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TMI Blog2025 (3) TMI 1142X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent herein, against the Corporate Debtor, M/s Servomax Limited. 2. Brief Facts of the Case: The Corporate Debtor (CD), M/s Servomax Limited, being the company incorporated under the provisions of the Companies Act, 2013 on 08.11.2017, is engaged in the Business of manufacturing transformers. The Respondent No.1 M/s TVN Enterprises, the Operational Creditor (OC) is a Registered Partnership firm and has also been registered as an MSME (Micro, Small, and Medium Enterprises) Unit. As per the averments made, the Operational Creditor is engaged in the purchase and sale of merchandise goods including the supply of spare parts for transformers and related goods. Owing to a longstanding business relationship between them, the Corporate Debtor had issued various purchase orders to the Operational Creditor for the supply of goods including copper conductors and core assembly units till 15.09.2020. The Operational Creditor had also made the supply of goods as per the purchase orders issued by the Corporate Debtor and had raised invoices for such supply. The Corporate Debtor had also made payments to the Operational Creditor from time to time against such invoices. During the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Contentions: 5. The Appellant has contended that the order of Ld. NCLT is erroneous because the debt due will not cross the threshold of Rs. 1 crore, once the invoices falling due for payment are for the period between 25.03.2020 to 25.03.2021, which should have been excluded from the total debt due on account of the stipulation of Section 10 A of the Code. He has contended that out of 28 invoices totalling Rs.1,00,49,270/- (Rupees One Crore Forty-Nine Thousand and Two Hundred and Seventy Rupees), which has been cited by the Respondent 1/ Operational Creditor, as it stood pending for payment by the Corporate Debtor, only one invoice raised on 13.02.2020 was for an amount of Rs. 2,86,994/- (Rupees Two Lakh Eighty-Six Thousand and Nine Hundred and Ninety-Four) which fell due in preSection 10 A period. 6. He has further contended that he has raised the dispute with the Operational Creditor with respect to the quality of the material supplied several times and got compensation of Rs. 30,00,000/- (Rupees Thirty Lakh) from the Operational Creditor, that he has reported the details of the dispute in NeSL IU portal, that the Respondent has also filed a Commercial Original Suit COS No.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the invoices raised from 13.02.2020 onwards. He has further stated that it is the practice that he will issue the statement of account to Corporate Debtor at the end of every financial year for confirmation and that the Corporate Debtor will confirm and acknowledge the same, that the amount falling due to be paid on 01.04.2021 to 31.03.2022 by the Corporate Debtor to him was Rs. 1,00,49,270/- (Rupees One Crore Forty-Nine Thousand and Two Hundred and Seventy only) and the same has not been disputed by the Corporate Debtor. Further, the date of default being 14.03.2020 as mentioned by the Operational Creditor in NeSL portal has not been disputed by the Corporate Debtor till the CIRP proceedings were commenced. 10. He has further stated that as the date of default is 14.03.2020, his Section 9 application is not covered by the provisions of Section 10 A of the I & B Code, 2016. He has also contended that even though some of the invoices raised by him are pending for payment, would fall within the period covered by Section 10 A of the Code, acknowledgment of the debt by the Corporate Debtor, and its confirmation by his Statement of Account together post 25.03.2021, will show that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. Adjudicating Authority has framed 3 points for determination:- i. Whether an operational debt of a sum exceeding rupees one crore due and payable by the respondent to the petitioner exists as on the date of filing of this petition? If so, whether the respondent defaulted in repayment of the same? ii. Whether there is a pre-existing dispute as to the subject debt between the parties? If so, whether the petition is maintainable? iii. Whether the initiation of Corporation Insolvency Resolution Process (CIRP) against the respondent is barred under section 10A of the Insolvency &Bankruptcy Code, 2016? If so, whether the Company Petition is maintainable? On the first point, that is, whether there exists a debt due and payable by the Corporate Debtor on 11.11.2022 being the date of filing of Section 9 petition, the answer is unequivocally yes because admittedly by as per the statement of account of the financial year 2020-2021 and financial year 20212022, the due at the end of respective financial year is shown as Rs.1,00,49,270/- (Rupees One Crore Forty Nine Thousand and Two Hundred and Seventy only). Further, it is seen that the debt due is not hit by limitation as the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resolution process of a corporate debtor for the said default occurring during the said period. Explanation. - For the removal of doubts, it is hereby clarified that the provisions of this section shall not apply to any default committed under the said sections before 25th March, 2020." (*The prohibited period was extended to 25.03.2021 vide MCA Notifications)" This has been further elaborated by the Hon'ble Apex Court in its Judgment in Civil Appeal No.4050 of 2020, Ramesh Kymal v. M/s Siemens Gamesa Renewable Power Private Limited. The relevant extraction is reproduced below: "20. The substantive part of section 10A adverts to an application for the initiation of the CIRP. It stipulates that for any default arising on or after 25 March 2020, no application for initiating the CIRP of a corporate debtor shall be filed 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 expression "from such date" is evidently intended to refer to 25 March 2020 so that for a period of six months (extendable to one year by notification) no application for the initiation of the CIRP can be filed... 23. .... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebtor has cleared about Rs. 74.95 lakhs out of Rs.1,05,08,583/- being the opening balance of the dues to be paid as on 01.04.2020 and that the amounts pending to be paid pertain to invoices that were raised during Section 10 A period, that is during the period 25.03.2020 to 25.03.2021. The Ld. Adjudicating Authority has held that these 27 invoices represent a continuing default, starting from 14.03.2020, that the Corporate Debtor has acknowledged the debt post 25.03.2021 (the date from which Section 10 A stopped operating) and therefore CIRP proceedings can be initiated for the dues against these invoices. The Ld. Adjudicating Authority placed reliance on the judgment of the Hon'ble NCLAT dated 23 January 2023 in Vishal Agarwal V. ICICI Prudential Real Estate AIR-I & Anr in Company Appeal (AT) (Ins) 1016 /2022. The relevant portion is extracted below: " Insofar as application being barred by 10A, benefit under Section 10A can be claimed by the application only when there is clear default during the prohibited period. The said benefit cannot be claimed by the Appellant by ignoring the admission of default which was prior to 25.03.2020. There being clear admission in the present c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , unless there is a clear default in the prohibited period. It may be borne in mind that in three cases as stated above, the matter relates to Section 7 applications where there is a financial debt and interest accrued during the 10 A period are sought to be added, only in the matter of Beetel Teletech, the dues are in nature of operational debt but the threshold of Rs.1 crore was already reached prior to 25.03.2020. However, in the instant case, each unpaid invoice gives rise to a distinct & separate default. Further, only Rs.2,86,762/- is the amount that is in default from the pre-section 10A period. Even though the Corporate Debtor has acknowledged the debt that has accumulated in the period 25.03.2020 to 16.09.2020, it cannot be taken as a continuation of the default claimed to have been committed on 14.03.2020, for the reason being that the Corporate Debtor had repaid a total of Rs.79,54,973/- of the amount due as on 01.04.2020 during the period of 01.04.2020-31.03.2021. Thus there will be a bar on including the amount involved in the 27 invoices that fell due during the Section 10 A period to the total debt due for the purpose of initiating CIRP as per the proviso to Section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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