TMI Blog2023 (8) TMI 1376X X X X Extracts X X X X X X X X Extracts X X X X ..... to acknowledgement made by the Corporate Debtor in its balance sheets for the financial year 2018-19, 2019-20 and 2020-21 where the dues were clearly acknowledged. Thus, the present is the case where default was committed prior to commencement of Section 10A period. The submission that since default was also committed by the Corporate Debtor during the Section 10A period of the OTS amount which ultimately withdrawn on 25th January, 2021, the Application should be barred by Section 10A does not commend here. There being categorical default by the Corporate Debtor prior to Section 10A period, the Appellant was not clearly entitled for the benefit of Section 10A Period. There are no merit in the contention of Learned Sr. Counsel for the Appellant that Application under Section 7 of I B Code, 2016 was barred by Section 10A. The Adjudicating Authority did not commit any error in admitting Section 7 Application - appeal dismissed. - Justice Ashok Bhushan, Chairperson And Barun Mitra, Member (Technical) For the Appellant : Mr. Sudhir Makkar, Sr. Advocate with Mr. Sandeep Bajaj, Mr. Vipul Jai and Mr. Mayank Biyani, Advocates. For the Respondents : Mr. Arjun Krishnan, A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d during Section 10A Period hence the default under the OTS being under Section 10A period, Section 10A was attracted and the Adjudicating Authority committed error in rejecting Section 7 Application. Learned Counsel for the Appellant has also relied on the Judgment of Hon ble Supreme Court in Civil Appeal No. 4050/2020, Ramesh Kymal Vs. M/s. Siemens Gamesa Renewable Power Pvt. Ltd. 4. Learned Counsel for the Respondent refuting the submissions of Learned Counsel for the Appellant submits that in the present case, the Adjudicating Authority has rightly repelled the defence of Section 10A since admittedly the default was committed much prior to Section 10A period. The Defaults have been acknowledged in financial year 2018-19, 2019-20 and 2020-21. The OTS which was approved on 14.02.2020 having also been withdrawn subsequently by the Corporate Debtor on 25th January, 2021, no benefit can be claimed by the Appellant regarding OTS Proposal. 5. We have considered the submissions of Learned Counsel for the parties and have perused the record. 6. Section 10A of the I B Code, 2016 provides as follows: Section 10A: Suspension of initiation of corporate insolvency resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gathered from the language used, the object indicated, the nature of rights affected, and the circumstances under which the statute is passed. (emphasis supplied) 23 Adopting the construction which has been suggested by the appellant would defeat the object and intent underlying the insertion of Section 10A. The onset of the Covid-19 pandemic is a cataclysmic event which has serious repercussions on the financial health of corporate enterprises. The Ordinance and the Amending Act enacted by Parliament, adopt 25 March 2020 as the cut-off date. The proviso to Section 10A stipulates that no application shall ever be filed for the initiation of the CIRP for the said default occurring during the said period . The expression shall ever be filed is a clear indicator that the intent of the legislature is to bar the institution of any application for the commencement of the CIRP in respect of a default which has occurred on or after 25 March 2020 for a period of six months, extendable up to one year as notified. The explanation which has been introduced to remove doubts places the matter beyond doubt by clarifying that the statutory provision shall not apply to any default b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication was rightly rejected. The above judgment of the Hon ble Supreme Court has laid down that if the default is after 25th March, 2020, the Application is hit by Section 10A. The object as was indicated in the ordinance for bringing Section 10A in the statute book is relevant to notice which is to the following effect: AND WHEREAS a nationwide lockdown is in force since 25th March, 2020 to combat the spread of COVID-19 which has added to disruption of normal business operations: AND WHEREAS it is considered expedient to suspend under Sections 7, 9 and 10 of the Insolvency and Bankruptcy Code, 2016 to prevent corporate persons which are experiencing distress on account of unprecedented situation, being pushed into insolvency proceedings under the said Code for some time; AND WHEREAS it is considered expedient to exclude the defaults arising on account of unprecedented situation for the purposes of insolvency proceeding under this Code. 9. Thus the focus of the law which was brought by Section 10A was that when the Corporate Debtor suffers default on account of Covid-19, they should be protected from the filing of any Insolvency Application in the default ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ared off. Now in the current situation of closure of major activities of the company, though your bank has not accepted our request to revise payment of balance OTS of Rs. 420 lacks upto Mar-22, and abruptly withdrawn the OTS; the company from its side also withdraws the OTS alongwith its request for revision in payment of balance OTS. Since the company will not be in a condition to honour the balance OTS payment, hence it is withdrawn. This is for your kind information. Yours faithfully, For Khadkeshwar Hatcheries Ltd. 13. The OTS was accepted prior to commencement of Section 10A Period. From the letter which was given by the Corporate Debtor on 13th March, 2020 which has been brought on record along with the Appeal, it is clear that Corporate Debtor committed default of the OTS even before 25th March, 2020. The Letter dated 13th March, 2020 of the Corporate Debtor is as follows: To, Mr. Nitin Arora, Senior Vice President Structured Assets Group, Axis Bank Limited, Worli, Mumbai 400025 Reg: One Time Settlement of Khadkeshwar Hatcheries Ltd. Dear Sir, This has reference to our Company, Khadkeshwar Hatcheries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... une 2020, by which time we expect to come back to achieving positive cash flow at the group level. d. KHL will give Post-dated cheques (PDCs) for each of the proposed instalments. e. We request that the above payout schedule be accepted and that the carry interest be considered at 10% p.a. (payable monthly) 14. Thus, even the default of the OTS Approval dated 14th February, 2020 was committed by the Corporate Debtor before 25th March, 2020, the present is thus a case where default was committed by the Corporate Debtor much before Section 10A period as noted above. Even OTS as accepted by the Bank on 14.02.2020 was also not complied with by the Corporate Debtor. 15. The submission that since default was also committed by the Corporate Debtor during the Section 10A period of the OTS amount which ultimately withdrawn on 25th January, 2021, the Application should be barred by Section 10A does not commend us. There being categorical default by the Corporate Debtor prior to Section 10A period, the Appellant was not clearly entitled for the benefit of Section 10A Period. 16. Learned Counsel for the Respondent has rightly relied on Judgment in Company Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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