The court clarified that under Section 10-A, defaults continuing after a moratorium remain subject to insolvency proceedings, affirming NCLT's authority in such matters.

ORDER

S.S.SUNDAR, J.

(1)This writ petition is filed by the Shareholders and suspended Directors of the Corporate Debtor, namely, Evershine Wood Packaging Private Limited, seeking for issuance of a writ of certiorari to quash the order passed by the National Company Law Tribunal [in short 'NCLT'], Division Bench-II, Chennai, dated 23.06.2023 in CP[IB].No.13/2023, admitting the Company Petition with directions and appointing Interim Resolution Professional [IRP] with further direction.

(2)Brief facts that are necessary for the disposal of this writ petition are as follows:

(3)The Company/Corporate Debtor, namely Evershine Wood Packaging Private Limited is carrying on business of timber and availed various credit facilities with M/s.Indian Bank from the year 2017. The Corporate Debtor signed the Demand Promissory Note, Letter of Continuity, Agreement of Guarantee etc. The Corporate Debtor also acknowledged the liability which is not in issue. It is admitted that the Corporate Debtor committed default in payment of loan/debt and hence, a Demand Notice was issued on 10.11.2021. The Accounts of the Corporate Debtor was declared as ''Non Profitable Asset'' [NPA] on 31.03.2021 with effect from 23.12.2020 as per RBI guidelines. It is also stated that the Corporate Debtor paid some amounts on irregular basis until 25.10.2021. However, the default continued thereafter. Hence, the financial creditor, namely, the Indian Bank, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 [in short 'IBC, 2016'] for initiating Corporate Insolvency Resolution Process [in short 'CIRP'].

(4)It is also admitted that the Corporate Creditor issued a statutory notice under Section 13[2] of SARFAESI Act . Even though the Corporate Debtor had sent a revised OTS proposal to the Bank on 04.03.2023, after rejection of the earlier OTS proposal, it is admitted that the Corporate Creditor did not accept the OTS offer. Though the account of the Corporate Debtor was declared NPA, the Corporate Debtor sought permission to operate the accounts on the premise that the Corporate Debtor being a MSME Unit, it can be permitted to operate the account. In all the OTS proposals, it appears that the Corporate Debtor has admitted the default. After referring to the statutory provisions and the admitted facts, the Tribunal admitted the Company Petition with a few directions. Aggrieved by the same, the above writ petition is filed even though a statutory appeal is also provided as against the order of the Tribunal.

(5)This Court, taking note of the alternative remedy available to the petitioners, admitted the writ petition after recording the submission of the learned Senior counsel that no application under Section 7 is maintainable before NCLT as the default is committed between 25.03.2020 and 24.03.2021. This Court also recorded the argument of the learned Senior counsel that relying upon the judgment of Hon'ble Supreme Court in Ramesh Kymal Vs. SiemensGamesa Renewable Power Private Limited reported in 2021 [3] SCC 224 .

(6)This Court granted interim order and the same was extended thereafter. The only ground on which the order of NCLT was challenged before this Court is by relying upon Section 10-A of IBC, 2016, which reads as follows:-

10A. S uspension of initiation of corporate '' insolvency resolution process

Notwithstanding anything contained in sections 7, 9 and 10, no application for initiation of corporate insolvency resolution process of a corporate debtor shall be filed, for any default arising on or after 25th March, 2020 for a period of six months or such further period, not exceeding one year from such date, as may be notified2 in this behalf:

Provided that no application shall ever be filed for initiation of corporate insolvency resolution process of a corporate debtor for the said default occurring during the said period.

Explanation. – For the removal of doubts, it is hereby clarified that the provisions of this section shall not apply to any d