Petition Denied Due to COVID-19 Impact

The Tribunal dismissed the petition seeking initiation of Corporate Insolvency Resolution Process against the Corporate Debtor for default occurring on 31.10.2020, citing that Section 10A of the Insolvency and Bankruptcy Code, 2016 barred such action due to the impact of the COVID-19 pandemic on business operations. The suspension of Sections 7, 9, and 10 during the specified period rendered the petition invalid as per the legislative intent to address pandemic-related economic challenges.

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Issues Involved:
1. Default in repayment of loan by the Corporate Debtor.
2. Applicability of Section 10A of the Insolvency and Bankruptcy Code, 2016 due to COVID-19 pandemic.
3. Validity of the petition filed during the suspension period of Sections 7, 9, and 10 of the Insolvency and Bankruptcy Code, 2016.

Issue-wise Analysis:

1. Default in repayment of loan by the Corporate Debtor:
The Petitioner, Axis Bank Limited, sought the initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, Maharashtra Theatres Private Limited, under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Corporate Debtor defaulted on a loan repayment amounting to Rs. 55,75,27,571/- as of 31.10.2020. The details of the defaulted amount and the facilities availed by the Corporate Debtor were provided in Form-1. Despite several correspondences and agreed repayment schedules, the Corporate Debtor failed to fulfill its obligations. The account was declared a Non-Performing Asset (NPA) on 29.01.2019, and the Financial Creditor recalled the credit facilities and invoked guarantees against personal guarantors on 11.07.2019.

2. Applicability of Section 10A of the Insolvency and Bankruptcy Code, 2016 due to COVID-19 pandemic:
The Corporate Debtor argued that the petition was not maintainable due to the suspension of Sections 7, 9, and 10 of the Insolvency and Bankruptcy Code, 2016, as per the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020, and subsequent notifications. Section 10A was inserted to suspend the initiation of CIRP for defaults arising on or after 25th March 2020 due to the COVID-19 pandemic and its impact on business operations. This suspension was extended further by notifications dated 24.09.2020 and 22.12.2020, making the petition filed on 30.12.2020 invalid as the default occurred on 31.10.2020.

3. Validity of the petition filed during the suspension period of Sections 7, 9, and 10 of the Insolvency and Bankruptcy Code, 2016:
The Tribunal examined the petition and found that the date of default was declared as 31.10.2020 in Form-1. The petition was filed on 30.12.2020, during the suspension period of Sections 7, 9, and 10, as per Section 10A. The Tribunal referred to the Supreme Court judgment in Ramesh Kymal vs. Simens Gamesa Renewal Power Private Limited, which clarified the distinction between the initiation and commencement of CIRP and affirmed that no application for initiation of CIRP could be filed for defaults occurring on or after 25th March 2020. The Tribunal concluded that the petition was not maintainable as it was filed during the period when there was a specific bar enforced by Section 10A.

Conclusion:
The Tribunal dismissed the petition on the grounds that the initiation of CIRP against the Corporate Debtor for a default occurring on 31.10.2020 was barred by Section 10A of the Insolvency and Bankruptcy Code, 2016. The legislative intent was to suspend the operation of Sections 7, 9, and 10 for defaults arising during the COVID-19 pandemic, impacting normal business operations and the global economy.

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