M/S Bharat Steel Rolling Mills Unit -1 vs Revital Reality Private Limited

IN THE MATTER OF: Bharat Steel Rolling Mills Unit-1 ...Appellant Versus Revital Reality Pvt. Ltd. ...Respondents

Present: For Appellant : Ms. Gunjan Mittal, Advocate. For Respondents : Mr. Gaurav Mitra, Mr. Lokesh Malik, Ms. Aditi Sharma, Mr. Yatin Dev, Mr. Ishaan C. and Mr. Akhand Pratap Singh, Advocates for R1.

ORDER

(Hybrid Mode)

20.03.2024 : This appeal is against an impugned order dated 16.03.2023, whereby a petition under Section 9 of the 'Code' filed by the appellant was dismissed.

2. The facts that led to the filing of the petition under Section 9 were the appellant had supplied goods viz. TMT Steel Bars w.e.f. the year 2017 till 2021 to the respondent and both maintained a running account. The invoices were being raised since 23.08.2017 and the last invoice was raised on 22.07.2021. Admittedly, from time to time the respondent used to make part payments. In its demand notice dated 30.09.2021, the appellant had sought recovery of principal amount of Rs.1,95,89,098/- along with interest of Rs.13,41,218/- thus, totalling to Rs.2,09,30,316/-. No reply was given by the respondent and then company petition under Section 9 of the 'Code' was filed. The said petition was dismissed primarily on the following grounds:-

8. The second contention of the Respondent is that certain invoices are barred by Section 10A, IBC, 2016 excluding which the present Application would not be able to meet the threshold limit of Rs.1 Crore under Section 4, IBC, 2016. With respect to the same, the invoices relied upon by the Applicant are dated 30.10.2020 to 21.03.2021. The payment with respect to the said invoices were to be made within 15 days from the date of such invoices. Therefore, the date of default with respect to each invoice would be 15 days from the date of such invoices. Per Section 10A of the IBC, 2016 and the MCA Notifications dated 24.09.2020 and 22.12.2020, no application for CIRP may be filed for defaults occurring between 25.03.2020 to 24.03.20221. The default with respect to the invoices dated 30.10.2020 - 07.03.2021 occurred on the lapse of 15 days from the date of such invoices thereby, falling within the period specifically barred by Section 10A, IBC, 2016. Further, excluding these invoices, the remining invoices dated 21.03.21- 22.07.2021 amounting to Rs.68,64,820/- (Sixty Eight Lakh Sixty Four Thousand Eight Hundred and Twenty) including interest fail to meet the threshold limit of Rs.1 Crore u/s, 4, IBC, 2016. Therefore, the said Application is not maintainable.

3. It is submission of the learned counsel for the appellant the parties were having running account and till 31.03.2019 an amount of Rs.2,83,91,641/- was due on invoices which were prior to 25.03.2020 and thus the amount due till after the last invoice, include the amount due on invoices even prior to 25.03.2020 which was more than Rs. 1.00 Crore and as such the petition under Section 9 was maintainable.

4. Heard. We are not inclined to accept this argument. If one peruse the statement of accounts filed by the appellant herein along with this appeal, it shows substantial amounts were paid by the corporate debtor during the period from 25.03.2020 till 24.03.2021 and such amounts were obviously adjusted against all earlier invoices, as it is a practice that the amount, if any, paid is firstly adjusted against the amount due on invoices prior in time, hence it cannot be said the amount of liability as on filing of petition would include the amount of invoices prior to 25.3.2020 which rather stood cleared.

5. Further, if one peruse the demand notice issued by the appellant and its petition under Section 9 of the 'Code' of dated 20.12.2021 it would show the appellant is also claiming amounts due only on 17 invoices from dated 30.10.2020 till 22.07.2021. These are 17 invoices, out of which 12 invoices are within the period covered under Section 10-A of the 'Code'. Only 5 invoices

Comp. App. (AT) (Ins) No. 666 of 2023 2 of 4 were beyond the said period, as has been rightly noted by the Ld. NCLT in its impugned order. The law qua filing of the petition under Section 9 of the 'Code' and the amount due on invoices between the 25.03.2020 till 24.03.2021 is made clear, in Civil Appeal No. 4050 of 2020 titled as Ramesh Kymal Vs. Siemens Gamesa Renewable Power Private Limited (2021) 3 Supreme Court Cases 224 wherein it is noted:-

28. The first proviso and the Explanation, reading the provisions together, it is evident that Parliament intended to impose a bar on the filing of applications for the commencement of the CIRP in respect of a corporate debtor for a default occurring on or after 25-3-2020; 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 10-A. For, it would leave a whole class of corporate debtors where the default has occurred on or after 25-3-2020 outside the pale of protection because the application was filed before 5-6-2020.

29. We have already clarified that the correct interpretation of Section 10-A cannot be merely based on the language of the provision: rather it must take into account the object of the Ordinance and the extraordinary circumstances in which it was promulgated. It must be noted, however, that the retrospective bar on the filing of applications for the commencement of CIRP during the stipulated period does not extinguish the debt owed by the corporate debtor or the right of creditors to recover it.

30. Section 10-A 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 recitals 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 of the IBC, as has been noted by a two-Judge Bench of this Court in its judgment in Swiss Ribbons (P) Ltd. v. Union of India.

Comp. App. (AT) (Ins) No. 666 of 2023

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32. Hence, the embargo contained in Section 10-A must receive a purposive construction which will advance the object which was sought to be achieved by enacting the provision. We are therefore unable to accept the contention of the appellant.

6. As 12 invoices were admittedly related to the period covered under Section 10-A of 'Code', and since the amount due against remaining 5 invoices, including interest, was below threshold of Rs.1.00 Crore specified in Section 4 of IBC, 2016, hence the petition u/s 9 of the 'Code' was rightly rejected.

7. In view of the above, there is no infirmity in the impugned order passed by the learned NCLT and accordingly it is dismissed.

[Justice Yogesh Khanna] Member (Judicial)

[Ajai Das Mehrotra] Member (Technical) harleen/Kam

Comp. App. (AT) (Ins) No. 666 of 2023 4 of 4