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TMI Blog2022 (9) TMI 954X X X X Extracts X X X X X X X X Extracts X X X X ..... e Adjudicating Authority. Part II of the Code is applicable only when minimum amount of default of Rupees One Crore is fulfilled after 24.03.2020. Thus, right to initiate the CIRP after 24.03.2020 is only on the condition that minimum default is of Rupees One Crore. There is no right to initiate CIRP after 24.03.2020 when minimum default is not Rupees One Crore. Section 10A was inserted in the Code to give protection to the Corporate Debtor from initiation of CIRP process with regard to default committed by the Corporate Debtor after 25.03.2020. The object and purpose of insertion of Section 10A was clearly to save the Corporate Debtor on account of ill-consequences which ensued after spread of COVID-19. 25.03.2020 is the date when lockdown was imposed in the entire country - Section 10A was inserted to give protection to the Corporate Debtor to save from initiation of any CIRP against them since the default committed by the Corporate Debtor was mostly due to ill-consequences of COVID-19. The explanation clearly indicates that the provisions of this section shall not apply to any default committed under the sections 7, 9 or 10 after 25th March, 2020. The idea was to give protect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31.03.2019. (iii) Invoices being not paid a Demand Notice dated 05.03.2020 under section 8 of the I B Code was issued demanding an amount of Rs.41,10,166/- including principal and interest. (iv) After the demand notice was delivered on 11.03.2020, an application under Section 9 was filed by the Operational Creditor on 18.01.2021, which came to be rejected by the Adjudicating Authority. The Adjudicating Authority by the impugned order accepting the submission of the Corporate Debtor, amount claimed being 41,10,166/-, which is below the threshold limit of Rupees One Crore held that the petition is non-maintainable. 3. Shri Pankaj Jain, learned counsel for the Appellant challenging the impugned order of the Adjudicating Authority has raised following submissions: (i) The default by the Corporate Debtor in paying the outstanding debt having been committed prior to 24.03.2020, by which date threshold of Rupees One Crore was introduced and the Demand Notice having been issued on 05.03.2020 i.e. prior to Notification dated 24.03.2020, the application filed by the Appellant under Section 9 on 18.01.2021 was maintainable. What is relevant for the purpose of Section 4 is the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ATION New Delhi, the 24th March, 2020 S. O. 1205 ( E ) . - In exercise of the powers conferred by the proviso to section 4 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), the Central Government hereby specifies one crore rupees as the minimum amount of default for the purposes of the said section. 8. Section 4(1) provides that this Part shall apply to matters relating to the insolvency and liquidation of corporate debtors where the minimum amount of the default is one lakh rupees . Part II of the Code deals with Insolvency Resolution and Liquidation for Corporate Persons . The applicability of the Part II is dependent on minimum amount of default as prescribed in Section 4(1). Minimum amount to default was Rupees One Lakh which has been subsequently amended to Rupees One Crore by Notification dated 24.03.2020. The applicability of Part II is dependent on minimum amount of default thus. 9. Section 6 of the Code provides for persons who may initiate Corporate Insolvency Resolution Process (CIRP). Section 6 is as follows:- 6. Persons who may initiate corporate insolvency resolution process. Where any corporate debtor commits a default, a financi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Part II of the Code applied to matters relating to insolvency Resolution Process for Corporate Debtor, where minimum default is Rupees One Crore (as on 24.03.2020). Thus, Part II of the Code is applicable only when default is of Rupees One Crore or more. There is no right to initiate an application under Section 9 on 24.03.2020 or thereafter if the minimum default of Rupees One Crore is not fulfilled. Thus, crucial date to find out applicability of the threshold is the date when application to initiate CIRP is made. If we accept the submission of learned counsel for the Appellant that date of default or date of demand notice under Section 8 is to be taken and if default is less than Rupees One Crore which occurred prior to 24.032020 right should be given to the applicant to initiate the CIRP after 24.03.2020, it will be clearly contrary to the scheme of the Code as delineated by Section 4, 6, 7, 9 and 10. When the legislative scheme indicate that application for CIRP can be filed only after fulfilling the minimum threshold limit applicable w.e.f. 24.03.2020, no other interpretation of Section 4 can be given. When Section 4 empowers the Central Government to specify the minimum amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds employed in the notification dated 24.03.2020 of the Ministry of Corporate Affairs, Government of India, one cannot infer an intention to take or make it retrospective as in this regard, the relevant words are conspicuously absent and besides there being no implicit inference to be drawn for such a construction in the context in issue. That apart, if the notification dated 24.03.2020 of the Ministry of Corporate Affairs, Government of India, is made applicable to the pending applications of IBC (filed earlier to the notification in issue) it will create absurd results of wider implications / complications. 57. In view of the upshot and also this Tribunal, on a careful consideration of respective contentions advanced on either side and considering the facts and circumstances of the instant case in a conspectus fashion holds unhesitatingly that the notification dated 24.03.2020 of the Ministry of Corporate Affairs, Government of India, is prospective in nature and it is not retrospective or retroactive in nature. Further, the said notification will not apply to the pending applications filed before the concerned Adjudicating Authority (Authorities), under IBC (waiting for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follows:- ORDER Issue notice on the applications for intervention, stay as well as on appeal, returnable in six weeks. The above order passed by the Hon ble Supreme Court indicates that judgment of this Tribunal has not been stayed so as to take away the precedential value of the judgment. 