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TMI Blog2021 (2) TMI 394X X X X Extracts X X X X X X X X Extracts X X X X ..... issue involved raises a question of law. Hence, while setting out the facts as set up in the appeal, we need to clarify that the factual dispute has not arisen for adjudication. 3 The appellant claims that a sum of INR 104,11,76,479 is due and payable to him pursuant to his resignation "from all capacities held by him in the respondent in accordance with the various Employment Agreements/Incentive Agreements" entered into by him with the respondent during his tenure as Chairman and Managing Director. The appellant entered into an Employment Agreement with the respondent on 16 July 2009. Another Employment Agreement was entered into on 16 December 2013, effective from 1 January 2014, which superseded the previous agreement. The Employment Agreement dated 16 December 2013 was coupled with an Incentive Agreement signed on the same date. The Incentive Agreement is stated to have been amended and restated on 17 April 2015, along with a further amendment through a Side Letter dated 20 April 2015. Further, the new Employment Agreement was amended through a Letter Amendment No. 1 dated 17 April 2015. 4 On 21 January 2020, the appellant submitted his resignation to the respondent and its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inserted provisions of Section 10A. The NCLT upheld the submission of the respondent, holding that a bar has been created by the newly inserted provisions of Section 10A. This decision has been upheld in appeal by the NCLAT. 8 The issue which falls for determination in this appeal is whether the provisions of Section 10A stand attracted to an application under Section 9 which was filed before 5 June 2020 (the date on which the provision came into force) in respect of a default which has occurred after 25 March 2020. Before proceeding to discuss the rival submissions, it is necessary to preface the discussion with reference to three significant dates which have a bearing on the present proceedings: * 30 April 2020 - date of default as set up in Form 3; * 11 May 2020 - date of institution of the application under Section 9; and * 5 June 2020 - date on which Section 10A was inserted in the IBC. 9 The date of default is crystalized as 30 April 2020 in the demand notice issued by the appellant in Form 3, which is prescribed under Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The statutory form provides for a disclosure of the parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s further actions which are adopted towards the initiation of the insolvency resolution process. The question which needs to be resolved is whether Section 10A would stand attracted to a situation such as the present where the application under Section 9 was filed prior to 5 June 2020, when Section 10A was inserted, and in respect of a default which has taken place after 25 March 2020. 11 Mr Neeraj Kishan Kaul submits that: (i) Section 10A creates a bar to the 'filing of applications' under Sections 7, 9 and 10 in relation to defaults committed on or after 25 March 2020 for a period of six months, which can be extended up to one year; (ii) The Ordinance and the Act which replaced it do not provide for the retrospective application of Section 10A either expressly or by necessary implication to applications which had already been filed and were pending on 5 June 2020; (iii) Section 10A prohibits the filing of a fresh application in relation to defaults occurring on or after 25 March 2020, once Section 10A has been notified (i.e., after 5 June 2020); (iv) Section 10A uses the expressions "shall be filed" and "shall ever filed" which are indicative of the prospective n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al business operations; AND WHEREAS it is difficult to find adequate number of resolution applicants to rescue the corporate person who may default in discharge of their debt obligation; AND WHEREAS it is considered expedient to suspend under sections 7, 9 and I 0 of the Insolvency and Bankruptcy Code, 2016 to prevent corporate persons which are experiencing distress on account of unprecedented situation. being pushed into insolvency proceedings under the Court for some time; AND WHEREAS it is considered expedient to exclude the defaults arising on account of unprecedented situation for the purposes of insolvency proceeding under this Code;" (emphasis supplied) 16 Section 10A is prefaced with a non-obstante provision which has the effect of overriding Sections 7, 9 and 10. Section 10A provides that: (i) no application for the initiation of the CIRP by a corporate debtor shall be filed; (ii) for any default arising on or after 25 March 2020; and (iii) for a period of six months or such further period not exceeding one year from such date as may be notified in this behalf. The proviso to Section 10A stipulates that "no application shall ever be filed" for the initiation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 when the provision was inserted. Such a construction cannot be accepted. 