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TMI Blog2020 (12) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... of delivery of Form 3 Notice on the Corporate Debtor. The said period of 10 days is neither optional nor elective but is mandatory in nature. 3. Section 9 of the Companies Act, 2013 is reproduced below: - "Section 9. Application for initiation of corporate insolvency resolution process by operational creditor. "(1)After the expiry of the period of ten days from the date of delivery of notice or invoice demanding payment under Sub-Section (1) of Section 8, if the operational creditor does not receive payment from the corporate debtor or notice of the dispute under Sub-Section (2) of Section 8, the operational creditor may file an application before the Adjudicating Authority for initiating a corporate insolvency resolution process. (2) The application under Sub-Section (1) shall be filed in such form and manner and accompanied with such fee as may be prescribed. (3) The operational creditor shall along with the application furnish. (a) a copy of the invoice demanding payment or demand notice delivered by the operational creditor to the corporate debtor, (b) an affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on process shall commence from the date of admission of the application under sub-section (5) of this section". 4. To fortify his argument the Applicant relied upon the case law of Hon'ble Supreme Court in (AIR 2015 SC 157) in Yogendra Pratap Singh Vs Savitri Pandey, that was a case under Section 138 of Negotiable Instruments Act, 1881. In that case the complaint was filed before expiry of 15 days mandated ie , 15 days from the date on which notice has been served on the accused. In that case the Hon'ble Supreme Court held as under: - "42. Section 142 of the NI Act prescribes the mode and so also the time within which a complaint for an offence under Section 138 of the NI Act can be filed. A complaint made under Section 138 by the payee or the holder in due course of the cheque has to be in writing and needs to be made within one month from the date on which the cause of action has arisen under clause (c) of the proviso to Section 138. The period of one month under Section 142(b) begins from the date on which the cause of action has arisen under clause (c) of the proviso to Section 138. However, if the complainant satisfies the Court that he had sufficient cause for not making a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication to Adjudicating Authority) Rules, 2016 demanding payment of Rs. 31,33, 595/- (Thirty-one lakh thirty-three thousand five hundred ninety-five only) was sent to the Corporate Debtor at its registered office through speed post. That no reply raising any dispute has been received by the Applicant within the stipulated period of ten days. It is therefore evident that despite the expiry of ten days from the date of service of the demand notice no dispute nor repayment of the due amount has been brought to the notice of the Applicant, which clearly shows that the Corporate Debtor is not able to pay its debts taken in the normal course of business and had thus become insolvent. Thus, the Applicant is taking steps under the Insolvency and Bankruptcy Code,2016 for initiation of Corporate Insolvency Resolution Process." 6. The learned counsel states that the Applicant has made a false averment as the Applicant has not satisfied the mandate under Section 8 and 9 of the Insolvency and Bankruptcy Code, 2016 because the ten days period has not been expired on 07.03.2020, when the application was filed. 7. The Applicant further stated that the initial copy of the 1B Application which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solutely untenable. Even if a right accrues from a date on which could have been prior to the notification dated 24.03.2020, a vested right, assuming there is one, cannot under any stretch of imagination be viewed as an exclusive right to sue under this legislation. A right to sue vests with the Operational Creditor to sue the Applicant/ Corporate Debtor, but he cannot claim that the same has to be mandatorily under the provisions of the IBC, as his right to sue under other laws still remains wide open. 12. It is further argued that the right to sue / initiate proceedings under Section 9 of the Insolvency and Bankruptcy Code did not and cannot accrue as there can be no cause of action till the expiry of the mandatory period of 10 days as is enshrined under Section 9 of the Insolvency and Bankruptcy Code, 2016, because the date of initiation of the proceedings being only 25.09.2020, as has been discussed above, the date on which the cause of action arose having no significance, as the ten days mandatory notice period under Section 9 has not been observed by the Operational Creditor. Hence, the IBA filed by the Operational Creditor is premature in nature and is not maintainable. Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quent to the notification, if a creditor satisfies the NCLT that the default has taken place prior to the notification, such an application may be entertained. 16. It is further contended that it is settled principle of law that an amendment by way of delegated legislation that affects the substantive rights of parties can only be prospective and cannot act retrospectively unless made retrospective, either expressly by necessary implication or intention. A law relating to forum and limitation is procedural in nature, whereas law relating to right of' action and right of appeal even though remedial is substantive in nature. The time at which a right to file an appeal vests in the Operational Creditor is relevant in the instant case or the fact that such right had already been accrued to the Operational Creditor after the expiry of 10 days from the date of filing of the demand notice. The Notification is not an amendment of the Code. but an instance of delegated legislation simply increasing the limits set out under Section 4 of the Code. It affects substantive rights of the stakeholders. However, even in case of delegated legislation, the Hon'ble Supreme Court has held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke an Ordinance passed by the Legislature does not have an object clause or any scope for stating reasons which reflect the intention of the Legislature in its action. Hence, it is pertinent to bring on record the Ordinance 9/2020 dated 05.06.2020 wherein the legislature while suspending Section 7,9 and 10 of the 1&B Code, 2016 made the following clear: a) The pandemic has impacted business, financial markets and economy all over the world, including India, and created uncertainty and stress for business for reasons beyond their control; b) Nationwide Lockdown is in force since 25.03.2020 to combat the spread of COVID-19 which has added disruption of normal business operations; c) It was further made clear that Section 10A of the Code applies only to those defaults arising on or after 25.03.2020 for a period of 6 months. 20. From the reading of the above makes it clear that the intention of the Government in passing the Ordinance and the Notification was to prevent large-scale insolvencies, especially against the MSMEs, as a result of the financial stress caused by COVID-19 pandemic. Both the Ordinance as well as the Notification come into force with effect from 25.03.2020 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal, after carefully and with great circumspection, ongoing through the contents of the notification dated 24.03.2020 issued by the Ministry of Corporate Affairs, Government of India, whereby and where under the minimum amount of default limit was specified as Rs. One crore (obviously raising the minimum amount from Rs. one lakh to one crore) unerringly comes to a definite conclusion that the said notification is only Prospective in nature' and not a retrospective' one because of the simple reason the said notification does not in express term speaks about the applicability of retrospective or 'retroactive' operation. Suffice it for this Tribunal to point out that from the tenor, spirit and the plain words employed in the notification dated 24.03.2020 of the Ministry of Corporate Affairs, Government of India, one cannot infer an intention to make or make it retrospective as in this regard, the relevant words are conspicuously absent and besides there being no implicit inference to 35 Company Appeal (AT) (Insolvency) No. 557 of 2020 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hough by and large the law of limitation has been held to be a procedural law, there are exceptions to this principle. Generally, the law of limitation which is in vogue on the dale of the commencement of the action governs it. But there are certain exceptions to this principle. The new law of limitation providing a longer period cannot revive a dead remedy. Nor can it suddenly extinguish vested right of action by providing for a shorter period of Limitation". 26. On a perusal of the documents placed on record, it is seen that the Notification dated 24.03.2020 does not save the Applicant/ Corporate Debtor from the initiation of insolvency especially in cases where defaults towards creditors have taken place before the pandemic and the resultant financial crisis. Such an interpretation would be contrary to the intention of the executive in exercise of its power of delegated legislation. Thus, if the intention was to provide for a blanket protection to Corporate Debtors from being dragged to the NCLT irrespective of when or what extent a default has taken place, it would necessarily require a legislative amendment, and that a mere issuance of the notification would not suffice. 27. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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