TaxTMI 
TaxTMI 
2022 (4) TMI 428
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...., Guntur, Andhra Pradesh. Sree Karpagamoorthy Transport i.e., Operational Creditor issued an email on 06.02.2018 quoting its rate for transporting Gypsum. The Corporate Debtor on the same day informed the Operational Creditor to wait for about a week. Subsequently, the Corporate Debtor issued a purchase order dated 19.02.2018 vide email of even date for transporting 2000 MT of Gypsum. ii. Thereafter, the Operational Creditor transported Gypsum from 24.02.2018 to 14.03.2018. The Corporate Debtor vide email dated 15.03.2018 acknowledged the receipt of Gypsum and requested the Operational Creditor to raise the bill on low weight basis. The Corporate Debtor requested the Operational Creditor to raise the bill in two formats vide email dated 17.03.2018 with details of Truck etc. iii. Accordingly, Operational Creditor raised a bill dated 15.03.2018 for Rs. 32,88,824.55/- for transporting Gypsum. As the performance of the Operational Creditor was to the satisfaction of the Corporate Debtor, it instructed the Operational Creditor over phone to transport another approximately 600 MT of Gypsum. As such the same was transported from 15.03.2018 to 31.03.2018 for a value of Rs....
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....te of default based on the IB Code (Amendment) Ordinance, 2020 and IB Code (2nd Amendment Act), 2020 is not at all applicable to the standing order 1205(E) dated 24.03.2020 issued by the Central Government under Section 4 of the IBC. It is contended that Ordinance 9 of 2020 and Amendment Act 17 of 2020 clearly specify that for the defaults that occurred on or after 25.03.2020 CIRP process cannot be initiated under Sections 7, 9 & 10 of the I&B Code and thereby suspended the operations under those Sections specifying the time limit on account of Covid. Whereas notification dated 24.03.2020 raising the threshold limit does not specify as such. The crucial date is the date of filing of Form-5 which is 04.03.2021. Hence, since the amount of claim is less than the pecuniary jurisdiction of this Tribunal, the application cannot be entertained and has to be dismissed. The 2nd objection is with regard to the Special Power of Attorney dated 11.01.2021 and the letter dated 12.01.2021 given by the Special Power of Attorney Holder to A.M. Sridharan who issued Form-3 demand notice. The contents of the Special Power of Attorney clearly show that Mrs. M. Rajeswai, the Proprietrix of Operationa....
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....yable on 14.04.2018 and 30.04.2018. Therefore, the default presupposes the filing of the application hence, it has to be seen what was the minimum amount prescribed by Section 4 on the date of occurrence of default. He contends that Section 4 does not employ the words "the date of the application" unlike Section 2(g) of Recovery of Debts and Bankruptcy Act, 1993 or the words "at the time the petition is presented" unlike Section 267 of the UK Insolvency Act, 1986. He contends that Recovery of Debts and Bankruptcy Act is also a Central Act and there is a need to employ those words in RDB Act because application can be filed for the debts which are payable in future also under Section 19 of the said Act. He contends that the definition of debt is more on the lines of definition of debt under Section 3(11) of IBC. He also relies on Section 10 of the Presidency-Towns Insolvency Act, 1909 and Section 7 of the Provincial Insolvency Act, 1920, where under a debtor is judged as insolvent pursuant to the act committed under Section 9 and 6 of those Acts respectively. He contends that under IBC the Corporate Debtor is not adjudged as insolvent, rather an application only for initiat....
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....on the Counsel makes an effort to draw support to his contention that it is the date of default which triggers the right to initiate the CIRP process. The judgment of Supreme Court in Asset Reconstruction Company (India) Limited vs. Bishal Jaiswal, Aironline 2021 SC 267 is relied upon wherein it is held that the trigger for filing the application is the default of a debt above INR 1 Lakh. He also relies on a judgment of Supreme Court in Swiss Ribbons Private Limited vs. Union of India, AIR 2019 Supreme Court 739, wherein it is observed that the trigger for Financial Creditors application is non-payment of dues when they arise under loan agreements. The judgment rendered by the NCLAT, New Delhi Bench in Madhusudan Tantia vs. Amit Choraria, (2020) ibclaw.in 294 is relied upon, wherein it was held that the notification dated 24.03.2020 is prospective in nature and not retrospective one. It held that if the said notification, is made applicable to the pending applications of IBC it will create absurd results. But the said judgment does not throw any light on the issue involved in this case. The judgment of NCLT, New Delhi Bench in BLS Polymers Limited vs. M/s. RMS Power Soluti....
