The National Company Law Appellate Tribunal, led by Justice Ashok Bhushan, ruled that Section 10A of the Insolvency and Bankruptcy Code (IBC) is designed to provide relief to corporate debtors who defaulted during its specified period. While the underlying debts remain, Section 10A bars applications for Corporate Insolvency Resolution Processes (CIRP) under Sections 7, 9, and 10 for defaults occurring on or after March 25, 2020. The Tribunal clarified that this prohibition continues even after the specified period has ended.
The case involved an appeal from Office Beanz Pvt. Ltd., whose application under Section 10 of the IBC, 2016 was dismissed due to the restrictions imposed by Section 10A of the Code. The dismissal occurred because Section 10A prohibits filing such applications during the bar period. Aggrieved by this decision, the Appellant challenged the order, contending that the interpretation of Section 10A was incorrect.
The Appellant argued that Section 10A only prohibited the filing of applications during the bar period, while the underlying debt remained intact. They contended that once the bar expired, an application could be filed. To support this position, the Appellant cited the Supreme Court's judgment in Ramesh Kymal vs. Siemens Gamesa Renewable Power Private Limited (2021) 3 SCC 224, which clarified the scope of Section 10A and reinforced their claim that applications could be submitted once the bar was lifted.
The Respondent contended that the application was correctly dismissed due to the prohibition imposed by Section 10A. They argued that this bar was absolute, with no provision for reviving or filing applications after its expiration.
The NCLAT observed that the Supreme Court in Ramesh Kymal emphasized that the interpretation of Section 10A should consider its broader context and objectives, not just its literal wording. The Court clarified that while Section 10A imposes a retrospective bar on applications, it does not extinguish the underlying debt; instead, it prevents the initiation of insolvency processes for defaults during the specified period. The legislative intent was to provide relief to corporate debtors impacted by the COVID-19 pandemic, as initiating proceedings during such extraordinary circumstances could undermine the IBC's purpose. The NCLAT agreed with this interpretation, asserting that Section 10A clearly prohibits filing applications for defaults that occurred during its coverage. Allowing such applications post-expiration would contradict the provision's intent to offer relief during the pandemic.
Consequently, the NCLAT determined that the Appellant's interpretation, based on the Supreme Court's judgment, was flawed, and thus dismissed the appeal.
Office Beanz Pvt. Ltd. vs ------
Company Appeal (AT) (Insolvency) No. 1725 of 2024
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