IBC Ordinance Suspending Insolvency Process Applicable To Pending Applications With Respect To Defaults Arising On Or After March 25: NCLT [Read Order]

The National Company Law Tribunal, Chennai Bench has ruled that Section 10A of the Insolvency and Bankruptcy Code, 2016, which bars the initiation of insolvency proceedings against a defaulter, will be applicable to pending applications with respect to defaults arising on or after March 25. "The date of filing cannot determine the rights of the parties in view of the prevalent extraordinary situation which will wholly defeat the object of the promulgation of the Ordinance in protecting the interest of the corporate persons", held the NCLT The Chennai Bench of NCLT passed this verdict in a case where insolvency proceedings under Section 9 IBC were pending against a Corporate Debtor, when the Centre promulgated the "Insolvency and Bankruptcy Code Ordinance, 2020" on June 5, which suspended the workings of Section 7, 9 and 10 of the IBC. Taking stock of the legislative intent, the Tribunal further stated as follows:- "The Executive, as manifest from the Objects and reasons, seems to have also been concerned about proper suitors being available for resolution of insolvency of corporate persons if pushed into insolvency in relation to defaults, arising on or after 25th March 2020… …the object of I&B Code is for the resolution of insolvency of corporate persons in a time bound manner by maximizing the value of the assets available with the Corporate Debtor by balancing the interest of all the stakeholders concerned, which may not happen; this seems to be apprehension of the Executive under the prevailing situation prompting it to exclude the default arising on or after 25.03.2020 as a 'default' itself giving rise to the filing of an application seeking initiation of the CIRP." Additionally, considering the application before it, NCLT laid emphasis on the proviso to Sec 10A to enunciate that pending insolvency applications regarding defaults which had allegedly occurred on or after March 25 are removed from the ambit of Sections 7, 9 and 10.