Ramesh Kymal. Vs. Siemens Gamesa Renewable Power Private Limited - The bar created is retrospective as the cut-off date has been fixed as 25th March, 2020 while the newly inserted Section 10A introduced through the Ordinance has come into effect on 5th June, 2020.

NCLAT (19.10.2020) in Ramesh Kymal. Vs. Siemens Gamesa Renewable Power Private Limited [Company Appeal (AT) (Insolvency) No. 701 of 2020] held that; 

• The bar created is retrospective as the cut-off date has been fixed as 25th March, 2020 while the newly inserted Section 10A introduced through the Ordinance has come into effect on 5th June, 2020. 

• Indeed, the explanation removes the doubt by clarifying that such bar shall not operate in respect of any default committed prior to 25th March, 2020.

• The bar on initiation cannot operate in respect of applications filed for initiation of CIRP by the eligible applicant in respect of default committed before 25th March, 2020 though such application has been filed after 25th March, 2020 but before enforcement of Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 on 5th June, 2020.

 

Excerpts of the order;

IBA/215/2020 came to be filed as an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (“I&B Code” for short) by the Operational Creditor- Mr. Ramesh Kymal (Appellant herein) against the Corporate Debtor-‘M/s. Siemens Gamesa Renewable Power Pvt. Ltd.’ (Respondent herein). The Adjudicating Authority, taking note of the newly inserted Section 10A of the ‘I&B Code’ as a sequel to the promulgation of Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 published in the Gazette of India on 5th June, 2020 declined to admit the application holding that 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 (Amendment) Ordinance, 2020published in Gazette of India on 5th June, 2020 is reproduced hereunder:-

• “10A. Notwithstanding anything contained in sections 7, 9 and 10, no application for initiation of corporate insolvency resolution process of a corporate debtor shall be filed, for any default arising on or after 25th March, 2020 for a period of six months or such further period, not exceeding one year from such date, as may be notified in this behalf:

• Provided that no application shall ever be filed for initiation of corporate insolvency resolution process of a corporate debtor for the said default occurring during the said period.

• Explanation.- For the removal of doubts, it is hereby clarified that the provisions of this section shall not apply to any default committed under the said sections before 25th March, 2020.”

 

# 6. Heard learned counsel for the parties and perused the record. The fate of this appeal entirely rests upon interpretation of Section 10A of the ‘I&B Code’ introduced through Ordinance No.9 of 2020 dated 05th June, 2020 which has been reproduced hereinabove.

 

# 7. The precise issue for consideration is whether an application for initiation of CIRP of a Corporate Debtor in respect of default committed before 25th March, 2020 but filed 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.

 

# 9. On a plain reading of the newly inserted Section 10A, it is manifestly clear that the Section, beginning with a non-obstante clause overriding provisions of Sections 7, 9 & 10 of the ‘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.

 

# 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 specifically provides that the Ordinance shall come into force at once. It is, therefore, to be considered whether an application in respect of a default committed on or before 25th March, 2020 but filed thereafter though before 05th June, 2020 i.e. the date of enforcement of Ordinance, would lie.

 

# 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’ refers to passing of order of admission of application by the Adjudicating Authority. The ‘initiation date’ ascribes a role to the eligible applicant whereas the ‘commencement date’ rests upon exercise of power vested in the Adjudicating Authority. Adopting this interpretation would leave no scope for initiation of CIRP of a Corporate Debtor at the instance of eligible applicant in respect of default arising on or after 25th March, 2020 as the provision engrafted in Section 10A clearly bars filing of such application by the eligible applicant for initiation of CIRP of Corporate Debtor in respect of such default. The bar created is retrospective as the cut-off date has been fixed as 25th March, 2020 while the newly inserted Section 10A introduced through the Ordinance has come into effect on 5th June, 2020. The object of the legislation has been to suspend operation of Sections 7, 9 & 10 in respect of defaults arising on or after 25th March, 2020 i.e. the date on which Nationwide lockdown was enforced disrupting normal business operations and impacting the economy globally. Indeed, the explanation removes the doubt by clarifying that such bar shall not operate in respect of any default committed prior to 25th March, 2020. It would however, be absurd to hold that the embargo would extend to an application filed by the eligible applicant in respect of such default after 25th March, 2020 but before 5th June, 2020 i.e. the commencement of Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 as the bar operates in respect of default arising on or after 25th March, 2020 and not before such date. An eligible applicant could, by no stretch of imagination, have the foresight of having even an inkling of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 being promulgated. The bar on initiation cannot operate in respect of applications filed for initiation of CIRP by the eligible applicant in respect of default committed before 25th March, 2020 though such application has been filed after 25th March, 2020 but before enforcement of Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 on 5th June, 2020. Such interpretation not only serves the object of basic legislation but also goes along the tone and tenor of Section 10A with the explanation appended thereto clarifying the mist, if any, surrounding, the newly inserted provision. We hold accordingly.

 

# 14. Adverting to the facts of instant case, be it seen that in Form-5 i.e. the application to the Adjudicating Authority as also in Form-3 i.e. Demand Notice, the Appellant- Operational Creditor has specified 30th April, 2020 as the date of default which clearly goes beyond the cut-off date. Therefore, the Adjudicating Authority was perfectly justified in rejecting the application under Section 9 of the ‘I&B Code’ at the instance of Appellant- Operational Creditor as the default has occurred after the cut-off date and the bar imposed under Section 10A was clearly attracted.

 

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