TMI Blog2020 (10) TMI 915X X X X Extracts X X X X X X X X Extracts X X X X ..... e I B Code places an embargo on filing of application for initiation of CIRP of a Corporate Debtor for any default arising on or after 25th March, 2020 for a period of six months or such further period as may be notified but not exceeding one year from such date. This provision is clearly prohibitory in nature and filing of applications under Sections 7, 9 10 in respect of default arising on or after 25th March, 2020 is clearly barred for the specified period of six months or the extended period not exceeding one year, if so notified. Proviso to this main provision creates a further bar qua a default that may occur during the specified period. This construction is placed on the proviso adopting purposive interpretation to advance the intended object of the Ordinance viz. to prevent corporate persons experiencing distress due to impact of COVID-19 pandemic. Any other interpretation would lead to absurdity and defeat the object of the amending Ordinance. The explanation clarifies that Section 10A cannot be interpreted to apply the embargo in terms of main provision to any default committed before 25th March, 2020 - An eligible applicant could, by no stretch of imagination, have t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was a bar created by law in terms of the newly inserted Section 10A coming into force. Aggrieved thereof and thereunder the Operational Creditor has preferred the instant appeal. 2. Heard learned counsel for the parties on the limited question of interpretation/ applicability of Section 10A of the I B Code . The sole question for consideration is whether the amending provision of Section 10A introduced in I B Code providing for suspension of initiation of Corporate Insolvency Resolution Process (CIRP) at the instance of a Financial Creditor, an Operational Creditor or a Corporate Person would be applicable, for any default arising on or after 25th March, 2020 for the specified period of six months or any extended period not exceeding one year as may be notified to applications filed post 25th March, 2020 and if so what would happen to an application filed by a Financial Creditor, an Operational Creditor or a Corporate Person who has preferred such application for the said default on or after 25th March, 2020 and before promulgation of Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 on 5th June, 2020. Section 10A inserted vide Insolvency and Bankruptcy Code ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prohibits filing of application on or after 5th June, 2020 for defaults occurring during the relevant period specified in the Ordinance and not initiation of CIRP after the said date. Once an application has been filed, Section 10A does not stand as an impediment in its admission or non-admission on the basis of merit. It is lastly submitted that Section 10A cannot be construed to include applications that had already been filed and were pending before the Adjudicating Authority. It is further submitted that the intention is further clarified by the expression shall ever be filed which refers to applications that are intended to be filed on or after 5th June, 2020 for defaults occurring during the relevant period specified in the Ordinance. 4. Per contra, it is submitted on behalf of the Respondent that initiation of insolvency proceedings against businesses, when the economy and markets have been critically impacted on account of COVID-19, would not only be counterproductive to the legislative scheme of the I B Code , but also detrimental to the revival of the economy. This is said to be the intention of the legislature as gathered from the preamble of the Ordinance. Dwel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led before 05th June, 2020 i.e. the date on which amending ordinance came into force, in respect of such default, would be maintainable in view of the express bar created by the main provision of Section 10A. 8. It is by now well settled that a substantive administrative right cannot be taken away except by clear indication of intention to that effect by an express statutory provision or by necessary implication. No statute, unless it deals with procedure only, can be construed to have retrospective operation unless there is an express provision to that effect or same can be inferred by necessary implication. Dealing with interpretation of statutes and the concept of purposive interpretation qua a welfare legislation in Bharat Singh v. Management of New Delhi Tuberculosis Centre, New Delhi and Ors.- (1986) 2 SCC 614 , the Hon ble Apex Court observed as under: 11. In interpretation of statutes, Courts have steered clear of the rigid stand of looking into the words of the Section alone but have attempted to make the object of the enactment effective and to render its benefits unto the person in whose favour it is made. The legislators are entrusted with the task of only maki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applications under Sections 7, 9 10 in respect of default arising on or after 25th March, 2020 is clearly barred for the specified period of six months or the extended period not exceeding one year, if so notified. Proviso to this main provision creates a further bar qua a default that may occur during the specified period. This construction is placed on the proviso adopting purposive interpretation to advance the intended object of the Ordinance viz. to prevent corporate persons experiencing distress due to impact of COVID-19 pandemic. Any other interpretation would lead to absurdity and defeat the object of the amending Ordinance. The explanation clarifies that Section 10A cannot be interpreted to apply the embargo in terms of main provision to any default committed before 25th March, 2020. 10. It is significant to notice that the embargo on filing of applications under Sections 7, 9 10 for initiation of CIRP of a Corporate Debtor for default arising on or after 25th March, 2020 for the specified period would not apply in regard to default committed prior to 25th March, 2020. The amending Act was published in Gazette of India dated 05th June, 2020 and Clause 1(1) thereof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nitiating corporate insolvency resolution process by the Adjudicating Authority under sections 7, 9 or section 10, as the case may be 12. However, initiation date in respect of CIRP in regard to Corporate Debtor is different from the Insolvency Commencement Date . Section 5(11) defines initiation date as under: 5. Definition.- ...........(11) initiation date means the date on which a financial creditor, corporate applicant or operational creditor, as the case may be, makes an application to the Adjudicating Authority for initiating corporate insolvency resolution process; 13. It is manifestly clear that initiation date for CIRP is the date on which the Financial Creditor, Operational Creditor or Corporate Applicant (for short eligible applicant ) makes an application to the Adjudicating Authority for initiating such process. Thus, it is crystal clear that initiation date is different from commencement date of CIRP in respect of the Corporate Debtor. Reading the two definition clauses in juxtaposition, it emerges that while the first viz. initiation date is referable to filing of application by the eligible applicant, the later viz. commencement date ..... X X X X Extracts X X X X X X X X Extracts X X X X
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