Chemical Suppliers India Pvt. Ltd. Vs.Kanodia Technoplast Ltd. - The objective of IBC is for the revival, resolution and rejuvenation of a Corporate Debtor from financial distress rather than leverage the provisions of IBC as a coercive recovery tool to abandon the Corporate Debtor to face the peril of corporate death and extinction.

NCLAT (2025.01.07) in Chemical Suppliers India Pvt. Ltd. Vs.Kanodia Technoplast Ltd. [(2026) ibclaw.in 10 NCLAT, Company Appeal (AT) (Insolvency) No. 1244 of 2025] held that; 

• The objective of IBC is for the revival, resolution and rejuvenation of a Corporate Debtor from financial distress rather than leverage the provisions of IBC as a coercive recovery tool to abandon the Corporate Debtor to face the peril of corporate death and extinction. 

• We would like to add that the protective shield of Section 10-A does not extinguish or wipe out the liability but only renders it unenforceable in Section 7 and 9 proceedings. 

• The Operational Creditor can always enforce the liability arising out of invoices falling within the Section 10- A period by taking recourse to civil remedies and not by way of Section 9 proceedings.

Excerpts of the Order;

The present appeal filed under Section 61 of Insolvency and Bankruptcy Code 2016 (‘IBC’ in short) by the Appellant arises out of the Order dated 12.06.2025 (hereinafter referred to as ‘Impugned Order’) passed by the Adjudicating Authority (National Company Law Tribunal, New Delhi Bench-IV) in C.P. (IB) No. 734/ND/2021. By the impugned order, the Adjudicating Authority has dismissed the Section 9 application filed by the Appellant-Chemical Suppliers India Pvt. Ltd. Aggrieved by the impugned order, the present appeal has been preferred by the Appellant-Operational Creditor.

# 2. Coming to the chronology of events of this present matter, we notice that the Appellant-Operational Creditor had been engaged by the Respondent-Corporate Debtor for supply of chemicals and raw materials. The materials were supplied by the Appellant but as the Respondent had purportedly failed to discharge their payment obligations of an outstanding amount of Rs 7,84,94,085/- which included the principal and interest component of Rs 6,13,26,856/- and Rs 1,71,67,229/- respectively, the Appellant had filed C.P No. 734 of 2021 under Section 9 on 22.11.2021 before the Adjudicating Authority to initiate CIRP against the Respondent. The Section 9 application was dismissed by the Adjudicating Authority on 16.10.2023 on the ground of non- maintainability by holding that the default had occurred based on invoices pertaining to the suspended period under Section 10-A of IBC. This Section 9 dismissal order was challenged by the Appellant before this Tribunal. This Tribunal observed that what was relevant to be seen was as to whether the outside Section 10-A period invoices in the Table of invoices set out by the Operational Creditor exceeded Rs 1 Cr. This Tribunal after noticing that there were several invoices exceeding Rs 1 Cr. which fell outside the Section 10-A period and remained unpaid, this Tribunal on 09.07.2024 restored the Section 9 application and remanded the matter back to the Adjudicating Authority to proceed further in accordance with law. In pursuance of the above order of this Tribunal, the Adjudicating Authority on 24.02.2025 directed the matter to be listed for hearing on 20.03.2025. However, this order of the Adjudicating Authority was challenged by the present Appellant on the ground that the order of this Tribunal dated 09.07.2024 ipso facto meant admission of the Section 9 application. However, this appeal came to be dismissed by this Tribunal on 02.04.2025 following which Adjudicating Authority proceeded with the hearing of CP No. 743 of 2021. The Adjudicating Authority noticed that the Corporate Debtor had tendered a Demand Draft dated 26.03.2025 amounting Rs 1,65,89,311/- to square off the operational debt in respect of the invoices which fell outside the protective ambit of Section 10-A which the Appellant-Operational Creditor had claimed in their Section 9 application. The Adjudicating Authority further noticed that inspite of this offer of payment by Corporate Debtor to settle the enforceable portion of the debt, the same was rejected by the Appellant as partial/conditional payment. Holding the rejection by the Appellant of the offer made by the Corporate Debtor to settle the debt to be misuse of the insolvency process tantamount to using IBC as a recovery mechanism which is inconsistent with the objectives of the IBC, the Adjudicating Authority by its order dated 12.06.2025 directed the Corporate Debtor to deposit an amount of Rs 1,65,89,311/- in an interest-bearing Fixed Deposit Receipt (FDR) with the NCLT Registry, to be retained in safe custody for an initial period of six months and rejected the Section 9 application filed by the Appellant. Aggrieved by the impugned order, the present appeal has been preferred by the Appellant.

# 3. Making submissions on behalf of the Appellant-Operational Creditor, Shri Sunil Fernandes, Ld. Sr. Counsel had submitted that the Adjudicating Authority erroneously dismissed the Section 9 petition as it is a settled position in law that the scope of adjudication under Section 9 of the IBC is limited to determining whether an operational debt is due and payable and whether any default has occurred in relation to such debt and if the amount of default exceeds the statutory threshold outlined under Section 4 of the IBC. Once these conditionalities are established, the Adjudicating Authority is mandatorily required to admit the Section 9 petition as long as the Corporate Debtor fails to establish the existence of a pre-existing dispute or show any other legally sustainable defence which is well settled in terms of the judgment of the Hon’ble Supreme Court in Mobilox Innovations Pvt. Ltd. Vs Kirusa Software Pvt. Ltd. (2108) 1 SCC 353.

# 4. It was further submitted that in the present case, there is a clear admission of debt and default above Rs 1 Cr. in terms of the invoices raised by the Operational Creditor and there being no grounds of pre-existing dispute raised by the Corporate Debtor, the Section 9 applicable should have been admitted. It was vehemently contended that the Adjudicating Authority has erroneously held that the outstanding liability is only Rs 1.65 Cr. The Adjudicating Authority has failed to take into cognisance that in the list of 60 invoices submitted by them, apart from the 7 invoices amounting Rs 1.65 Cr. which clearly fall outside the Section 10-A period, there were two other invoices which fell outside the Section 10-A period. By factoring in these 2 invoices, the outstanding liability of the Corporate Debtor stood at Rs 2.26 Cr. and not Rs 1.65 Cr. However, the Corporate Debtor had offered to only pay Rs 1.65 Cr. which did not meet the entire debt liability. It is the case of the Operational Creditor that when the Corporate Debtor did not clear the full payment of outstanding dues, the Operational Creditor retained its rights to refuse to accept the part payment offered by the Corporate Debtor. The Adjudicating Authority also does not possess statutory jurisdiction to compel the Operational Creditor to accept any such part or conditional settlement. Non-acceptance of part payment cannot be held against the Operational Creditor as if they were pursuing the Section 9 application for causing harassment to the Corporate Debtor to demand more payment. It was contended that the Operational Creditor cannot be deprived of exercising his option to accept or reject the partial payment offered by the Corporate Debtor and cannot be deprived of their statutory rights to follow up on the Section 9 proceedings.

# 5. Refuting the submissions made by the Appellant, Shri Abhishek Anand, Ld. Counsel for the Respondent submitted that the Appellant has issued a Demand Notice under Section 8 of the IBC by adverting attention to 60 invoices out of which 53 invoices were between 01.07.2020 to 23.03.2021 which clearly fell within the Section 10-A period and only 7 invoices between 31.03.2021 till 03.06.2021 fell outside the Section 10-A period. The Corporate Debtor in their reply dated 08.10.2021 to the Section 8 Demand Notice had categorically pointed out that the invoices in question were barred under Section 10-A of IBC as they were raised after 25.03.2020. However, the Appellant filed C.P. IB No. 734 of 2021 under Section 9 basis a list of 60 invoices which was segregated into Table-A comprising of 53 invoices amounting Rs 4.15 Cr. falling in the Section 10-A period and Table-B comprising of 7 invoices amounting Rs 1.65 Cr. falling beyond the Section 10-A period. The said Section 9 petition was initially dismissed by the Adjudicating Authority on 16.10.2023 which on appeal had been remanded on 09.07.2024 by this Tribunal to the Adjudicating Authority. Submission was pressed that even when the matter was remanded back to the Adjudicating Authority by this Tribunal, even at that stage the list of invoices submitted by the Operational Creditor in their Section 9 application was not interfered with. It was added that the Appellant has now raised the issue of modification of the invoices in Table-A and Table-B with respect to Section 10-A which cannot be agitated at this stage.