21 The date of 25 March 2020 has consciously been provided by the legislature in the recitals to the Ordinance and Section 10A, since it coincides with the date on which the national lockdown was declared in India due to the onset of the Covid-19 pandemic. In Sardar Inder Singh vs State of Rajasthan 1957 SCR 605, the Rajpramukh promulgated the Rajasthan (Protection of Tenants) Ordinance (9 of 1949) on 21 June 1949 which, inter alia, provided for the reinstatement of tenants who had been in occupation on 1 April 1948 but had been subsequently dispossessed. When it was challenged before the Supreme Court, the Constitution bench, speaking through Justice T L Venkatarama Ayyar, relied on the recital in its preamble -"Whereas with a view to putting a check on the growing tendency of landholders to eject or dispossess tenants from their holdings, and in the wider national interest of increasing the production of foodgrains, it is expedient to make provisions for the protection of tenants in Rajasthan from ejectment or dispossession from their holdings." while interpreting its provisions. The Court held that: " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could be granted, and that the decision of the matter is left to the unfettered and uncanalised discretion of the Government, and is therefore repugnant to Article 14. It is true that that section does not itself indicate the grounds on which exemption could be granted, but the preamble to the Ordinance sets out with sufficient clearness the policy of the legislature; and as that governs Section 15 of the Ordinance, the decision of the Government thereunder cannot be said to be unguided..." (emphasis supplied) 22 The language of the provision is not always decisive to arrive at a determination whether the provision if applicable prospectively or retrospectively. Justice G.P. Singh in his authoritative commentary on the interpretation of statutes, Principles of Statutory Interpretation - G.P. Singh, Principles of Statutory Interpretation (1st edn., Lexis Nexis 2015), has stated that: "In deciding the question of applicability of a particular statute to past events, the language used is no doubt the most important factor to be taken into account; but it cannot be stated as an inflexible rule that use of present tense or present perfect tense is decisive of the matter that the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r a period of six months, extendable to one year. Acceptance of the submission of the appellant would defeat the very purpose and object underlying the insertion of Section 10A. For, it would leave a whole class of corporate debtors where the default has occurred on or after 25 March 2020 outside the pale of protection because the application was filed before 5 June 2020. 24 We have already clarified that the correct interpretation of Section 10A cannot be merely based on the language of the provision; rather it must take into account the object of the Ordinance and the extraordinary circumstances in which it was promulgated. It must be noted, however, that the retrospective bar on the filing of applications for the commencement of CIRP during the stipulated period does not extinguish the debt owed by the corporate debtor or the right of creditors to recover it. 25 Section 10A does not contain any requirement that the Adjudicating Authority must launch into an enquiry into whether, and if so to what extent, the financial health of the corporate debtor was affected by the onset of the Covid-19 pandemic. Parliament has stepped in legislatively because of the widespread distress cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liquidator can sell the business of the corporate debtor as a going concern. (See ArcelorMittal [ArcelorMittal (India) (P) Ltd. v. Satish Kumar Gupta, (2019) 2 SCC 1] at para 83, fn 3)." Hence, the embargo contained in Section 10A must receive a purposive construction which will advance the object which was sought to be achieved by enacting the provision. We are therefore unable to accept the contention of the appellant. 26 The date of the initiation of the CIRP is the date on which a financial creditor, operational creditor or corporate applicant makes an application to the adjudicating authority for initiating the process. On the other hand, the insolvency commencement date is the date of the admission of the application. This distinction is also evident from the provisions of sub-section (6) of Section 7, sub-section (6) of Section 9 and sub-section (5) of Section 10. Section 7 deals with the initiation of the CIRP by a financial creditor; Section 8 provides for the insolvency resolution by an operational creditor; Section 9 provides for the application for initiation of the CIRP by an operational creditor; and Section 10 provides for the initiation of the CIRP by a corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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