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TMI Blog2023 (9) TMI 1668X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision does not put any bar on the initiation of CIRP proceedings. The law of Section 10A is well settled. The object and purpose of Section 10A has been explained in the ordinance by which Section 10A was brought into operation - The aim and objective of Section 10A was to protect a Corporate Debtor from the filing of any insolvency application against it for any default committed during the period when Covid-19 pandemic was prevailing. It was never intended to cover any default which occurred before Section 10A period and continuing thereafter. The present is a case where default has been committed by the Corporate Debtor since 29.02.2020 which is prior to commencement of Section 10A period. Hence, this is a case where the default was undisputedly committed before the bar of Section 10A came into play. There being categorical default by the Corporate Debtor prior to Section 10A period, the Corporate Debtor was clearly not entitled to claim the benefit of Section 10A period. Quantum of unpaid operational debt above the minimum threshold limit of Rs. 1 crore or not - HELD THAT:- This finding of the Adjudicating Authority has been challenged by the Appellant on the ground that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the present appeal has been preferred by the Operational Creditor. 2. Briefly recapitulating the factual matrix of the present case, the Corporate Debtor and the Operational Creditor had executed a Channel Partner Registration Form wherein both parties had agreed to work on mutually accepted terms and conditions. The Corporate Debtor raised a purchase order on 25.10.2019 pursuant to which the Operational Creditor supplied goods and services and raised an invoice No.RV1927813879 dated 31.12.2019 for which payments remained due. Despite several reminders including meetings held between the two parties as the entire payment assured by the Corporate Debtor was not received by the Operational Creditor, a demand notice under Section 8 of the IBC was issued by the Operational Creditor. The Corporate Debtor did not file any reply to the statutory demand notice. Subsequently the Operational Creditor filed a Section 9 application on 15.12.2021 seeking initiation of CIRP of the Corporate Debtor. The Corporate Debtor filed a reply to the Section 9 application. On hearing the matter, the Adjudicating Authority dismissed the Section 9 application as not maintainable on the ground that the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... detailed submissions advanced by the Learned Counsel for the Appellant and perused the records carefully. 6. None appeared for the Corporate Debtor before this Tribunal right since the first date of hearing on 13.12.2022. This Tribunal had directed issue of Notice to the Respondent - Corporate Debtor on 13.12.2022. Noticing that the Notice sent to the Respondent by speed post having been returned undelivered, the Appellant was permitted to hand over Dasti Notice personally on 30.01.2023. The Learned Counsel for the Appellant informed this Tribunal on 24.03.2023 that the Appellant having been denied entry by the security staff, the Notice could not be served. This Tribunal had therefore directed that Notice be published in two leading newspapers which is found to have been complied with and an affidavit of service has also been filed. It is, therefore, held that service of Notice on Corporate Debtor is sufficient and that the Corporate Debtor has not appeared despite Notice. 7. We notice that the Adjudicating Authority has dismissed the Section 9 application of the Appellant on two grounds. One ground taken is that the period for which interest has been claimed by the Operational ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 10A signifies that no application/ proceedings under Sections 7, 9 and 10 can be initiated for any default in payment which is committed during Section 10A period. Thus, what is essentially barred is initiation of CIRP proceedings when the Corporate Debtor commits any default during the Section 10A period. However, if the default is committed prior to the Section 10A period and continues in the Section 10A period, this statutory provision does not put any bar on the initiation of CIRP proceedings. 11. The law of Section 10A is well settled. The object and purpose of Section 10A has been explained in the ordinance by which Section 10A was brought into operation. Further, the object and intent underlying the insertion of Section 10A has also been propounded by the Hon'ble Supreme Court in its judgment of "Ramesh Kymal vs. M/s Siemens Gamesa Renewable [Civil Appeal No. 4050 of 2020]". In consonance with the tenor and spirit of the above-mentioned judgment of the Hon'ble Supreme Court, this Tribunal on 18.08.2023 in Company Appeal (AT) (Ins.) No. 914 of 2023 in the matter of Raghavendra Joshi v. Axis Bank Limited & Anr ("Raghavendra" in short) had the occasion to notice the objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her interest payments accrued during the Section 10A period is to be deducted while computing the threshold and it has been held that: - "If the default is committed prior to Section 10A period and default continues there is no prohibition in initiating proceedings under Section 7 and we are not persuaded to accept the submission of the counsel for the respondent that the liability of interest which accrued during Section 10A period should be ignored or should not be computed in the amount while finding the threshold. Liability to pay interest which default committed prior to Section 10A period continues and is not obliviated by Section 10A." 13. Thus, the aim and objective of Section 10A was to protect a Corporate Debtor from the filing of any insolvency application against it for any default committed during the period when Covid-19 pandemic was prevailing. It was never intended to cover any default which occurred before Section 10A period and continuing thereafter. 14. The present is a case where default has been committed by the Corporate Debtor since 29.02.2020 which is prior to commencement of Section 10A period. Hence, this is a case where the default was undisputedly c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plied) 17. This finding of the Adjudicating Authority has been challenged by the Appellant on the ground that a creditor is entitled to apply his own discretion to appropriate any on-account payment received from the debtor against any outstanding debt(s) due from the debtor in terms of the Indian Contract Act, 1872. 18. At this stage, it may be useful to have a look at Section 60 of the Indian Contract Act, 1872 which is as follows: Section 60. Application of payment where debt to be discharged is not indicated. - Where the debtor has omitted to intimate, and there are no other circumstances indicating to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in force for the time being as to the limitations of suits. -- Where the debtor has omitted to intimate, and there are no other circumstances indicating to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in force for th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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