# 6. Submission was pressed by the Corporate Debtor that the Section 9 application was not filed with the purpose of resolution of the Corporate Debtor but for the purpose of recovery. It was asserted that the Adjudicating Authority had rightly taken notice that the Corporate Debtor had offered to make payment of Rs 1.65 Cr. to the Operational Creditor to clear the outstanding liability in terms of the Table-B invoices which had been submitted by the Operational Creditor in the Section 9 application as invoices which fell outside the Section 10-A period. The Corporate Debtor had already demonstrated its bonafide intention to discharge its liability as it had tendered the entire non 10-A liabilities by way of Demand Draft which also goes to vindicate that the Corporate Debtor was financially capable and not financially insolvent. It was the Operational Creditor who was trying to pitch for an expanded non 10-A liabilities which was a clear deviation from their earlier claim which shows that they were trying to misuse the provisions of the IBC as a recovery mechanism rather than as a means of resolution. The Corporate Debtor being a financially solvent company cannot be pushed into the rigours of CIRP. Since the Appellant had adamantly refused to accept Rs 1.65 Cr. and instead insisted upon payment of Rs 2.26 Cr., the Adjudicating Authority had rightly relied on the judgment of this Tribunal in M/s SNJ Synthetics Ltd. Vs PepsiCo India Holdings Pvt. Ltd. in CA(AT)(Ins) No. 386 of 2025 to hold that rejection by the Appellant of the offer made by the Corporate Debtor’s bonafide offer to settle the enforceable portion of the debt showed an ulterior motive behind their conduct which amounted to misuse of the insolvency process as a recovery mechanism which is inconsistent with the objectives of the IBC.

# 7. We have duly considered the arguments advanced by the Learned Counsel for the parties and perused the records carefully.

# 8. The short question to be answered is whether the Adjudicating Authority had erred in rejecting the Section 9 application after noticing that the Corporate Debtor had agreed to discharge their outstanding liabilities of Rs 1.65 Cr. arising out of 7 invoices which fell outside the Section 10-A period.

# 9. It is the case of the Operational Creditor that out of the 53 invoices which have been held to be covered by Section 10-A, 2 invoices at Sl. No. 52 & 53 were beyond the Section 10-A period as the invoices were payable after 90 days. While the Invoice no. 52 for an amount of Rs 30.45 lakhs became payable on 15.06.2021, Invoice no. 53 amounting Rs 30.46 lakhs became payable on 23.06.2021 making them both fall outside the purview of Section 10-A period. If these invoices are added then the outstanding principal amount stood at Rs 2.26 Cr. and not Rs 1.65 Cr. as has been held in the impugned order. Since the Corporate Debtor did not make any offer to clear the outstanding liability arising out of these 2 invoices, the Section 9 application could not have been dismissed by the Adjudicating Authority. It was also asserted that when the matter had been considered by this Tribunal on 09.07.2024, this Tribunal had not looked into the number of invoices which fell beyond the Section 10-A period but had only looked into whether the invoices relied upon by the Operational Creditor crossed the threshold of Rs 1 Cr. for the purpose of maintaining the Section 9 application. Since no finding had been returned by this Tribunal as such on individual invoices, there is no restriction operating on the Operational Creditor to identify the final set of invoices beyond the 10-A period basis which the operational debt claim could be quantified. It is also contended by the Appellant that the Adjudicating Authority has wrongly relied on the judgment of Pepsico India Holdings supra as the facts of that case differ from the facts of the present case. In that case, there was no principal amount which was due which is why the Operational Creditor was not allowed to agitate the interest component, whereas in the present case, the principal operational debt remains partly paid by the Corporate Debtor. Hence, the Operational Creditor was well within its rights to claim full dues and merely because full payment was sought by the Operational Creditor, it cannot be inferred that the Section 9 petition was being used as a recovery tool.

# 10. Coming to our analysis and findings, when we look at the Section 9 application filed by the Operational Creditor which is placed at page 70 of the Appeal Paper Book, we find that it is the Operational Creditor who have themselves submitted the invoices in two separate tables and the same tables have been followed both by the Adjudicating Authority in its order dated 16.10.2023 and by this Tribunal in its remand order dated 09.07.2024. Further, when we look at the order of this Tribunal dated 09.07.2024 remanding the matter back to the Adjudicating Authority, we find that at para 7 therein, a clear reference has been made to the list of invoices which was arrayed by the Appellant before the Adjudicating Authority in the CP No. 734 of 2021. This list of invoices as extracted out in the order of this Tribunal on 09.07.2024 is as reproduced below:

# 11. The invoice list of the Operational Creditor as expressly recorded by the Adjudicating Authority in its order dated 16.10.2023 finds a replica reflection in the order of this Tribunal dated 09.07.2024. It is clear from the list reproduced in the immediately preceding paragraph that the Operational Creditor had relied on 60 invoices basis which the operational debt has been claimed in the Section 9 application. These invoices were categorized into two Tables of which 53 invoices in Table-A fell in the prohibited period of Section 10-A and 7 invoices in Table-B fell outside the Section 10-A period as they were dated between 31.03.2021 to 03.06.2021. The order of this Tribunal dated 09.07.2024 while remanding the CP No. 734 of 2021 to the Adjudicating Authority had not interfered in any manner with respect to the list of invoices which formed the basis of the claim preferred by the Operational Creditor in their Section 9 application. When the matter was remanded back to the Adjudicating Authority by this Tribunal on 09.07.2024, the Operational Creditor had not challenged the categorization of the invoices in Table-A relating to invoices barred by Section 10-A and Table-B relating to invoices unaffected by Section 10-A. Thus, the Operational Creditor having expressly acknowledged at the time of filing Section 9 application that only 7 invoices amounting Rs 1.65 Cr. fell outside the protective shield of Section 10-A, the Operational Creditor cannot be seen to claim subsequently that there were other invoices apart from the aforementioned 7 invoices which also fell outside the ambit of Section 10-A. This stand never having been taken by the Operational Creditor earlier either before the Adjudicating Authority or before this Tribunal cannot now alter their stand as it would be in direct contradiction to the submissions and pleadings made by the Operational Creditor before the Adjudicating Authority and this Tribunal earlier. The present claim of adding 2 more invoices to the earlier list of 7 invoices as invoices falling outside the Section 10-A period amounts to shifting the goal-post which cannot be accepted. This amounts to be an attempt to improving their own case to inflate the quantum of default and arm-twist the Corporate Debtor into parting with more than what was envisaged in the original Section 9 application. We are of the firm view that the Operational Creditor cannot now canvass for reopening for segregation of invoices afresh from what was originally depicted by them while filing the Section 9 application. Once the Operational Creditor had on their own volition admitted the operational debt to be Rs 1.65 Cr. qua 7 invoices not hit by Section 10-A, it cannot alter, modify, expand or shrink the list of invoices originally set up by themselves in Table-A and Table-B which had been set out by them in their Section 9 application.

# 12. We also notice that the Corporate Debtor had offered to pay the entire amount of Rs 1.65 Cr. by way of Demand Draft to the Corporate Debtor towards meeting the claim amount arising out of the 7 invoices which undisputedly fell outside the purview of Section 10-A. This clearly affirms the bonafide intention of the Corporate Debtor to discharge their liabilities arising out of the 7 undisputed invoices not covered by Section 10-A. This commitment given to clear their liabilities coupled with deposit of FDR of the said amount with the NCLT Registry also demonstrates that the Corporate Debtor was not only keen to discharge its outstanding liabilities but also financially solvent. The Appellant by not accepting the amount of Rs 1.65 Cr. which has already been deposited by the Corporate Debtor shows that the Operational Creditor was using the Section 9 application as a coercive recovery tool and not as a resolution mechanism.

# 13. The decision of the Operational Creditor not to accept the payment proposal of the Corporate Debtor to liquidate their debt by asking for an amount more than what was indicated by them earlier goes to show that their demand was not to further the spirit and objective of IBC of reorganisation and resolution of the Corporate Debtor but to subject the Corporate Debtor to debt recovery procedure thereby making their denial to accept payment from the Corporate Debtor arbitrary and unsustainable. In such circumstances, we have no reasons to disagree with the Adjudicating Authority that it would not be in consonance with the objective of IBC to drag the Corporate Debtor into insolvency. The objective of IBC is for the revival, resolution and rejuvenation of a Corporate Debtor from financial distress rather than leverage the provisions of IBC as a coercive recovery tool to abandon the Corporate Debtor to face the peril of corporate death and extinction. We would like to add that the protective shield of Section 10-A does not extinguish or wipe out the liability but only renders it unenforceable in Section 7 and 9 proceedings. The Operational Creditor can always enforce the liability arising out of invoices falling within the Section 10- A period by taking recourse to civil remedies and not by way of Section 9 proceedings.

