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TMI Blog2025 (3) TMI 338X X X X Extracts X X X X X X X X Extracts X X X X ..... 15.03.2020 till 28.02.2022 (extended period of suo-motu limitation) enjoyed complete immunity from initiation of CIRP proceedings. The legislative intent of introducing Section 10A into the scheme of IBC was to protect the Corporate Debtor from being shoved into the morass of insolvency in the extenuating circumstances inflicted by the Covid-19 pandemic. In the present facts of the case, the payment schedule given in the Settlement Deed, barring one instalment due on 28.02.2020, the rest of the other instalments fell due from 31.03.2020 to 31.12.2020 which were all hit by Section 10A of the IBC on the date of filing of Section 9 application by the Operational Creditor which took place in September 2020, the major portion of the default claimed by the Operational Creditor in the said Section 9 application clearly fell within the protected and prohibited period under Section 10A. Any default falling within this period cannot form the basis for initiating CIRP. The default which occurred during the Section 10A period therefore cannot be included in the calculation of debt and default for initiating CIRP. In the present case, when the portion of debt claimed by the Operational Credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 8 Demand Notice on 25.11.2019 following which a Settlement Deed was executed on 31.01.2020 mutually between the Operational Creditor and the Corporate Debtor. In terms of this Settlement Deed dated 31.01.2020, the Operational Creditor had agreed to accept Rs 1,14,84,292/- from the Corporate Debtor. After the execution of the Settlement Deed, the Corporate Debtor made certain part payments to the Operational Creditor which sum had also been accepted by them. However, the Operational Creditor issued another Section 8 Demand Notice against the Corporate Debtor on 19.06.2020 on the ground that there has been a breach of Settlement Deed thereby claiming Rs 1,30,27,634/- from the Corporate Debtor. Thereafter, the Operational Creditor filed a Section 9 application against the Corporate Debtor before the Adjudicating Authority on 17.11.2020 for a total outstanding sum of Rs 1,14,534,363/-. The Adjudicating Authority on 24.04.2023 admitted the Section 9 application and admitted the Corporate Debtor into CIRP. Aggrieved by the impugned order, the present appeal has been filed by the suspended director. 3. The matter was heard by this Tribunal on several occasions. The salient interim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the Appellant seeks liberty to file settlement with the Operational Creditor on record. He may do so during the course of the day. 2. Counsel for the Operational Creditor submits that the Operational Creditor has received the entire amount. 3. Resolution Professional has also submitted that he has received his fee and expenses. 4. As prayed, list the matter on 05.09.2024. Interim order to continue." 6. When this matter came up for hearing on 27.01.2025, submission was made on behalf of the Operational Creditor that though the settlement amount had been paid to them, they are aggrieved that there was delay in receiving the payment. Though the payment was to be made by 21.01.2024, the same had been received in July 2024. Hence, the Respondent would require time to decide on whether to refund the amount to the Appellant or file Form-FA for withdrawal of CIRP. The Learned Counsel for the Respondent was allowed time to seek instructions from the Operational Creditor on this aspect. " Heard Learned Counsel for parties. Learned Counsel for the Appellant submits that as per the settlement between the parties, the amount had been received by the Operational Creditor whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Tribunal dated 03.09.2024. The Operational Creditor even after admitting before the Appellate Tribunal that the entire amount as per Settlement Deed was fully received on 17.07.2024 has now resiled and is not providing the hard copy of the signed Settlement Deed. Admitting that there was slight delay on their part in making the full payment in terms of the Settlement Deed of 29.09.2023, it was asserted that the issue of delayed receipt of payment was never raised by the Operational Creditor at any point of time before 21.02.2025. It was also contended that the very fact that the Operational Creditor continued to receive payments even after 31.01.2024 which was subsequent to the final deadline shows that they had implicitly waived the time-lines. Yet even after receiving full payment of the settlement amount, they reneged on their promise to withdraw the CIRP proceedings against the Corporate Debtor. This demonstrated the unseemly conduct of the Operational Creditor who was trying to harass, arm-twist and coerce the Corporate Debtor into making further payments beyond what was agreed upon in terms of settlement agreement and that this tantamount to gross misuse of the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth the parties and perused the records carefully. 14. The short issue for our consideration is whether the Section 9 application filed by the Operational Creditor was not maintainable since it was premised on default which had arisen during the prohibited period of Section 10A. 15. It is the case of the Appellant that there is no debt above the threshold level which was due and payable. It is the contention of the Appellant that the Section 9 application which was filed on 22.09.2020 was not maintainable since after deducting the instalments which fell due during the Section 10A period, the outstanding amount failed to meet the threshold limit of Rs 1 Cr. From the second instalment of the payment schedule which fell due on 31.03.2020 until the last instalment which became due on 31.12.2020, all fell during the prohibited period under Section 10A and is therefore time-barred. Thus, apart from the first instalment of Rs 10 lakhs which fell due on 28.02.2020, all other instalments fell during the Section 10A period on the date of filing the Section 9 application. The Adjudicating Authority in not having taken cognisance of the non-maintainability aspect from the perspective of thres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2020. 18. As regards the ambit and scope of Section 10A, is concerned, the law is well settled in the landmark judgment of the Hon'ble Supreme Court in Ramesh Kymal Vs Siemens Gamesha Renewable Power Pvt. Ltd., (2021) 3 SCC 224 that no application for initiation of CIRP under Section 9 can be initiated for default which is committed during the Section 10A period. The Ramesh Kymal judgment supra made it crystal clear that if any Corporate Debtor suffered default on account of Covid-19, they should be protected from the filing of any insolvency application in respect of default committed by them during this prohibited period. Thus, any default committed after 15.03.2020 till 28.02.2022 (extended period of suo-motu limitation) enjoyed complete immunity from initiation of CIRP proceedings. The legislative intent of introducing Section 10A into the scheme of IBC was to protect the Corporate Debtor from being shoved into the morass of insolvency in the extenuating circumstances inflicted by the Covid-19 pandemic. 19. When we look at Section 3(12) of the IBC which defines 'default' we find that it means non-payment of debt when whole or any part or instalment of the amount of debt ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BC cannot be initiated at the instance of the Operational Creditor. Further, in terms of the objectives of the IBC and settled proposition of law as expressed and explained time and again by the Hon'ble Supreme Court, the provisions of IBC cannot be turned into a debt recovery proceeding as it is a beneficial legislation which envisions the revival of the Corporate Debtor and bringing it back on its feet from the perils of extinction. 23. In the present case, since the entire payment in terms of the Settlement Deed has already been made, even though paid belatedly, we do not countenance the contumacious behaviour of the Operational Creditor in harassing the Corporate Debtor even after having received the entire payment as per Settlement Deed. Such rapacious and intimidatory conduct on the part of any Operational Creditor cannot be tolerated as such conduct violates the quintessential sprit of IBC which is insolvency resolution. 24. In result, the impugned order cannot be sustained and is set aside. The Appeal is allowed. The Corporate Debtor is released from the rigours of CIRP. For the reasons discussed earlier, this Bench is also of the considered view that the Operational Cred ..... X X X X Extracts X X X X X X X X Extracts X X X X
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