The Nationwide Firm Regulation Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson), Ms. Shreesha Merla (Technical Member) and Mr. Naresh Salecha (Technical Member), whereas adjudicating an enchantment in Hinduja Leyland Finance Ltd. v Fly Specific Logistic Pvt. Ltd., has upheld that Company Insolvency Decision Course of (“CIRP”) can’t be initiated over a default which had occurred within the interval talked about below Part 10A of the Insolvency and Chapter Code, 2016 (“IBC”), i.e. between 25.03.2020 to 24.03.2021. The order was handed on 20.05.2022.
Part 10A was inserted in IBC in 2020 to discourage initiation of CIRP over defaults arising on account of the COVID-19 pandemic.
“Part 10A- Suspension of initiation of company insolvency decision course of. However something contained in sections 7, 9 and 10, no utility for initiation of company insolvency decision technique of a company debtor shall be filed, for any default arising on or after twenty fifth March, 2020 for a interval of six months or such additional interval, not exceeding one 12 months from such date, as could also be notified on this behalf:
Offered that no utility shall ever be filed for initiation of company insolvency decision technique of a company debtor for the mentioned default occurring through the mentioned interval.
Rationalization. – For the elimination of doubts, it’s hereby clarified that the provisions of this part shall not apply to any default dedicated below the mentioned sections earlier than twenty fifth March, 2020.”
The Part 10A was inserted in IBC by modification Act No. 17 of 2020 and thereafter the Central Authorities had prolonged the interval of exemption until March, 2021.
Hinduja Leyland Finance Ltd. (“Appellant”) had filed a petition below Part 7 of the IBC bearing CP (IB) NO. 31/ALD/2022, earlier than the NCLT Allahabad Bench (“Adjudicating Authority”), in search of initiation of CIRP towards Fly Specific Logistic Pvt. Ltd. (“Respondent”). The precise date of default was 19.03.2020. Nevertheless, the Appellant had inadvertently talked about the date of default as 24.12.2020 within the petition.
The Adjudicating Authority noticed that the date of default talked about within the petition, i.e. 24.12.2020, falls inside the prohibited interval talked about in Part 10A of the IBC. Earlier than the Appellant may file an modification utility to rectify the error in date of default, the Adjudicating Authority vide an order dated 05.04.2022 had dismissed the petition whereas observing that no CIRP might be initiated for default occurring within the prohibited interval. Nevertheless, liberty was granted to take recourse below another regulation as could also be obtainable.
Enchantment Earlier than The NCLAT
The Appellant filed an enchantment earlier than the NCLAT towards the order dated 05.04.2022, difficult the rejection of Part 7 petition over the inaccurate date of default. The Applicant had submitted that within the Part 7 petition ‘date of default’ was wrongly talked about as 24.12.2020 rather than 19.03.2020 and no modification utility might be filed because the Petition was dismissed on first day of listening to.
The NCLAT noticed that because the petition talked about 24.12.2020 because the date of default and no modification was made, the Adjudicating Authority had not erred in rejecting the petition for being barred by Part 10A of the IBC. NCLAT dismissed the enchantment filed by the Appellant and granted liberty to provoke contemporary continuing below Part 7 of IBC with the corrected paperwork, in accordance with regulation.
Case Title: Hinduja Leyland Finance Ltd. v Fly Specific Logistic Pvt. Ltd., Firm Enchantment (AT) (Ins.) No. 553 of 2022.
Counsel for Appellant: Mr. Gulshan Kr. Sachdev, Advocate