# 14. In view of the foregoing discussion, we are in agreement with the impugned order rejecting the Section 9 application in view of the fact that the amount of Rs 1.65 Cr. stands deposited by the Corporate Debtor by FDR with NCLT Registry for making the same available to the Appellant towards discharge of operational debt in terms of Table-B of the invoices alongwith liberty to the Appellant to avail other remedies in accordance with law. We do not find any good ground to interfere with the above order of the Adjudicating Authority. There is no merit in the Appeal. The Appeal is dismissed with no order as to costs.

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Rashtriya Polymers & Solvents. Vs. Kanodia Technoplast Ltd. - Notice under Section 8 has nothing to do with the invoices which fall within the period of Section 10A and beyond the period of Section 10A as notice under Section 8 is given by Operational Creditor to the Corporate Debtor so that the Corporate Debtor may either make the payment or raise the issue of pre-existing dispute.

 NCLAT (2024.07.09) in Rashtriya Polymers & Solvents. Vs. Kanodia Technoplast Ltd.  [Company Appeal (AT) (Ins) No. 1140 of 2023] held that; 

• Notice under Section 8 has nothing to do with the invoices which fall within the period of Section 10A and beyond the period of Section 10A as notice under Section 8 is given by Operational Creditor to the Corporate Debtor so that the Corporate Debtor may either make the payment or raise the issue of pre-existing dispute.

Excerpts of the order;

This order shall dispose of two appeals bearing Company Appeal (AT) (Ins) No. 1680 of 2023 titled as Chemical Suppliers India Pvt. Ltd. Vs. Kanodia Technoplast Ltd. (hereinafter referred to as the first appeal) filed against the order dated 16.10.2023 by which the National Company Law Tribunal, New Delhi, Bench-IV has dismissed the application filed by the appellant under Section 9 of the Insolvency & Bankruptcy Code, 2016 (in short ‘Code’) bearing CP No. (IB)-734 (ND)/2021, inter alia, on the ground that the application is filed under Section 9 for resolution of the amount based upon invoices some of which fall within the period from 23.03.2020 - 24.03.2021 is hit by Section 10A of the code and even if of some invoices which crosses the threshold, provided under Section 4, are beyond the aforesaid period, the segregation is not allowed and the application as a whole has to be dismissed. Company Appeal (AT) (Ins) No. 1140 of 2023 has been filed by Rashtriya Polymers & Solvents vs. Kanodia Technoplast Ltd. (hereinafter referred to as second appeal) against the order dated 12.07.2023 by which application filed by the said appellant under Section 9 of the Code, has been dismissed. 

# 2. Both these matters are being taken up together because in both the cases, the Corporate Debtor is the same and in case anyone of the appeal is allowed then the second appeal would become redundant or infructuous because two CIRPs cannot be initiated against the same CD. 

# 3. For the sake of convenience, we are taking up the first appeal. The brief facts of this case are that the appellant issued a demand notice dated 30.09.2021 to the respondent demanding payment of outstanding debt of Rs. 6,13,26,856/- along with interest of Rs. 1,71,67,229/- calculated @ 24%, based upon 60 invoices starting from 01.07.2020 to 03.06.2021. The demand notice was replied by the respondent on 08.10.2021. 

# 4. Since the amount claimed by the appellant was not resolved by the respondent, therefore, the appellant filed the application under Section 9 of the Code on 02.11.2021 for resolution of the amount of Rs. 7,84,94,085/-. 

# 5. This application has been dismissed by the Tribunal on the ground that out of the 60 invoices, 53 invoices are of the period between 01.07.2020 till 23.03.2021 which falls within the period between 23.03.2020-24.03.2021 i.e. the period prescribed under Section 10A of the Code during which if the default is committed, the application under Section 7, 9 & 10 cannot be filed at all. 

# 6. The Tribunal has held, relying upon the decision of Hon’ble Supreme Court in the case of Ramesh Kymal Vs. Siemens Gamesa Renewable Power Private Limited (Civil Appeal No. 4050 of 2020) decided on 09.02.2021 and the decision of this Court in Company Appeal (AT) (Ins) No. 387 of 2023 Yatra Online limited Vs Ezeego One Travel & Tours Limited decided on 31.03.2023 that the application under Section 9 was not maintainable because the segregation of the amount of the period falling under Section 10A was not possible. 

# 7. Learned Counsel for the appellant has argued that the finding recorded by the Tribunal that the amount cannot be segregated is contrary to the facts noticed by the Tribunal. In this regard, he has referred to paragraph 11 of the impugned order in which the Tribunal itself has made the segregation of the amount based upon Invoices No. 1 to 53, which falls within the period provided under Section 10A and Invoices No. 54 to 60 falls after the period provided under Section 10A. The said chart is reproduced for a quick glance which read as under:  . . . . . . 

# 8. It is further submitted that the amount arising out of the invoices from 54 to 60 is Rs. 1,65,89,311/- which is more than the amount of threshold provided under Section 4 of Rs. 1 crore, therefore, the application could not have been dismissed by the Ld. Tribunal and deserves to be admitted. In support of his submissions, he has relied upon a decision of this Court in Company Appeal (AT) (Ins) No. 39 of 2023 titled as Naresh Choudhary Vs. Sterling Enamelled Wires Pvt. Ltd. decided on 16.08.2023. It is submitted that in the decided case, notice under Section 8 was given on 14.08.2021 claiming total amount of Rs.2,07,11,209/- which included the amount based upon the NonLC and the LC amount. 

# 9. It is further submitted that the Non-LC amount which falls within the period between 23.03.2020-24.03.2021 (as prescribed under Section 10A) do not have any effect on the maintainability of the application under Section 9 if the non LC amount is above the threshold and the application can be maintained on the said amount. In this regard, the observations made by this Tribunal are reproduced as under: 

• “15. This brings us to the second issue for determination as to whether the debt arising out of the invoices fell during the period which attracts the bar of Section 10A of IBC. It is the case of the Appellant that the Operational Creditor has not provided the date of default either in the Section 8 demand notice or in the Section 9 application. Further, it has been stated that payments were to be made by the Corporate Debtor by way of LC which was to be created within 90 days from each invoice and hence the date of default would be 90 days post the date of each such invoice. Since the Appellant had not created any LC within a period of 90 days the default occurred on the 90th day from the day of invoice. After calculating the 90th day of these invoices, it has been contended that the date of default arises between 01.05.2020 to 29.05.2020 which clearly falls in the ambit of Section 10A and hence barred from being subject to IBC proceedings. 

• 16. Refuting the above, it has been submitted by the Learned Counsel for the Respondent No.1 that the Corporate Debtor had placed four purchase orders which find place at pages 272-275 of APB. Of the four purchase orders, only two purchase orders (3rd and 4th purchase orders) make reference to the creation of LC of 90 days. As regards the other two purchase orders (1st and 2nd purchase orders), there was no such stipulation of 90-day LC. Hence in respect of these two purchase orders, the date of default was the date of invoice. It was stated that the invoices raised under the 4th purchase order were anyways already excluded. It was further submitted that even if the 3rd and 4th purchase orders are excluded, the first two purchase orders cumulatively amount to default which is above the threshold limit of Rs.1 crore necessary for filing an insolvency application. We are satisfied with the reasoning offered by the Operational Creditor and do not find any force in the contention of the Appellant. 

• 17. We have no hesitation in observing that in the present case, all requisite conditions necessary to trigger CIRP under Section 9 stands fulfilled with operational debt having been acknowledged and default committed thereto and there being no real pre-existing disputes discernible from given facts. For the foregoing reasons, we are of the view that the Adjudicating Authority has rightly admitted the application of the Operational Creditor filed under Section 9 of IBC. We are satisfied that the impugned order does not warrant any interference. There is no merit in the Appeal. The Appeal is dismissed. No order as to costs.” 

