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of <h1>NCLAT dismisses appeal challenging CIRP initiation citing Section 10A IBC protection and RBI moratorium guidelines</h1> <h3>JC Flowers Asset Reconstruction Private Limited Versus Laxmi Oil and Vanaspati Private Limited</h3> JC Flowers Asset Reconstruction Private Limited Versus Laxmi Oil and Vanaspati Private Limited - TMI Issues Involved:1. Substitution of Appellant2. Default in Payment and Declaration as NPA3. Applicability of Section 10A of the Insolvency & Bankruptcy Code, 20164. Admissibility of CIRP ApplicationSummary:1. Substitution of Appellant:The appeal was initially filed by Yes Bank Limited u/s 61 of the Insolvency & Bankruptcy Code, 2016. An I.A. No. 991 of 2023 was filed by J.C. Flowers Asset Reconstruction Private Limited seeking substitution as the Appellant due to an assignment agreement with Axis Bank. The substitution was allowed by the Appellate Tribunal on 06.03.2023.2. Default in Payment and Declaration as NPA:The Respondent, Laxmi Oil and Vanaspati Private Limited, availed credit facilities from Yes Bank. The Appellant claimed that the Respondent delayed payments towards interest for November 2019 to January 2020, which were serviced with delay. The interest for February 2020 was charged on 01.03.2020, and the cash credit limit was overdrawn. The Appellant declared the Respondent as NPA on 20.07.2020 due to non-submission of stock statements for six months. A loan recall notice was issued on 27.08.2020, and the guarantees were invoked on 07.09.2020.3. Applicability of Section 10A of the Insolvency & Bankruptcy Code, 2016:The Appellant argued that the default occurred in February 2020, prior to the period stipulated under Section 10A of the Code. Section 10A was introduced to protect businesses affected by the Covid-19 pandemic and barred initiation of CIRP for defaults occurring during the specified period. The Appellant contended that Section 10A did not apply to defaults before 25.03.2020. The Respondent argued that the loan recall notice dated 27.08.2020 fell within the prohibited period under Section 10A, and the default should be considered within the moratorium period.4. Admissibility of CIRP Application:The Tribunal noted that Section 10A provides temporary suspension on initiation of CIRP for defaults occurring on or after 25.03.2020. The Tribunal observed that the Appellant's claim of default on 28.02.2020 was incorrect, as the instalment was due on 01.03.2020. The RBI Circular dated 27.03.2020 provided a moratorium on payments from 01.03.2020 to 31.05.2020, extended to 31.08.2020. The Tribunal concluded that the default could not be taken as 28.02.2020 or 01.03.2020 due to RBI guidelines and Section 10A. The Tribunal dismissed the appeal, stating that the Appellant was not entitled to initiate CIRP and could pursue other legal remedies to recover the debt.Conclusion:The appeal was dismissed, and the Tribunal emphasized that IBC aims to sustain the Corporate Debtor and not push it into unnecessary insolvency or liquidation. No costs were awarded, and interlocutory applications were closed.
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