March 2021 and October, 2021. A complete reading of the Part IV indicates that claim in the application was both for the period which was covered under the prohibition under Section 10A as well as the period which was beyond the said period. The period of six months or such further period not extending one year from such date as referred to in Section 10A was period during which the protection was to be extended by the statute from initiation of CIRP under Section 7, 9 10 - there is no support to the submission from the Section 10A that the prohibition from initiation of CIRP was limited for six months or one year and after expiry of that period an application can be filed for period covered by Section 10A also. The use of the expression in the proviso that no application shall ever be filed is clearly clarificatory of legislative intendment as contained in Section 10A. For the default which was committed during the period covered under the Section 10A no application could ever be filed. However, for any default which is committed prior to or subsequent to prohibited period, an application can be filed under Section 7,9,10 - since in the application which was filed by the appellant the period was also default for the period subsequent to prohibited period. Ends of justice be served in giving liberty to the appellant to file a fresh application after giving notice under Section 8. Appeal disposed off.

Summary

Issues:
- Application filed under Section 9 rejected by Adjudicating Authority
- Interpretation of Section 10A regarding the bar on filing applications for initiation of corporate insolvency resolution process
- Whether the appellant can file a fresh application for defaults occurring beyond the prohibited period under Section 10A

Analysis:
1. The appeal was filed against the rejection of an application under Section 9 by the Adjudicating Authority, citing the application as barred under Section 10A due to defaults occurring from July 2020 onwards.

2. The Adjudicating Authority dismissed the application, stating that the default period fell within the Section 10A prohibition period, suspending the initiation of CIRP for defaults arising after March 25, 2020.

3. The appellant argued that defaults extended beyond the prohibited period, specifically mentioning defaults in March 2021 and October 2021, which were not covered by Section 10A.

4. The appellant contended that the embargo under Section 10A was limited to one year, relying on a Supreme Court judgment, but the Tribunal noted that the legislative intent was to bar applications for defaults occurring after March 25, 2020, for a specific period.

5. The Tribunal highlighted that Section 10A aimed to protect corporate debtors during the COVID-19 pandemic, and allowing applications after the prohibition period would defeat the purpose of the provision.

6. The Tribunal rejected the appellant's argument that the prohibition under Section 10A had a time limit, emphasizing that no application could be filed for defaults falling within the prohibited period but allowed for applications for defaults outside that period.

7. Consequently, the Tribunal granted the appellant liberty to file a fresh application for defaults occurring beyond the Section 10A period after issuing a notice under Section 8, clarifying that observations in the previous order would not hinder the new application.

8. The Tribunal refrained from expressing opinions on potential defenses available to the Corporate Debtor, leaving those matters to be addressed before the Adjudicating Authority during further proceedings.

9. The appeal was disposed of accordingly, with the decision focusing on the interpretation of Section 10A and the appellant's ability to file a fresh application for defaults falling outside the prohibited period.