# 10. In reply, counsel appearing for the respondent has vehemently argued that the issuance of notice under Section 8 of the Code is sine qua non for the purpose of maintainability of an application under Section 9. He has further submitted that if the invoices falling between the dates 23.03.2020-24.03.2021 are also a part of the said notice then the application under Section 9 on that basis is not maintainable. He has relied upon the decision of Hon’ble Supreme Court in Ramesh Kymal Vs. Siemens Gamesa Renewable Power Private Limited (supra) and the decision of this Court in Yatra Online Limited Vs Ezeego One Travel & Tours Limited (supra) in support of his contention. 

# 11. We have heard both the counsel for the parties and perused the record with their able assistance. 

# 12. The issue involved in this case travels in a narrow compass, as to whether an application under Section 9, filed on the basis of invoices which fall within the period of Section 10A and also beyond the said period is maintainable in case the invoices of period beyond of Section 10A are sufficient to cross the threshold? 

# 13. The answer of this question lies in the decision by this Court in the case of Naresh Choudhary Vs. Sterling Enamelled Wires Pvt. Ltd. (supra) in which the same issue was involved. Notice under Section 8 has nothing to do with the invoices which fall within the period of Section 10A and beyond the period of Section 10A as notice under Section 8 is given by Operational Creditor to the Corporate Debtor so that the Corporate Debtor may either make the payment or raise the issue of pre-existing dispute. 

# 14. All that has to be seen by Ld. Tribunal is that the invoices relied upon by the Operational Creditor beyond the period of Section 10A crosses the threshold of Rs. 1 crore for the purpose of maintaining the application. The Judgment in the case of Ramesh Kymal Vs.Siemens Gamesa Renewable Power Private Limited (supra) of the Hon’ble Supreme Court as well as the decision of this Court in the case of Yatra Online Ltd Vs Ezeego One Travel & Tours Limited are not applicable to the facts of this case. The relevant para of Yatra Online Limited Vs Ezeego One Travel & Tours Limited which has been strongly relied upon by the respondent is reproduced as under: 

• “15. Admittedly, the application under Section 9 has to be filed after a notice under Section 8 of the Code is delivered. Meaning thereby notice under Section 8 of the Code is a sine qua non to maintain an application under Section 9 of the Code. Section 8 of the Code provides that the Operational Creditor shall deliver a demand notice upon the Corporate Debtor who may within a period of 10 days of the receipt of the demand notice either raise the issue of an existing dispute or bring to notice of the Operational Creditor that the payments have been made / paid of operational debt and an application under Section 9 of the Code could be filed only after the expiry of period of 10 days from the date of delivery of notice. The Resolution Professional who was appointed on 09.03.2021 and is familiar with the provisions of the Code mentioned the date of default as 30.10.2020 in the notice and after the notice, the application under Section 9 of the Code too contained the date of default as 30.10.2020. Thus, the positive case before the Adjudicating Authority, at the instance of the Resolution Professional, was that the date of default is 30.10.2020 and not July 2019 but while contesting the application filed under Section 10A the RP conveniently changed the date of default from 30.10.2020 to July, 2019 in order to wriggle out of the rigorus of Section 10A of the Code. 

• 16. In the background of the aforesaid facts and circumstances of the case, the question thus would arise as to whether the date of default, mentioned in the demand notice as well as in the application filed under Section 9 of the Code, which has not been amended even if it was allegedly wrongly mentioned, can be changed in the litigation which arises from a miscellaneous application?” 

# 15. In view of the aforesaid discussion, we find merit in the present appeal, therefore, the same is hereby allowed and the impugned order is set aside. The application bearing CP No. (IB) 734/ND/2021 is hereby restored. The matter is remanded back to the Ld. National Company Law Tribunal to proceed further in accordance with law. The Parties are directed to appear before the Tribunal on 26.07.2024. 

# 16. In so far as the second appeal is concerned, we have not gone into the merits of the said appeal because the first appeal has since been allowed. Therefore, the second appeal is hereby dismissed as redundant and infructuous. No Costs.

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REC Limited Vs. Hiranmaye Energy Limited. - The terms and conditions as well as the sanctioan letter does not provide that in case of the failure of the repayment plan, the date of default shall be reckoned from a date prior to the sanction of the plan. It does not have a pre-empting or a remedial clause to that effect. Thus, the date of default cannot now be assumed to be outside this restructured plan.

NCLT Kolkata (2024.01.02) in REC Limited Vs. Hiranmaye Energy Limited. [CP (IB) No. 138/KB/2021] held that;

• Be that as it may, the restructured plan is indeed a revised set of terms and conditions and a new financial contract complete with the details of the money lent and the manner of its repayment alongwith mode and manner of securitisation thereof by virtue of mortgage and/or issuance of OCDs etc. The terms and conditions as well as the sanctioan letter does not provide that in case of the failure of the repayment plan, the date of default shall be reckoned from a date prior to the sanction of the plan. It does not have a pre-empting or a remedial clause to that effect. Thus, the date of default cannot now be assumed to be outside this restructured plan.

• The important part however is that the first payment of Rs.50 Crore was made on 24th of December 2021, whereas it was supposed to be made by 31st March 2021 as per the revised sanctioned letter (supra). The default can thus be seen to have taken place on 31st March 2021 itself, which is outside the 10A period, though by a whisker.

• The corporate debtor is entitled to point out that a default has not occurred in the sense that the “debt”, which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete,

• The Hon’ble Supreme Court in the above case has observed that the moment Adjudicating Authority is satisfied that default has occurred, the Application must be admitted, unless it is incomplete.

Excerpts of the order;

# 1. This Court convened through hybrid mode.

Brief facts of the case

# 2. The underlying Company Petition has been filed by REC Limited (Financial Creditor) and thereafter I.A. (IB) No. 1020/KB/2022 was filed by Hiranmaye Energy Limited, (Corporate Debtor) which was heard and reserved for orders. Thereafter, the Corporate Debtor filed another I.A. (IB) 828/KB/2023, wherein the maintainability of the Company Petition was challenged on account of being hit by Section 10A of IBC. This IA could be heard on a later date due to re-constitution of the benches i.e. 17 July 2023.

C.P.(IB) No. 138/KB/2021 and I.A. (IB) No. 1020/KB/2022

# 3. The Company Petition filed under section 7 of the Insolvency and Bankruptcy Code, 2016 (“Code”) by REC Limited, represented by its Mr. Dinesh Kaushik, Deputy General Manager (Law) to initiate Corporate Insolvency Resolution Process (“CIRP”) against Hiramaye Energy Limited (“Corporate Debtor”).

# 4. The Corporate Debtor was incorporated on 28 April 2008, having CIN: U40105WB2008PLC125220. Its registered office is Plot X, 1, 2 & 3, 2nd Floor, Block EP, Sector V, Salt Lake, Kolkata- 700091. Therefore, this Bench has  jurisdiction to deal with this petition.

# 5. The Company Petition was filed before this Adjudicating Authority by the Financial Creditor on the ground that the Corporate Debtor has defaulted to make a payment of a sum of Rs.21,83,19,16,896/- (Rupees Two Thousand One Hundred Eighty-Three Crore Nineteen Lakh Sixteen Thousand Eight Hundred and Ninety- Six only) as on 05 June 2021. The date of the default has been stated as 31 March 2018.

# 6. The Corporate Debtor filed its affidavit-in-reply affirmed on 22 April 2022 in the main Company Petition. The I.A. has been filed by the Corporate Debtor against the Financial Creditor under section 60(5) of the Insolvency and Bankruptcy Code, 2016 seeking the following reliefs:

a) C.P. (IB) No. 138/KB/2021 be disposed of and/or dismissed recording the proposals of the alleged Corporate Debtor to make payment in the manner stated in paragraphs 11 and 12 above;

b) Permanent injunction restraining the Petitioner from proceedings with or from taking any other or further steps in connection with the said C.P. (IB) No. 138/2021;

c) Stay of all further proceedings in C.P. (IB) No. 138/2021; 

d) Declaration that the restructuring agreements dated 24th September, 2020 and 14th January , 2021 are valid and in force and stand modified by the proposal;

e) Leave be granted to the alleged Corporate Debtor to make payment of the claims of the Petitioner in the manner as contained in the restructuring agreements dated 24th September 2020 and 14th January, 2021 on and from the month beginning September 2022 and to make payment of the arrears of interest in 24 instalments commencing from the month of September 2022 as more fully and particularly stated in paragraph 11 and 12;

f) Ad interim Order in terms of the prayers above;

g) Such further or other order and/or orders as this Hon’ble Tribunal may deem fit and proper.

