Facts of the Case;
The debt had become due on 06.07.2019.
On 25.02.2020, the Demand Notice in Form 3, demanding payment of Rs. 31,33,595/- was sent by the Operational Creditor to the Corporate Debtor at its registered office through speed post.
Section 9 Application dated 07.03.2020 was filed by the Operational creditor on 25.09.2020.
The provisions of section 4 of the Code were modified vide Notification No. S. O. 1205(E) dated 24.03.2020 by the Ministry of Corporate Affairs enhancing the minimum amount of default as Rs.1 crore with effect from 24.03.2020.
Excerpts of the order;
# 22. I have meticulously heard the arguments advanced by the learned senior counsel for the Applicant and the learned counsel for the Respondent. The Notification dated 24.03.2020 was issued by the Ministry of Corporate Affairs, stating that “In exercise of the powers conferred by the proviso to Section 4 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), Central Government hereby specifies one crore rupees as the minimum amount of default for the purposes of the said Section”.
# 23. To get further clarity on this issue, I have gone through Section 4 of the Companies Act, 2013 which may be referred to, which: -
“Section 4. Application of this Part (1) This Part shall apply to matters relating to the insolvency and liquidation of corporate debtors where the minimum amount of the default is one lakh rupees: PROVIDED that the Central Government may, by notification, specify the minimum amount of default of higher value which shall not be more than one crore rupees."
# 24. The Hon’ble NCLAT in its Order in Madhusudhan Tantia VS. Amit Choraria and Anr. in Company Appeal (AT) (Insolvency) No. 557 of 2020 dated 12.10.2020 held that: -
57. In view of the upshot and also this Tribunal, on careful consideration of respective contentions advanced on either side and considering the facts and circumstances of the instant case in a conspectus fashion holds unhesitatingly that the notification dated 24.03.2020 of the Ministry of Corporate Affairs, Government of India, is prospective in nature and it is not retrospective or retroactive in nature. Further, the said notification will not apply to the pending applications filed before the concerned Adjudicating Authority (Authorities). under 1BC (waiting for admission), prior to the issuance of the aforesaid notification, as opined by this Tribunal. Viewed in the above prospective, the conclusion arrived at by the ‘Adjudicating Authority' in the impugned order to the effect that the notification dated 24.03. 2020 of the Ministry of Corporate Affairs, Government of India, shall be considered as prospective and not retrospective and the finding that there was no payment on the side of "Corporate Debtor' after receipt of Demand Notice, no pre- existing dispute also alleged or proved and ultimately admitting the application filed by the 2nd Respondent Operational Creditor are fee from legal infirmities.”
# 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. In the instant application filed under Section 9 of IBC, the debt has become due on 06.07.2019. That on 25.02.2020, the Demand Notice in Form 3 under Rule 5 of the Insolvency and Bankruptcy Code, 2016 demanding payment of Rs. 31,33,595/- (Rupees Thirty-One Lakhs Thirty-Three Thousand Five Hundred and Ninety-Five Only) was sent to the Corporate Debtor at its Registered Office through speed post. However, no reply raising any dispute has been received by the Respondent/Operational Creditor within the stipulated period of ten days from 25.02.2020. It is therefore, evident that despite the expiry of 10 days from the date of service of the demand notice, neither dispute nor repayment of the due amount has been brought to the notice of the Operational Creditor. This would clearly show that Applicant/Corporate Debtor is not able to pay its debts taken in the normal course of business. Since, the Demand Notice in Form 3 has been sent by the Operational Creditor to the Corporate Debtor and after waiting for 10 days from that date only, Operational Creditor filed the application, the contention of the Applicant/ Corporate Debtor has no legs to stand.
# 28. Therefore, since the application IBA/34/KOB/2020 has been filed by the Applicant after exhausting the remedy by issuing the statutory notice, the application is in order.
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High Court Kerala, vide orders dated 11.12.2020, stayed the furthur proceedings in IBA/34/KOB/2020 before the NCLT Kochi.
ReplyDeleteForm 3 sent by OC on 25/02/2020 giving 10 days time for reply from CD.
ReplyDeleteNo dispute raised by CD.
BUt will filing application after a long gap in Sep 2020 be in order?
Off course no time limit is there where application is to be filed after issue of notice.
When time lines are important in IBC,delay of several months gives a chance to litigate and raise the date of 24 Mar 2020 as a defence.
High Court Kerala (01.02.2022) in M/s Tharakan Web Innovations Pvt. Ltd. Vs. Cyriac Njavally & Anr. [W.P.(C)Nos.27636 of 2020 & 14158 of 2021] held that;
ReplyDelete- The Appellate Tribunal found that on facts, in the case considered in Ext.P9 demand notice under Section 8 was issued on 31.7.2019 and the application under Section 9 was filed on 5.9.2019 which were both before 24.3.2020, on which date the threshold limit was increased to Rs.1 Crore.
- The Tribunal hence found that the said decision cannot be relied upon to decide whether a petition can be maintained for an amount of less than Rs.1 Crore after 24.3.2020.
- The Appellate Tribunal went on to hold that the threshold limit will be applicable for applications filed under Section 7 or Section 9 on or after 24.3.2020, even if the debt is on a date earlier than 24.3.2020. The above view of the Tribunal is in consonance with the decision of the Hon’ble Supreme Court in Manish Kumar (supra).
- As such, from the date of amendment, Part II of the IBC can apply only to matters relating to insolvency and liquidation of corporate debtors, where the minimum amount of default is Rs.1 Crore.
- Once that is the position, the application of Part II of the IBC itself, is taken away with effect from 24.03.2020 as far as defaults less than Rs.1 Crore are concerned and hence no application can be filed after 24.03.2020 regarding an amount where the default is less than Rs.1 Crore.
- By application of Section 10A, even in cases where the default is more than Rs.1 Crore, an application cannot be filed for a period of six months from 24.3.2020.