Corporate Debtor's Section 10A defense fails as default acknowledged before suspension period began

The NCLAT dismissed an appeal challenging admission of a Section 7 IBC application. The Corporate Debtor argued the application was barred under Section 10A, claiming default occurred on 25.08.2020, after the Section 10A suspension period began on 25.03.2020. However, the NCLAT found clear acknowledgement by the Corporate Debtor of Rs.64,04,90,697/- due as on 19.02.2020, prior to the Section 10A period. The tribunal held that when default occurs before the Section 10A period, applications cannot be barred. The Adjudicating Authority correctly accepted the default date as 15.12.2021 and properly admitted the application, rejecting the Corporate Debtor's attempts to avoid liability under the loan agreement.

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Issues Involved:
1. Validity of the Section 7 Application under the Insolvency and Bankruptcy Code, 2016.
2. Dispute regarding the date of default and its implications under Section 10A of the Insolvency and Bankruptcy Code, 2016.
3. Acknowledgment and repayment of debt by the Corporate Debtor.

Summary:

1. Validity of the Section 7 Application:
The appeal was filed by a suspended Director of the Corporate Debtor challenging the National Company Law Tribunal (NCLT) order dated 09.11.2023, which admitted the Section 7 Application filed by the Financial Creditor, Emami Realty Ltd. The Corporate Debtor, Fort Projects Private Limited, had entered into an Agreement on 15.02.2016 with the Financial Creditor for a loan of Rs.35 Crores. The Financial Creditor disbursed Rs.34.55 Crores to the Corporate Debtor. Despite several communications and assurances from the Corporate Debtor, the amount was not repaid. A subsequent Agreement dated 26.02.2020 acknowledged a total due amount of Rs.64,04,90,697/- as on 19.02.2020. The Financial Creditor filed an application under Section 7 claiming Rs.91,74,27,304/- due to non-payment.

2. Dispute Regarding the Date of Default and Section 10A:
The Appellant argued that the default occurred on 25.08.2020, during the Section 10A period, thus barring the application. The Financial Creditor countered that the time for repayment was extended till 15.12.2021, and the default date was 15.12.2021. The Corporate Debtor's reply to the Section 7 Application claimed that the Agreement dated 26.02.2020 was never implemented, contradicting the Appellant's argument regarding the default date. The Tribunal found that the Corporate Debtor's acknowledgment of the debt in the Agreement dated 26.02.2020, which was prior to the Section 10A period, invalidated the Appellant's argument.

3. Acknowledgment and Repayment of Debt:
The Tribunal noted that the Corporate Debtor had acknowledged the debt of Rs.64,04,90,697/- in the Agreement dated 26.02.2020. Despite this acknowledgment, no payment was made, and the Financial Creditor extended the repayment period till 15.12.2021. The letter dated 13.01.2022 from the Financial Creditor to the Corporate Debtor, which was not contested, confirmed the extension of the repayment period. The Tribunal concluded that the Corporate Debtor's contradictory pleas and failure to act on the Agreement dated 26.02.2020 invalidated the Appellant's claim that the application was barred by Section 10A.

Conclusion:
The Tribunal dismissed the appeal, upholding the NCLT's decision to admit the Section 7 Application. The Tribunal found no merit in the Appellant's arguments and concluded that the application was not barred by Section 10A.

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