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TMI Blog2021 (12) TMI 1056X X X X Extracts X X X X X X X X Extracts X X X X ..... to Section 10A stipulates that no application shall ever be filed for the initiation of the CIRP of a corporate debtor for the said default occurring during the said period . The explanation which has been inserted for the removal of doubts clarifies that Section 10A shall not apply to any default which has been committed under Sections 7, 9 and 10 before 25 March 2020. It is clear that the Executive in the Promulgation of the Ordinance to meet an extraordinary situation and to avoid causing further stress to the already beleaguered businesses due to COVID pandemic throughout the world and also in addition affected by the lock down enforced by the State of the Union, all beyond their control have chosen to suspend the filing of any application in relation to defaults arising on or after 25.03.2020 - the Corporate Debtor received the products in various lots on 21.03.2020 and 23.03.2020 and also on 30.05.2020, where the part payments were made on 28.05.2020 and 28.07.2020 into the bank account of the Operational Creditor against the total amount due. Therefore, the date of default cannot be considered as 21.03.2020, as it is only the date of order but from the date 28.07.2020, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 30.11.2020 stood as ₹ 1,05,80,698/- (Rupees one crore five lakhs eighty thousand six hundred ninety-eight only) at the agreed rate of interest @ 18% p.a. and as per the trade practice for delayed payments. They stated that there is contractual relationship existing between both the parties. It is also stated that the Corporate Debtor in their Ledger Accountacknowledged the debt of principal of ₹ 93,53,248/- as on 27.07.2020which was signed by its agent. 3. The Operational Creditor submitted that they have issued statutory notice through email in Form 3 on 5th December, 2020and the same was duly acknowledged and responded by the Corporate Debtor through their Counsel's letter dated 30th December, 2020. i.e. after expiry of 10 days as allowed under the statute and thus the presumption is that there is no objection to the statutory Notice in Form3. It is further submitted that the Corporate Debtoron onehand admitted that the materials were received through their agent Mr. Unni and part payments made by thembut they took an untenable excuse that there was no 'privity of contract' between the Corporate Debtor and the Operational Creditor. Thisis against the public law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agent and the Corporate Debtor, and that the agent agreed to arrange for the supply of Vannamei Shrimp to them. 7. The Corporate Debtor further stated that due to the spread of Covid-19, they have apprehension that there are some restrictions which are about to come and hence they informed the agent to hold the supply of the goods. However, the agent compelled the Corporate Debtor to take delivery of the same informing that he will give good discount for the cargo. Considering the good relationship with the agent, the Corporate Debtor agreed for the delivery of 43982 Kgs of Vannamei Shrimp on 21.03.2020 and 23.03.2020. 8. It was argued by the learned counsel for the Corporate Debtor that on 21.03.2020, the lorry with the cargo arrived late night and immediately after the supply of the 18885 Kgs of the product, there was a "Janatha Curfew" declared in Kerala and the entire cargo was kept in the cold storage without sending it to the peeling shed stating that the agent will take up the liability in case any risk involved, he further supplied the second slot of the 25097 Kgs of Vannamei Shrimp on 23.01.2020. Due to the unprecedented situation prevailing, the Corporate Deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determine whether the provisions of Section 10A stand attracted to an application under Section 9 which was filed after 5th June 2020 (the date on which the provision came into force) in respect of a default which has occurred after 25 March 2020. 13. This application has been filed on 16.09.2020 under Section 9 of the IBC on the ground that there was a default in the payment of the operational dues of the applicant. An Ordinance was promulgated by the President of India on 5th June 2020 by which Section 10A was inserted into the IBC. Section 10A reads as follows: "10A. Suspension of initiation of corporate insolvency resolution process.- Notwithstanding anything contained in sections 7,9 and 10, no application for initiation of corporate insolvency resolution process of a corporate debtor shall be filed, for any default arising on or after 25th March, 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: Provided that no application shall ever be filed for initiation of corporate insolvency resolution process of a corporate debtor for the said default occurring during the said period. Explanation - For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or operational creditor, as the case may be, makes an application to the Adjudicating Authority for initiating corporate insolvency resolution process;" The expression "insolvency commencement date" is defined in Section 5(12) in the following terms: "5(12) "insolvency commencement date" means the date of admission of an application for initiating corporate insolvency resolution process by the Adjudicating Authority under sections 7, 9 or section 10, as the case may be:" xxxxxx 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 corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ond their control have chosen to suspend the filing of any application in relation to defaults arising on or after 25.03.2020. 18. In this application, the Corporate Debtor received the products in various lots on 21.03.2020 and 23.03.2020 and also on 30.05.2020, where the part payments were made on 28.05.2020 and 28.07.2020 into the bank account of the Operational Creditor against the total amount due. Therefore, the date of default cannot be considered as 21.03.2020, as it is only the date of order but from the date 28.07.2020, the Corporate Debtor failed to pay the balance amount. 19. Given the severity of the consequences that follow on initiation of insolvency proceedings against a company, it is important to safeguard against the exploitive use of the Code.Even though, the amendment application IA(IBC) 119/KOB/2021 was allowed in the first instance, after going in detail, the true facts and circumstances in this matter and the records produced as evidence to prove the outstanding dues categorically show the default date as 28.07.2020 and not 21.03.2020. Therefore, we are of the considered opinion that the applicant purposefully sought amendment of the date of default in thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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