NCLT Delhi: Criteria For Determination Of Limitation Period And Date Of Default With Respect To Debt Are Distinct Questions Of Law And Fact And Cannot Be Evaluated Similarly

The National Company Law Tribunal (“NCLT”), Delhi Bench, comprising of Mr. Manni Sankariah Shanmuga Sundaram (Judicial Member) and Dr. Binod Kumar Sinha (Technical Member) has rejected an application and held that as per Sec 10A of Insolvency and Bankruptcy Code, 2016 (“IBC”), no IBC proceedings can be initiated against the Corporate Debtor for the default which has occurred between the period from 25/03/2020 till 24/03/2021. The Bench further observed that the criteria for deciding the limitation period for a debt and the criteria for determining the date of default for that debt are two distinct questions of law and fact that cannot be evaluated on the same basis.Background Facts M/s. DB Power Limited (“Applicant/ Operational Creditor”) is operating a 1200 (2x600) MW coal-based thermal power plant in District Janjgir Champa, Chhattisgarh. On 06.08.2020, M/s Kreate Energy (I) Private Limited (“Respondent/Corporate Debtor”) offered to purchase 105 MW of RTC power for the period 01.09.2020 to 30.09.2020 @ Rs 2.75/KWh at Regional Periphery and the same offer was accepted by the Applicant. The Applicant has supplied 105 MW of RTC power for which invoice no. 100006518 for Rs 20.87 Crores was raised and the same was due on 01.12.2020. The Respondent defaulted in payment of the debt to the Applicant. On 21.10.2021, the Applicant served a Demand notice as per Section 8 of IBC for payment of the operational debt. As of 31.05.2022, the Respondent has made a default in payment of Rs 9.62 Crores including interest. Following this, the Applicant filed an application under Section 9 of IBC for initiation of a Corporate Insolvency Resolution Process (“CIRP”) against the Respondent. Contentions of ApplicantThe Applicant argued that the Respondent via e-mail on 09.03.2021 agreed to pay the debt due to Applicant during 25.03.2021-31.03.2021 i.e., after the expiry of the period mentioned under Section 10A of IBC. The Applicant further argued that the Respondent has acknowledged and admitted its liability to pay the operational debt to the Applicant through subsequent emails dated 09.03.2021, 10.06.2021, 21.06.2021, 11.08.2021, and 25.08.2021. This gives rise to a fresh cause of action under Section 10A of IBC.The Applicant further observed that the Respondent on 09.07.2021, issued a cheque for Rs. 10.87 Crores to pay the operational debt. However, the cheque was dishonoured and returned on 05.10.2021, giving rise to a fresh cause of action. Contentions by the RespondentThe Respondent opposed the submissions and held that as per the MCA Gazette Notifications dated 23.09.2020, Section 10A of IBC has been incorporated. Section 10A restricts the filing of any application under Sections 7, 9, and 10 of IBC if the default occurred on or after 25.03.2020, for a duration of six months. This period was later extended till 24.03.2021.The Respondent further observed that as per the Applicant, the date of default is 01.12.2020. NCLT VerdictThe NCLT rejected the application and held that the application could not be allowed as it fell within the shadow period of Section 10A IBC. As per Sec 10A IBC, no IBC proceedings can be initiated against the Corporate Debtor for the default which has occurred between the period from 25/03/2020 till 24/03/2021. The Bench further observed that the criteria for deciding the limitation period for a debt and the criteria for determining the date of default for that debt are two distinct questions of law and fact that cannot be evaluated on the same basis.This Adjudicating Authority would like to make a pertinent note of the fact that the criteria for determining the limitation period with respect to the debt and the criteria for determining the date of default with respect to the debt are two different questions of law and fact and cannot be tested on the same scale.Case Title: M/s. DB Power Limited vs M/s Kreate Energy (I) Private Limited.Case No:- COMPANY PETITION NO. (IB)-521/ND/2022Click here to Read/Download Order

NCLT Delhi: Criteria For Determination Of Limitation Period And Date Of Default With Respect To Debt Are Distinct Questions Of Law And Fact And Cannot Be Evaluated Similarly

Pragya Kriti

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