# 7. Submissions of the learned Senior Counsel appearing on behalf of the Financial

Creditor

7.1.The learned Senior Counsel submitted that an amount of Rs.1347,12,00,000/- (Rupees One Thousand Three Hundred Forty-Seven Crore and Twelve Lakh only) was availed by the Corporate Debtor under various facilities.

7.2.The Corporate Debtor proposed to develop, own, design, finance, construct, commission, operate and maintain a 450 MW Thermal Power Plant at Haldia.

7.3.On 19 June 2013, a Common Loan Agreement was executed by the Financial Creditor and Power Finance Corporation Limited and the Corporate Debtor for a term loan amounting to Res.1859,00,00,000/- for setting up the project.

7.4.The Corporate Debtor informed the lenders that there was an increase in the Project Cost and requested the Lenders to increase the loan amount. On 30 October 2015, the Financial Creditor along with Power Finance Corporation Limited sanctioned an additional term loan facility.

7.5.It is submitted that the Corporate Debtor was unable to pay the outstanding amounts under the Original Term Loan Facility and Cost Overrun Facility since 31 March 2018.

7.6.Thereafter, the Financial Creditor and Power Finance Corporation Limited made various efforts to devise resolution of the financial stress in the Project and to implement a restructuring plan, however, no restructuring plan could be implemented as the Corporate Debtor failed to comply with the terms of restructuring plan as approved by the Financial Creditor and Power Finance Corporation Limited, and the project continued to be in stress. The learned Senior Counsel has submitted that there was no restructuring agreement.

7.7.The Financial Creditor has proposed the name of Mr. Bhuvan Madan, registration number IBBI/IPA-001/IP-P01004/2017-2018/11655, as the Interim Resolution Professional of the Corporate Debtor. The proposed Interim Resolution Professional has given his written communication in Form 2 as required under rule 9(1) of the Insolvency and Bankruptcy [Application to Adjudicating Authority] Rules, 2016 along with a copy of registration.

7.8.The Financial Creditor has chosen not to file any reply affidavit with respect to I.A. (IB) No. 1020/KB/2022.

# 8. Submissions of the learned Senior Counsel appearing on behalf of the Corporate

Debtor

8.1.The learned Senior Counsel referred to paragraph 12(iii), 13, 15 of the letter dated 24 December 2021, wherein the Corporate Debtor has shown willingness to make payment and has submitted that the Financial Creditor has accepted the payment of a sum of Rs.50 Crore which would be deemed as acceptance of the proposals contain in the said letter.

8.2.Hence, acceptance of the sum of Rs.50 Crore tantamount to novation of the terms and conditions of the two agreements of Restructure of Debtor dated 29 September 2020 and 14 January 2021. The Learned Senior Counsel placed reliance on Dasharathi Ghosh v. Khandkar Abdul Hannan, Vol. 32 CWN 359 and Gurpreet Singh v. Union of India, 2006 (8) SCC 457.

8.3.It is further submitted that as per the restructuring agreements, the Corporate Debtor was to make payments from 31 March 2021 to 30 June 2022 for the Principal Amount of Rs.63.84Crore. The Corporate Debtor made a payment of approximately Rs.100 Crore which is a relevant fact to show that the Corporate Debtor is a solvent company.

8.4.It is submitted that the Company Petition was filed on 12 June 2021, even after filing the Company Petition, the Financial Creditor has demanded regular payments from the Corporate Debtor and has also accepted the payments made by the Corporate Debtor. The last payment was made on 19 January 2023. It is thus clear that the Operational Creditor is misusing the Code for recovery mechanism. 

8.5.The learned Senior Counsel placed reliance on Swiss Ribbons Private Limited and Other v. Union of India, (2019) 4 SCC 17, SS Engineers v. Hindusthan Petroleum Corporation Limited and Ors., 2022 SCC OnLine SC 13, Anshul Vashistha v. Jayhind SteelTraders & Anr., 2022 SCC OnLine NCLAT 673, Invent Asset Securitisation and Reconstruction Pvt. Ltd. V. Ginar Fibres Ltd., 2022 SCC OnLine SC 808, India Resurgence ARC Private Limited v. Amit Metaliks Limited and Anr., 2021 SCC OnLine SC 409.

8.6.The learned Senior Counsel further referred to letters dated 16 December 2021, 17 June 2022, 29 June 2022 and 31 August 2022 and 01 December 2022, wherein the Financial Creditor has admitted that the Corporate Debtor is in operation and has entered into Fuel Supply Agreements and has sufficient quantity of coal to carry on its power generation business.

8.7.It is further submitted that the Corporate Debtor has an ongoing Power Purchase Agreement (PPA) with WBSEDCL for purchase of the entire quantity of power generated by the Corporate Debtor.

8.8.Hence, the admission of the Corporate Debtor into Corporate Insolvency Resolution Process will hamper the business of the Corporate Debtor.

8.9.It is submitted that since the Financial Creditor chose not to file any affidavit with respect to I.A. (IB) No. 1020/KB/2022, the rule of non-traverse shall apply. With this respect, the learned Senior Counsel has relied on Kewal Krishan and others v. Dina Nath, 1992 2 SCC 51 and Lohiya Properties Private Limited v. Atmaram Kumar, 1993 4 SCC 6.

8.10. The restructuring agreement has been signed by the Chief General Manager of the Financial Creditor and the Corporate Debtor. The Corporate Debtor received a sum of Rs.137.84 Crore under the said restructuring Agreement and has subsequently repaid Rs.95.79 Crore to the Financial Creditor.

8.11. The Financial Creditor has not terminated the agreement dated 29 September 2020 and hence cannot now contend that the agreement does not exist.

I.A. (IB) No. 828/KB/2023

# 9. The present I.A. has been filed by Hiranmaye Energy Limited against REC Limited under section 60(5) of the Insolvency and Bankruptcy Code, 2016 seeking the following reliefs:

a. The order of this learned Tribunal dated 21 March 2023 reserving C.P. (IB) No. 138/KB/2021 for orders be recalled and/or set aside;

b. C.P. (IB) No. 138/KB/2021 be heard afresh on the point of the alleged debt and default being barred by the provisions of section 10A of the Code;

c. C.P. (IB) No. 138/KB/2021 be dismissed as being not maintainable;

d. All further proceedings in C.P. (IB) No. 138 of 2021 be stayed including the  passing of any order with regard to the final adjudication thereof pending the disposal of the present application;

e. Ad-interim orders in terms of prayers above;

f. Costs;

g. Such further and/or other order or orders and/or direction or directions as your Honour may deem fit and proper.

# 10. Submissions on behalf of the Applicant in I.A. (IB) No. 828/KB/2023

10.1. The learned Senior Counsel submitted that the Corporate Debtor had given its approval for restructuring without change in ownership vide a letter dated 21 February 2020 in accordance with the Reserve Bank of India Circular dated 07 June 2019. According to the repayment schedule for the sustainable debt portion of Unit- I and Unit-II as contained in the approval letter dated 21 February 2020, the quarterly repayment began from 31 December 2019.

10.2. As per the said sanction letter, principal repayment of the sustainable debt was to be made over 89 structured quarterly instalments commencing from 31 December 2020 and interest was to be paid on monthly basis commencing from 30 June 2020. Hence, the date falls within the period as mentioned under section 10A of the Code.

10.3. The Financial Creditor placed reliance on several letters and contended that the loan amount has fallen due from 31 March 2020. The learned Senior Counsel submitted that the Financial Creditor in its email dated 30 June 2020 has stated that the demand has fallen due on 30 June 2020 and thereafter, by an email dated 24 September 2020, it is stated that the demand has fallen due on 30 September 2020, Similarly, in an email dated 24 December 2020 the Financial Creditor raised a demand claiming to be due on 31 December 2020.

10.4. Thus, it is evident that the default occurred on or after 25 March 2020 and hence the Company Petition is squarely hit by Section 10A of the Code.

10.5. The learned Counsel submitted that in order to evade the bar under section 10 A of the Code, the Financial Creditor has stated that the date of default is 31 March 2018 which is 90 days prior to the NPA date i.e. 30 June 2018. After the approval of the restructuring of debt, the Financial Creditor could not have gone back to the alleged date of default i.e. 31 March 2018.