16. Learned counsel for the Appellant has placed much reliance on the judgment of three member Bench in Company Appeal (AT) (Insolvency) No. 557 of 2020, Madhusudan Tantia vs. Amit Choraria Anr. . Facts of the case indicates that in the above case as application under section 9 was filed in September, 2019 before the Adjudicating Authority being C.P. (IB) No.1735/KB/2019, subsequently, on 17.01.2020, Adjudicating Authority directed the Corporate Debtor to file a reply. When the Appeal came for hearing, submission was raised by the Corporate Debtor that operational debt is Rs.90,00,919.10/- only which is below the threshold limit of Rupees One Crore and the application ought to be rejected. This Tribunal considered the above submission and held that the Notification dated 24.03.2020 is not retrospective in its operation and the Notification cannot be treated to be made appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be considered as prospective and not retrospective and the finding that there was no payment on the side of Corporate Debtor after receipt of Demand Notice, no pre-existing dispute also alleged or proved and ultimately admitting the application filed by the 2nd Respondent / Operational Creditor are free from legal infirmities. Resultantly, the instant Appeal fails. 17. The judgment in Madhusudan Tantia (supra), thus, lays down that the Notification dated 24.03.2020 is prospective in nature and shall not be applicable on pending applications. The said judgment does not contain any ratio that when default was committed prior to 24.03.2020 and application was filed after 24.03.2020 the earlier threshold of Rupees One Lakh has to be looked into. 18. We may also refer to a judgment of this Tribunal in Company Appeal (AT) (CH) (INS) No. 55 of 2021, B. Sreekala vs. Al Sadiq Sweets and Ors. decided on 13.12.2021. In the above case, the cause of action arose on 03.01.2020 and application under Section 9 was filed on 16.09.2020 which was admitted by the Adjudicating Authority by order dated 26.02.2021. Appeal was filed by the Suspended Director of the Corporate Debtor conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e filed jointly by not less than one hundred of such allottees under the same real estate project or not less than ten per cent of the total number of such allottees under the same real estate project, whichever is less: 21. The amendment in Section 7 came to be challenged before the Hon ble Supreme Court by Writ Petitions. One of the submission raised before the Hon ble Supreme Court was that the date of default of different allottees may be different and Section 7 proviso which now adds fulfilment of conditions for filing Section 7 application would adversely impinge on the absolute right which otherwise exists with an allottee. The above submission of the petitioner was noticed in Para 159 of the judgment, which is to the following effect:- 159. It is urged on behalf of the petitioners that the provisos requiring support of one hundred persons or one-tenth of the allottees, whichever is lower, is unworkable and arbitrary having regard to the provisions of the Code. There can only be one default in a complaint, it is contended. When the required number of allottees may have to be drawn from allottees who may have entered into agreements with the builder on different da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of the filing of the application. 25. The law laid down by the Hon ble Supreme Court in the above case lend support to our conclusion that threshold of Rupees One Crore has to be fulfilled by an applicant under Section 9 on the date of filing of the application. The fact that default was committed prior to 24.03.2020 and notice under Section 8 was issued and served prior to 24.03.2020 are not determinative or material although they are condition precedent for initiating an application under Section 9. We have noticed the provision of Section 6 which provides that where any Corporate Debtor commits a default, a Financial Creditor, an Operational Creditor or the Corporate Debtor itself may initiate Corporate Insolvency Resolution Process in respect of such Corporate Debtor in the manner as provided under this Chapter. Thus, a default is a condition precedent. Part II of the Code becomes applicable only when default is Rupees One Crore or more w.e.f. 24.03.2020 and an Operational Creditor can initiate Corporate Insolvency Resolution Process against the Corporate Debtor after 24.03.2020 when default is more than Rupees One Crore. No application can be initiated after 24. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the Appellant in the present case. 28. Another judgment of three member Bench in Company Appeal (AT) (Ins.) No. 129 of 2022, Saru International Pvt. Ltd vs. Arumani Traders is also a case where default was of Rs.39 Lakhs and application was filed on 10.08.2020. In the above case, the Adjudicating Authority passed an interim order which was challenged in the Appeal before this Tribunal. This Tribunal considered the Notification dated 24.03.2020 and held that application filed on 10.08.2020 under Section 9 for a default of Rs.39 Lakhs was not maintainable and thus liable to be dismissed. In Para 8 and 9 following has been held:- 8. By Notification dated 24.03.2020, the threshold for entertaining an Application under Section 9 has been raised from Rs. 1 Lakh to Rs. 1 Crore. The Notification and the provisions for increasing threshold, shall operate prospectively i.e. after 24.03.2020. In the present case, the Application was filed by the Operational Creditor on 10.08.2020 i.e. subsequent to above Notification raising the threshold. The amount claimed in Section 9 Application only Rs. 39 Lakh hence, it was less than the threshold and Application ought to have been throw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. vs. Parag Gupta Associates, AIR 2018 SC 5601 for preposition that right to sue accrues when a default occurs. There cannot be any dispute to the preposition laid down by the Hon ble Supreme Court but in the present case question which is to be considered is as to what is the threshold to be fulfilled by an Operational Creditor when an application for initiation of CIRP has been filed. When Section 4 is applied to initiation of CIRP process, threshold should not be looked into when a right to sue accrues rather threshold be looked into on the date of initiation. Default by Corporate Debtor is a condition precedent which gives right to the Operational Creditor to file application under Section 9 but for initiating CIRP process threshold, as prescribed under Section 4, is to be fulfilled by the Operational Creditor on the date of initiation of CIRP process. 31. In view of the foregoing discussion, we are satisfied that no error has been committed by the Adjudicating Authority in rejecting Section 9 application filed by the Appellant on 18.01.2021 which did not fulfil the threshold of Rupees One Crore. We do not find any merit in the Appeal. Appeal is dismissed. - - Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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