Tribunal rules on prospective application of default limit, upholds CIRP admission

The Tribunal held that the notification enhancing the minimum default limit to Rs. 1 crore is prospective, not retrospective. The application under Section 9 of the IBC was deemed maintainable despite the amendment to Section 4 being prospective. The Operational Creditor fulfilled all procedural requirements, and the Corporate Debtor had no valid defense against the debt. The Adjudicating Authority's decision to admit the application for CIRP was upheld, and the appeal was dismissed without costs.

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Issues Involved:
1. Whether the notification dated 24.03.2020 enhancing the minimum default limit to Rs. 1 crore is retrospective or prospective.
2. Whether the application under Section 9 of the IBC is maintainable given the amendment to Section 4.
3. Whether the procedural requirements under Section 9 of the IBC were met by the Operational Creditor.
4. Whether the Corporate Debtor had any pre-existing dispute or made any payment after receiving the demand notice.
5. Whether the Adjudicating Authority erred in admitting the application for CIRP.

Issue-wise Detailed Analysis:

1. Retrospective or Prospective Nature of Notification:
The notification dated 24.03.2020 by the Ministry of Corporate Affairs specifies Rs. 1 crore as the minimum amount of default for initiating CIRP. The Tribunal concluded that the notification is prospective in nature and not retrospective because it does not explicitly state its retrospective application. The Tribunal emphasized that applying the notification retrospectively would create absurd results and wider complications.

2. Maintainability of Application under Section 9:
The Appellant contended that the application was not maintainable as the claim amount was below the threshold of Rs. 1 crore as per the amended Section 4. The Tribunal rejected this argument, stating that the amendment to Section 4 is prospective and does not affect applications filed before the notification date. The Tribunal held that the right to file an application under Section 9 is a substantive right and cannot be retrospectively affected by procedural changes.

3. Procedural Requirements under Section 9:
The Tribunal noted that the Operational Creditor had fulfilled all procedural requirements under Section 9 of the IBC, including serving a demand notice, producing a statement of bank account, and an affidavit. The Operational Creditor also proposed the name of the Resolution Professional, and there were no disciplinary proceedings against the proposed IRP.

4. Pre-existing Dispute or Payment by Corporate Debtor:
The Tribunal observed that the Corporate Debtor did not dispute the debt and had acknowledged the outstanding amount. Despite receiving the demand notice, the Corporate Debtor neither replied nor made any payment towards the outstanding debt. The Tribunal found no pre-existing dispute or any payment made after the demand notice, supporting the Operational Creditor's claim.

5. Adjudicating Authority's Decision:
The Tribunal upheld the Adjudicating Authority's decision to admit the application for CIRP. The Tribunal found that the Adjudicating Authority had correctly observed that there was no payment by the Corporate Debtor after receiving the demand notice and no pre-existing dispute was raised. The Tribunal concluded that the Adjudicating Authority's order was free from legal infirmities.

Conclusion:
The Tribunal dismissed the appeal, holding that the notification dated 24.03.2020 is prospective and does not apply to pending applications. The application under Section 9 was maintainable, and the procedural requirements were met by the Operational Creditor. The Corporate Debtor had no valid defense, and the Adjudicating Authority rightly admitted the application for CIRP. The appeal was dismissed with no costs, and all pending interlocutory applications were closed.

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