10.6. It is further submitted that I.A. (IB) No. 1020/KB/2022 was heard and reserved but due to inadvertence and oversight, the issue with respect to the issue of default falling within section 10A of the Code was not argued. It is submitted that the issue of maintainability of the Company Petition with respect to section 10A of the Code is a pure question of law and goes to the very root of the matter and hence, it must be considered even if the main matter has been reserved for orders.

# 11. Submissions on behalf of the Respondent in I.A. (IB) No. 828/KB/2023

11.1. The learned Senior Counsel submitted that the present application filed under Section 10A of the Code, deserves to be dismissed on grounds of maintainability itself, having been preferred subsequent to the Company Petition being reserved after detailed arguments made by both parties.

11.2. It is further submitted that if the present I.A. is allowed to be entertained, every litigant will keep raising frivolous issues and multiply litigations, to avoid the delivery of admission orders, the present Section 10A Application militates against the core objective of the Code for summary proceedings.

11.3. The learned Senior Counsel referred to the order of 18 January 2023, in which the order records ‘Post this IA along with the main CP for conclusion of arguments on 01.03.2023’, thus clearly recording that both the main petition and the IA filed by the Corporate Debtor were listed together. It is pertinent to highlight that no notice was issued by this Tribunal in the I.A. (IB) No. 1020/KB/2022, as it was submitted by the Financial Creditor that the IA does not merit any response and the affidavits already filed by the Financial Creditor adequately cover the response on all grounds raised in the application filed by the Corporate Debtor.

11.4. In this regard, it is also important to highlight that the statement on behalf of the Corporate Debtor that the arguments on the Section 7 Application is pending, is also contradicted by their Section 10A Application in which they have categorically sought that “the order of this learned Tribunal dated 21st March 2020 reserving CP(IB) No. 138 of 2021 for orders be recalled and/or set aside” and that “CP(IB) No. 138 of 2021 be heard afresh on the point of alleged debt and default being barred by the provisions of the section 10A of the Code;”

11.5. The Corporate Debtor is blatantly misleading and trying to create confusion and somehow delay the adjudication of the section 7 Company Petition endlessly and has prayed for setting aside of the order dated 21 March 2023. It is further submitted that once a matter is reserved, it cannot be opened, one should draw a line somewhere.

11.6. It is submitted that the entire premise of the present I.A. is that the default has occurred in a period which is hit by section 10A of the Code, placing reliance on a failed restructuring proposal dated 21 February 2020 read with 29 September 2020 (“Restructuring Proposal”).

11.7. At the outset, it is pertinent to reiterate that the Restructuring Proposal1, being relied on by the Corporate Debtor was merely a sanctioned restructuring proposal, which was subject to certain pre-implementation conditions being fulfilled by 28 February 20212 which never fructified. Once the pre-implementation conditions were not satisfied, the Restructuring Proposal failed to take effect as it was never implemented.

11.8. The learned Senior Counsel referred to the minutes of meeting dated 02 July 20213 which clearly records the failure of the Corporate Debtor to meet the pre implementation conditions of the Restructuring Proposal. Relevant part of the minutes is reproduced below:

• Lenders discussed the following in this regard:

• • REC/Lenders have approved the Restructuring Proposal on many occasions since the commissioning of the project (i.e. 2 units) in December 2017. But the Borrower & promoters have been repeatedly failed on account of one pretext or others.

• • In the last (i.e. 3rd) restructuring plan approved by the lenders, Borrower again failed to comply with certain pre-conditions for the implementation of Plan like continuous running of both units for 72 hrs, initial DSRA creation, upfront fund infusion and getting of tariff approval for project from WBERC. Borrower/Promoters were pursued rigorously by the lenders; but all the efforts of lenders went futile.

11.9. The issue of extension of the validity of the Restructuring Proposal, which forms the crux and basis of the present I.A., was considered by the Hon’ble High Court at Calcutta in Writ Petition No. 10679 of 2021 filed by the Corporate Debtor, in which the Hon’ble High Court at Calcutta has categorically dismissed the said writ petition vide order dated 02 July 20214 holding inter alia.

• “The actions of the respondent nos.3 and 45 in the instant case are purely contractual nature and were purely guided specifically by the terms and conditions of the restructuring proposal. In matters of this nature, respondent nos.3 and 4 are guided by and must act strictly on commercial considerations, for recovery of the financial dues. The respondents appear to have given substantial leverage to the writ petitioner no.1 to comply with the terms and conditions of the restructuring proposal which the petitioner has failed…. The REC and PFC cannot be expected to wait indefinitely for compliance and fulfilment of all terms by the writ petitioners.”

11.10. The Corporate Debtor filed an appeal before the division bench of the Hon’ble High Court at Calcutta in FMAT No. 626 of 2021 wherein the Division Bench, vide order dated 07 October 2021 dismissed the appeal with the following observations: 

• “The restructuring plan having failed to take off, the same was visited at a meeting of the Consortium of Lenders and the appellant company (for short hereinafter referred to as the said Consortium Meeting) on 17th of February, 2021. It was, inter alia, agreed at the said Consortium Meeting that the settlement of the tariff or, the Tariff Order of the Commission, is crucial to the restructuring. The settlement of the tariff or, the Tariff Order, being a pre-condition towards the restructuring arrangement arrived at in the meeting dated 17th February 2021, with the pronunciation of the Tariff Order by the Commission on the 31st day of May 2021, such pre-condition stood answered…It is evident that the restructuring exercise arrived at the said consortium meeting dated 17 February 2021 has not worked out.

• H. The question hardly begs an answer that a non-viable tariff is no tariff at all. Equally, the Corporate Creditors cannot wait ad infinitum for the tariff adjudicatory process to be exhausted and their debts dry up. Needless to  emphasize, in all this, the commission must get its acts together since shoddy arithmetic fetches zero numbers.

• I. At the same time, the action of R3 and R4 in proceedings straightway involving the IBC required to be positioned in the context of the action taken by the Appellant No.1/ the Company in terms of the said Consortium Meeting. 

• M. Therefore, the Tariff Order dated 31st May 2021 being fundamental to both the Corporate Debtor and the Corporate Creditor, its failure necessitated that the parties re-visit their positions or at least brief each other of their respective positions, prior to embarking upon their respective legal options, it would thus be open to the parties to keep the Tariff Oder dated 31st May 2021 one last time on the table and on failure to reach a commonality of perceptions either of the parties could them proceed with their chosen legal remedies.

• N. This court is not at all unmindful of the primacy of the IBC Proceedings. This court is not at all unmindful of the fact that the survival of the corporate entity, viz the Appellant No.1/the Company, as distinguished from its Promoter Group, shall be given due and deep consideration under the IBC. In the backdrop of the above, discussion, this Court directs as follows: II.R3 and R4 to address the Tariff Order dated 31st of May 2021 along with the extent of fulfilment of pre-conditions outlined in the said Consortium Meeting dated 17th February 2021 in a second consortium meeting with the Appellant No.1/ the Company, without prejudice to their respective rights and legal options”.

Therefore, evidently, the Hon’ble Kolkata High Court has also recognized that the Restructuring Proposal being repeatedly harped upon by HEL has failed.

11.11. The learned Senior Counsel further submitted that as is evident from the above, the Division Bench of the Hon’ble Kolkata High Court in view of the Tariff Order dated 31 May 2022, requested the lenders to consider the same in a joint lenders meeting (“JLM”) pursuant to which a JLM was held between the lenders and HEL on 11 November 2021, where the lenders informed HEL of the failure of the Restructuring Proposal6. Relevant part of the minutes is reproduced below: 

• “However, other pre-implementation conditions were not complied till 28.02.2021 and even till date, the Company is non-compliant to those conditions….. Therefore, that restructuring plan as approved by lenders now is not valid and therefore, it cannot be implemented……..”

11.12. Under these circumstances, it is adequately clear that the Restructuring Proposal, being referred to by Corporate Debtor, failed to fructify and therefore any application seeking to place reliance on such Restructuring Proposal cannot be entertained especially when grounds challenging such proposals have already been dealt with during the hearing of the main Company Petition.

