NCLAT sets aside Section 9 application as operational creditor's claim barred under Section 10A moratorium period

NCLAT set aside the admission of Section 9 application filed by operational creditor, holding it was barred under Section 10A of IBC. The tribunal found that despite the adjudicating authority recognizing the claim fell within the Section 10A prohibition period (25.03.2020 to 24.03.2021), it erroneously admitted the application. The default pertained to lease rentals from March 2020 to April 2021, with majority falling within the moratorium period. NCLAT ruled that Section 10A creates an absolute bar on filing applications for defaults during the specified period, regardless of corporate debtor's failure to raise the plea. The corporate debtor was freed from CIRP, and operational creditor was directed to pay IRP fees of Rs.2,00,000.

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Issues Involved:
1. Whether the Section 9 application filed by the Operational Creditor was barred by Section 10A of the Insolvency and Bankruptcy Code, 2016.
2. Whether the Adjudicating Authority erred in admitting the Section 9 application despite the bar under Section 10A.
3. Whether the Operational Creditor's application for withdrawal of the Company Petition was appropriately handled.

Summary:

Issue 1: Bar of Section 10A
The Appellant contended that the Section 9 application filed by the Operational Creditor was barred by Section 10A since the debt fell due from March 2020, which falls within the period stipulated under Section 10A of the Insolvency and Bankruptcy Code, 2016. The Adjudicating Authority noted in its order that the amount claimed fell within the 10A period but failed to consider this bar while admitting the application. The Supreme Court in `Ramesh Kymal' Vs. `Siemens Gamesa Renewable Power (P) Ltd.' held that no application for initiation of CIRP can be initiated for a default occurring on or after 25.03.2020 for a period of one year. The Adjudicating Authority's rejection of the Amendment Application on the ground that the Company Petition is barred by Section 10A further supports this contention.

Issue 2: Error in Admitting Section 9 Application
Despite acknowledging that the amount claimed fell within the 10A period, the Adjudicating Authority admitted the Section 9 application. The Tribunal held that the Adjudicating Authority committed an error in admitting the application without considering the bar under Section 10A. The Tribunal emphasized that the mere fact that the Corporate Debtor did not raise the bar in its reply is inconsequential when the bar is evident and acknowledged by the Operational Creditor.

Issue 3: Application for Withdrawal
The Operational Creditor had filed an application for withdrawal of the Company Petition but later filed an Amendment Application, indicating that they did not wish to pursue the withdrawal. The Tribunal noted that the Withdrawal Application was never pressed and the Amendment Application was rejected. The Tribunal clarified that for any default committed by the Corporate Debtor subsequent to the 10A period, a fresh application under Section 9 is maintainable.

Conclusion:
The Tribunal concluded that the Section 9 application filed by the Operational Creditor was barred by Section 10A and the Adjudicating Authority erred in admitting the application. The impugned order dated 09.02.2024 was set aside, and the Corporate Debtor was freed from CIRP. The IRP fee and expenses fixed by the Adjudicating Authority shall be paid by the Operational Creditor if not already paid. The Operational Creditor is at liberty to file a fresh application for defaults committed after the 10A period and seek appropriate remedies for their dues in accordance with the law. The Appeal was allowed subject to this liberty.

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