Section 10A suspension of CIRP: exclusion of defaults during immunity period upheld, Section 7 petition dismissed as non maintainable.

Section 10A suspension grants statutory immunity by excluding defaults that arose during the suspended period from computation of debt and default; the tribunal rejected an attempt to re anchor the date of default to evade that immunity and held the principal one time defaults occurring within Section 10A must be ignored, while recurring interest liability may be considered after the period. Because excluding those defaults reduced the remaining debt below the statutory threshold for a Section 7 petition, the petition was non maintainable and the appeal was dismissed.

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Issues: (i) Whether the Section 7 application was maintainable where the principal default arose during the period protected by Section 10A of the Insolvency and Bankruptcy Code, 2016, and whether, after excluding the portion of debt and default falling within Section 10A, the remaining default meets the minimum threshold under Section 4 of the Insolvency and Bankruptcy Code, 2016.

Analysis: The statutory scheme of Section 10A of the Insolvency and Bankruptcy Code, 2016 provides for suspension of initiation of corporate insolvency resolution process in respect of defaults arising on or after 25 March 2020 for the specified protected period and expressly provides that no application shall ever be filed for defaults occurring during that period. The particulars of financial debt filed in Part IV of the original and the subsequent Section 7 petitions show that the principal instalments fell due in March, April and May 2020, dates that indisputably fall within the Section 10A protected period. The subsequent Section 7 petition, though reworking interest to exclude the Section 10A period, continued to claim the same principal amount, which on the pleadings crystallizes the date(s) of default within the prohibited period. Where a default is pleaded with specific dates that fall within Section 10A, that amount must be excluded for purposes of maintaining a Section 7 application. Once the principal amounts arising during Section 10A are excluded, only the post-Section 10A interest remained, and that amount fell below the statutory threshold prescribed under Section 4 for initiation of CIRP. Reliance on the concept of continuing default does not permit circumventing the statutory embargo created by Section 10A where the date(s) of default have been specifically pleaded within the protected period; the protection afforded by Section 10A would otherwise be nullified.

Conclusion: Issue (i) is answered against the Appellant and in favour of the Respondent: the portion of debt which fell due during the Section 10A protected period must be excluded, and after such exclusion the remaining default does not meet the threshold under Section 4, rendering the Section 7 application non-maintainable; the appeal is dismissed.

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