11.13. It is further submitted that during the pendency of the Company Petition, several attempts have been made by the Corporate Debtor to misleadingly assert the revival of the Restructuring Proposal either on the basis of earlier approvals for Restructuring Proposal, which subsequently did not fructify on account of not meeting the pre-implementation conditions or the payments made out of the Trust and Retention Account of the Corporate Debtor, which are mere part payments with huge amounts still outstanding, however, the Financial Creditor has consistently in every communication maintained that the Restructuring Proposal had not fructified and there have been continuing defaults.

11.14. It is also important to highlight that even if the Restructuring Proposal would have fructified, even then the Corporate Debtor has failed to comply with its terms as, among other breaches, even the payments have not been made in terms of the erstwhile Restructuring Proposal. Notably, the total amount which should have been paid in terms of the erstwhile Restructuring Proposal was Rs.414.52 Crore , while the actual amount paid out of the Trust and Retention Agreement is Rs.111.82 Crore. 

11.15. It is submitted that the present I.A is another belated attempt to abuse the process of this Adjudicating Authority and delay the admission of the Corporate Debtor into insolvency under the Code while the promoters continue to enjoy the management of the Corporate Debtor, brazenly defaulting on payment of their dues.

# 12. Rejoinder of the Applicant in I.A. (IB) No. 828/KB/2023

12.1. The learned Senior Counsel submitted that the Restructuring Agreement of 21 February 2020 and 29 September 2020 were never given effect to is not correct. The learned Senior Counsel referred to the Restructuring Agreement of 21 February 2020 and 29 September 2020 wherein the Financial Creditor has conveyed its approval for Restructuring Plan.

12.2. The learned Senior Counsel submitted that a Court becomes functus officio only upon orders having been signed and orders having been pronounced in open court. In support of his argument, the learned Senior Counsel placed reliance on:- 

a. Chandgi v. Mehar Singh, 1998 SCC Online Punjab and Haryana 405, Para 6  Paras 13 & 14.

Para 6: ".. The final culmination of the judicial proceedings before the Court of competent jurisdiction would take place only upon the pronouncement of the judgment by the Court. It is this stage when the Court loses its jurisdiction over the matter for all intents and purposes. In other words, it becomes functus officio of the matter before it".

Para 14:".. the party would have a right to file an application for leading additional evidence prior to the pronouncement of the judgment under the provisions of Order18 Rule 17-A of the Code".

b. State Bank of India v. S.N. Goyal, 2008 (8) SCC 92, Para 28Para 28: "Thus where a judgment is reserved, mere dictation does not amount to pronouncement, but where the judgment is dictated in open court, that itself amounts to pronouncement. But even after such pronouncement by open court dictation, the Judge can make corrections before signing and dating the judgment. Therefore, a Judge becomes functus officio when he pronounces, signs and dates the judgment (subject to section 152 and power of review)".

12.3. In support of the contention that a plaint may be amended even after the final hearing the Learned Senior Counsel placed reliance of the judgment of the Hon’ble Supreme Court in Life Insurance Corporation of India v. Sanjeev Builders Private Limited and Another, 2022 SCC OnLine SC 1128 Para 70:

• "Our final conclusions may be summed up thus: 

• (vii) Where the amendment merely sought to introduce an additional or a new approach without introducing a time barred cause of action, the amendment is liable to be allowed even after expiry of limitation.

• (ix) Delay in applying for amendment alone is not a ground to disallow the prayer. Where the aspect of delay is arguable, the prayer for amendment could be allowed and the issue of limitation framed separately for decision. 

• (xi) Where the amendment is sought before commencement of trial, the court is required to be liberal in its approach. The court is required to bear in mind the fact that the opposite party would have a chance to meet the case set up in amendment. As such, where the amendment does not result in irreparable prejudice to the opposite party, or divest the opposite party of an advantage which it had secured as a result of an admission by the party seeking amendment, the amendment is required to be allowed. Equally, where the amendment is necessary for the court to effectively adjudicate on the main issues in controversy between the parties, the amendment should be allowed. (See Vijay Gupta v. Gagninder Kr. Gandhi, 2022 SCC OnLine Del 1897)”.

12.4. Thereafter, the learned Senior Counsel proceeded to distinguish the judgments relied on by the Financial Creditor:

a. Arjun Singh v. Mohindra Kumar, 1964 5 SCR 946. This judgment has no application whatsoever in that the same pertains to a matter under Order 9 of the Civil Procedure Code, where an ex-parte judgment had already been pronounced. In the present case the matter was only reserved for orders and no judgment was pronounced.

b. SSP Private Ltd.-us-Govindjee Dairy Milk Private Ltd. - NCLT, New Delhi. This judgment is wholly per incuriam in that the same does not follow the judgment of the Hon’ble Supreme Court in the matter of S.N. Goyal which was passed as far back as 2008.

c. Yash Mehra v. Arundhuti Mehra, 2006 SCC Online Delhi 964. This judgment has no application in that the same was passed in a matrimonial matter where a consent given by the wife was sought to be withdrawn after the conclusion of the hearing.

d. Rabiya Bi Kassim M. v. The Country Wide Consumer Financial Services Ltd. - ILR 2004 Karnataka 2215. In the said case after the conclusion of hearing an application was filed to adduce further evidence which was disallowed. In the present case no evidence or additional document is being sought to be introduced. The present I.A. is based on a pure question of law arising out of Section 10A of the Code.

e. Pujya Sindhi Panchayat v. C.L. Mishra - 2002 SCC Online Rajasthan 51. The said judgment is rendered by the Hon’ble High Court at Rajasthan in 2002. The same has no effect inasmuch as the law has since been declared by the Hon'ble Supreme Court of India in the matter of S.N. Goyal in the year 2008.

# 13. The Ld. Sr. Counsel also adverted to the Vidarbha judgement and presented revenue figures and other related facts to drive home the point that the Corporate Debtor is by no means an insolvent company. These assertions were filed by way of a supplementary affidavit by the Corporate Debtor.

Analysis and Findings

# 14. Heard the learned Sr. Counsel on both the sides and perused the pleadings.

# 15. That a debt is outstanding is an admitted fact and that the same is payable is also not disputed. However, it is the date of default that is contentious. The date of default as mentioned in part IV of the application has been stated as 31 March 2018, which is ostensibly on account of the original sanction of the load facilities and has been registered by the Information utility viz. NeSL on 05-06-2021 on application filed by the Financial Creditors on 10-10-2020. The contention of the CD is that the date of default now should be reckoned on the basis of the Re-structured loan, which falls under the time bracket stipulated for operation of Section 10A. 

# 16. The following issues arise out of the submissions:

• a) Whether the re-structuring of a loan is tantamount to novation of the original contract and whether non-fulfilment of the conditions or preconditions of the re-structuring relegates the date of default back to the original default date?

• b) Whether the NCLT is required to go into the details of the reasons of default, like non issuance of a Tariff order which could have a bearing on the purported default ?

a) In order to examine this issue, it is important to have a look at the order sanctioning the restructured plan. The restructured plan that was sanctioned by REC vide no. REC/CO/SAM/HEL/2020-21/147 dated 29.9.2020 inter-alia contains a repayment schedule that envisages following payments spread over a period of 30 odd years. Additionally, the restructured package also envisaged certain pre-requisites to be fulfilled as given in Annexure -I to the sanction letter ibid, which include a condition to get a favourable tariff order from the WESERC, which forms the basis of the restructured plan. This had to be dove-tailed with a guaranteed output from the project, which is the central pivot on which the entire restructured plan is supposed to be a workable proposition. This ostensibly has not happened and hence the present situation. Be that as it may, the restructured plan is indeed a revised set of terms and conditions and a new financial contract complete with the details of the money lent and the manner of its repayment alongwith mode and manner of securitisation thereof by virtue of mortgage and/or issuance of OCDs etc. The terms and conditions as well as the sanction letter does not provide that in case of the failure of the repayment plan, the date of default shall be reckoned from a date prior to the sanction of the plan. It does not have a pre-empting or a remedial clause to that effect. Thus, the date of default cannot now be assumed to be outside this restructured plan. In the supplementary affidavit filed by the Corporate Debtor it has been affirmed that against the requirement of repayment above, the following payment have been made in the manner shown herein: From the above two tables it is evident that the Corporate Debtor has made a payment of 170 Crore till 22nd September 2022 as against the total requirement of Rs 375.2 Crore. The important part however is that the first payment of Rs.50 Crore was made on 24th of December 2021, whereas it was supposed to be made by 31st March 2021 as per the revised sanctioned letter (supra). The default can thus be seen to have taken place on 31st March 2021 itself, which is outside the 10A period, though by a whisker. Even though the Corporate Debtor, by way of supplementary affidavits and also by way of the averments in the petition has sought to establish that he has made sizeable payments and also that it is financially a solvent company, the fact remains that the default has been committed in payment of the very first instalment of debt and interest that fell due even in terms of the revised restructuring plan of REC. It would be pertinent to extract here the definition of Debt and default as envisaged in the Code.