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....r the existence of dispute if any. Therefore, even if the default has occurred, an application under Section 9 of the IBC can only be filed if an opportunity is given to the Corporate Debtor to file a reply to the notice issued. At para No. 30 it further held that the question is whether by issuance of notification dated 24.03.2020 under proviso of Section 4 of the IBC, can a right which has already accrued to a person be taken away by that notification which is admittedly issued thereafter. Every notification has prospective effect and so far as filing of the Application either under Section 7, 9 or 10 is concerned it can only be filed when the default in making payment has occurred, except in the matter of Section 9 of IBC where demand notice has to be delivered after the default. From the above we can understand that the issuance of demand notice under Section 8 is mandatory for an application which is filed under Section 9 of the IBC. Since, the NCLAT held that the issuance of demand notice is mandatory and it is only on the failure of the Corporate Debtor to repay the debt or to bring to the notice of the Operational Creditor the pre-existing dispute that the debt becomes due ....
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....r the payment of unpaid operational debt by sending an attested copy of the record of electronic transfer of the unpaid amount from the bank account of the Corporate Debtor or by sending an attested copy of record that the Operational Creditor has encashed a cheque issued by the Corporate Debtor. By reading section 8 it can be understood that the default has already occurred by the date of issuing the demand notice, as the explanation to section 8 of IBC reads that for the purpose of the section a demand notice means a notice served by an operational creditor to the Corporate Debtor demanding payment of the operational debt in respect of which the "default has occurred". Hence, if the date of default is the point at which the CIRP becomes triggered, this case falls to be prior to the date of notification, since admittedly, the default occurred prior to the date of notification. But whether it is the date of default or the date of Application which attracts the application of the notification dated 24.03.2020 has to be looked into, with the help of the precedential law. The Counsel for the Corporate Debtor relied on a judgement of the NCLAT, New Delhi in Company Ap....
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....or for a default occurring on or after 25 March, 2020; the embargo remaining in force for a period of six months, extendable to one year. Acceptance of the submission of the appellant would defeat the very purpose and object underlying the insertion of Section 10A. For, it would leave a whole class of corporate debtors where the default has occurred on or after 25 March 2020 outside the pale of protection because the application was filed before 5 June 2020. 30: Section 10A does not contain any requirement that the Adjudicating Authority must launch into an enquiry into whether, and if so to what extent, the financial health of the corporate debtor was affected by the onset of the Covid-19 pandemic. Parliament has stepped in legislatively because of the widespread distress caused by an unheralded public health crisis. It was cognizant of the fact that resolution applicants may not come forth to take up the process of the resolution of insolvencies (this as we have seen was referred to in the recital to the Ordinance), which would lead to instances of the corporate debtors going under liquidation and no longer remaining a going concern. This would go against the very object....
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.... Indeed, the explanation removes the doubt by clarifying that such bar shall not operate in respect of any default committed prior to 25th March, 2020." Though the judgment of Supreme Court is in respect of Section 10(A) of IBC it would indicate that it is the date of application that has to be taken as criteria while entertaining an application under Section 7 or 9 of IBC. In view of the rulings of the binding judgments of the NCLAT it has to be concluded that the claim amount in this Application is below the limits of the pecuniary jurisdiction of this Tribunal and hence, the Application cannot be entertained. II. Whether the demand notice under Section 8 of IBC is in accordance with law. The Counsel for the Operational Creditor relies on the judgment of Supreme Court in Civil Appeal No. 15135, 15481 and 15447 of 2017 between Macquarie Bank Ltd. Vs. Shilpi Technologies Limited, wherein the Supreme Court held that a conjoint reading of Section 30 of Advocates Act and Section 8 and 9 of the Code together with the Adjudicating Authority Rules and Forms thereunder would yield the result that a notice sent on behalf of an Operational Credit....