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TMI Blog2023 (12) TMI 317X X X X Extracts X X X X X X X X Extracts X X X X ..... ing initiation of Corporate Insolvency Resolution Process ("CIRP" in short) against the Corporate Debtor - Rohan Developers Private Limited/present Respondent. Aggrieved by the impugned order, the present appeal has been filed by the Appellant. 2. The Learned Counsel for the Appellant has submitted that Shri Vijay N. Paranjpe ("Vijay" in short), the deceased husband of the present Appellant paid a sum of Rs.4 crore to the Respondent/Corporate Debtor who was engaged in real estate business. This sum of Rs. 4 crore was paid in 2008 as earnest money against advance sale consideration for booking of a flat. Since there was no progress in the said project until 2011, Vijay sought refund of the earnest money following which the Respondent assured to return the same with interest @ 12% per annum. Since then, the sum of Rs.4 crore was mutually treated as unsecured loan and reflected accordingly in the books of the account of the Corporate Debtor/Respondent. Interest thereon was paid by the Respondent and TDS also deducted thereon for which confirmation of books of accounts was periodically sought from Vijay by the Respondent. Thus, it was contended that the Respondent by his own conduct c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal in Narayan Mangal v Vatsalya Builders & Developers (P) Ltd 2023 SCC Online NCLAT 545 where it has been clearly held that if the default is committed prior to Section 10A period and continues in the Section 10 A period, the initiation of proceeding under Section 7 is not barred. 6. Making counter contentions, the Learned Counsel for the Respondent has submitted that there was no agreement between Vijay and the Respondent with respect to the amount advanced by him. Thus, there is nothing on record which outlines the terms of repayment of the amount invested by Vijay. It is also the contention of the Respondent that the investment was made by the Appellant to receive returns on investment from the Corporate Debtor. Hence, the sum advanced was in the nature of speculative investment and cannot be treated as a financial debt. 7. It has been further contended by the Learned Counsel for the Respondent that the company petition is not maintainable since the Appellant is not an 'allottee' within the meaning of Section 2(d) of the Real Estate (Regulation and Development) Act, 2016. It has been further stated that even if the Appellant is considered to be an allottee, the present Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all cumulatively go to show the mutual acknowledgment of loan transaction between the two parties. Thus, it has been contended that there is a clearcut admission of on the part of the Respondent of having received an unsecured loan from the deceased husband of the Appellant which loan amount was transferred in the name of the Appellant subsequently. Prima facie therefore it has been asserted that debt qua the Appellant stands established. 12. Furthermore, it has been stated that the Respondent has not disputed the fact that the Corporate Debtor was paying interest to the Appellant since 2011. It is also an undisputed fact as evident from a communication dated 31.03.2017 at page 34 of APB that making an admission of their financial difficulties a request was made for waiver of interest by the Respondent to Vijay which was not acceded to by the latter. It is their case that the Respondent default in the payment of interest arose only thereafter. One fact that has been contested is that while the Appellant has contended that the Respondent started defaulting in the payment of interest since October 2017, the Respondent has claimed to have paid interest even in 2018. In support of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Bench is of considered view that the Petition under section 7 filed by the Financial Creditor to initiate the CIRP against the Corporate Debtor is not maintainable." 14. The principal finding of the impugned order is that the Section 7 application was not maintainable by holding the date of default to be February 2021 which was during the prohibited period under Section 10A of the IBC. This brings us to the issue relating to maintainability of the instant Section 7 application of the Appellant. 15. For proper appreciation of the facts, we may begin by perusing the Section 7 application filed by the Appellant with particular reference to Form 1 at Part IV of the Application under Rule 4 of the Insolvency and Bankruptcy (Application to the Adjudicating Authority) Rules, 2016. Against the heading "Amount claimed to be in default", the entry made by the Appellant is to the effect: "The amount claimed to be in default is Rs.6,20,01,000/- (Rupees Six Crore Twenty Lakh One Thousand Only) with further interest thereon at the rate of 12% per annum on the principal amount from 1st January 2021 till payment and/or realisation." As against the column "Date on which default occurred", the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly to any default committed under the said sections before 25th March, 2020. 18. A plain reading of Section 10A signifies that no application/ proceedings under Sections 7, 9 and 10 can be initiated for any default in payment which is committed during Section 10A period. The object and purpose of Section 10A has been explained in the ordinance by which Section 10A was brought into operation. What is essentially barred is initiation of CIRP proceedings when the Corporate Debtor commits any default during the Section 10A period. However, if the default is committed prior to the Section 10A period and continues in the Section 10A period, this statutory provision does not put any bar on the initiation of CIRP proceedings. Thus, the aim and objective of Section 10A was to protect a Corporate Debtor from the filing of any insolvency application against it for any default committed during the period when Covid-19 pandemic was prevailing. It was never intended to cover any default which occurred before Section 10A period and continuing thereafter. 19. The present is a case where prima facie the default has been committed by the Corporate Debtor since 2018 which is prior to commencement o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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