• Section 3

• (12) “default” means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not 1[paid] by the debtor or the corporate debtor, as the case may be; 

Thus, the argument of the Corporate Debtor that it has already made substantial payments to the Financial Creditor is of no consequence, as even if a part remains unpaid on the due date of payment, it would constitute a default. This fact unambiguously emerges from the discussion above that the Corporate Debtor is in default of repayment as per the re-structuring plan sanctioned by the Financial Creditor, with the provisions of Section 10A not coming to his aid to escape the clutch of IBC. It has been contended that the onus of getting the pre-condition fulfilled was not only on the debtor but was also on the financial creditors as well as the WBSERC. In this context the judgment of Hon’ble High Court of Calcutta, in the matter of Appeal filed by the Corporate Debtor against the order of single bench on its writ petition, is of significance since it also directs the R3 & R4 to sort out and address the issue of Tariff order, that being the central to the restructuring plan. It has been inter-alia held as follows: 

• In the backdrop of the above, discussion, this Court directs as follows:

• II.R3 and R4 to address the Tariff Order dated 31st of May 2021 along with the extent of fulfilment of pre-conditions outlined in the said Consortium Meeting dated 17th February 2021 in a second consortium meeting with the Appellant No.1/ the Company, without prejudice to their respective rights and legal options”.

The issue then would be whether it is incumbent upon this Adjudicating Authority to go into the nitty gritty of finding out as to what were the factors that were responsible for creating a situation leading to the default. However, the issue is no longer res-integra, and in this regard we rely on para 15 of the Judgement of Hon’ble NCLAT in the matter of SBI v. N.S. Engineering Projects delivered in CA(AT)(Insolvency) 978, 1000 and 1039 of 2022, which

is reproduced below:

• 15. The Hon’ble Supreme Court has had occasion to examine the contours of Section 7 Application. The Hon’ble Supreme Court in Innoventive Industries Limited vs. ICICI Bank and Anr.- (2018) 1 SCC 407 had noted the Scheme of Section 7 of the Code and also contrasted it with the Scheme under Section 8 and 9. Paragraphs 28 and 29 of the judgment of the Hon’ble Supreme Court is as follows:

• “28. When it comes to a financial creditor triggering the process, Section 7 becomes relevant. Under the Explanation to Section 7(1), a default is in respect of a financial debt owed to any financial creditor of the corporate debtor — it need not be a debt owed to the applicant financial creditor. Under Section 7(2), an application is to be made under sub-section (1) in such form and manner as is prescribed, which takes us to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Under Rule 4, the application is made by a financial creditor in Form 1 accompanied by documents and records required therein. Form 1 is a detailed form in 5 parts, which requires particulars of the applicant in Part I, particulars of the corporate debtor in Part II, particulars of the proposed interim resolution professional in Part III, particulars of the financial debt in Part IV and documents, records and evidence of default in Part V. Under Rule 4(3), the applicant is to dispatch a copy of the application filed with the adjudicating authority by registered post or speed post to the registered office of the corporate debtor. The speed, within which the adjudicating authority is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor, is important. This it must do within 14 days of the receipt of the application. It is at the stage of Section 7(5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the “debt”, which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under sub-section (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be. 

• 29. The scheme of Section 7 stands in contrast with the scheme under Section 8 where an operational creditor is, on the occurrence of a default, to first deliver a demand notice of the unpaid debt to the operational debtor in the manner provided in Section 8(1) of the Code. Under Section 8(2), the corporate debtor can, within a period of 10 days of receipt of the demand notice or copy of the invoice mentioned in sub-section (1), bring to the notice of the operational creditor the existence of a dispute or the record of the pendency of a suit or arbitration proceedings, which is pre-existing—i.e. before such notice or invoice was received by the corporate debtor. The moment there is existence of such a dispute, the operational creditor gets out of the clutches of the Code”.

Further in Para 16 of the same judgement, it has been inter-alia mentioned that :

• 16. The Hon’ble Supreme Court in the above case has observed that the moment Adjudicating Authority is satisfied that default has occurred, the Application must be admitted, unless it is incomplete.

# 17. In view of the above facts and circumstances, we are satisfied that the present petition made by the Financial Creditor is complete in all respects as required by law. The Petition establishes that the Corporate Debtor is in default of a debt due and payable and that the default is more than the minimum amount stipulated under section 4 (1) of the Code, stipulated at the relevant point of time.

# 18. Accordingly, it is, hereby ordered as follows:-

(a) The application bearing CP (IB) No. 138/KB/2021 filed by REC Limited, the Financial Creditor, under section 7 of the Code read with rule 4(1) of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for initiating CIRP against Hiranmaye Energy Limited, the Corporate Debtor herein, is admitted.

(b) There shall be a moratorium under section 14 of the IBC.

(c) The moratorium shall have effect from the date of this order till the completion of the CIRP or until this Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 of the IBC or passes an order for liquidation of Corporate Debtor under section 33 of the IBC, as  the case may be.

(d) Public announcement of the CIRP shall be made immediately as specified under section 13 of the Code read with regulation 6 of the Insolvency & Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

(e) Mr. Bhuvan Madan, registration number IBBI/IPA-001/IP-P01004/2017- 2018, email: madan.bhuvan@gmail.com is hereby appointed as Interim Resolution Professional (IRP) of the Corporate Debtor to carry out the functions as per the Code subject to submission of a valid Authorisation of Assignment in terms of regulation 7A of the Insolvency and Bankruptcy Board of India (Insolvency Professional) Regulations, 2016. The fee payable to IRP or the RP, as the case may be, shall be compliant with such Regulations, Circulars and Directions as may be issued by the Insolvency & Bankruptcy Board of India (IBBI). The IRP shall carry out his functions as contemplated by sections 15, 17, 18, 19, 20 and 21 of the Code.

(f) During the CIRP period, the management of the Corporate Debtor shall vest in the IRP or the RP, as the case may be, in terms of section 17 of the IBC. The officers and managers of the Corporate Debtor shall provide all documents in their possession and furnish information in their knowledge to the IRP within one week from the date of receipt of this Order, in default of which coercive steps will follow. No separate notice for cooperation by the suspended management should be expected.

(g) The IRP/RP shall submit to this Adjudicating Authority periodical report with regard to the progress of the CIRP in respect of the Corporate Debtor.

(h) The Financial Creditor shall deposit a sum of Rs.4,00,000/- (Rupees Four Lakh only) with the IRP to meet the expenses arising out of issuing public notice and inviting & processing claims. These expenses are subject to approval by the Committee of Creditors (CoC).

(i) In terms of section 7(5)(a) of the Code, Court Officer of this Court is hereby directed to communicate this Order to the Financial Creditor, the Corporate Debtor and the IRP by Speed Post and email immediately, and in any case, not later than two days from the date of this Order.

(j) Additionally, the Financial Creditor shall serve a copy of this Order on the IRP and on the Registrar of Companies, West Bengal, Kolkata by all available means for updating the Master Data of the Corporate Debtor. The said Registrar of Companies shall send a compliance report in this regard to the Registry of this Court within seven days from the date of receipt of a copy of this order.

# 19. In light of the above I.A. (IB) No. 1020/KB/2022 and I.A. (IB) No. 828/KB/2023 are hereby dismissed.

# 20. CP (IB) No. 138/KB/2021 to come up on 02-02-2024 for filing the periodical report. Consequently, IA. (IB) No. 1946/KB/2023, which is an I.A. filed by the Financial Creditor for early pronouncement of order is hereby dismissed as infructuous.

# 21. The Registry is directed to send e-mail copies of the order forthwith to all the parties and their Ld. Counsel for information and for taking necessary steps.

# 22. Certified copy of this order may be issued, if applied for, upon compliance of all requisite formalities.

# 23. File be consigned to the record.

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