Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2024 Supreme(Online)(NCLT) 2567

NATIONAL COMPANY LAW TRIBUNAL
Mr. Praveen Gupta, Member (Judicial), Mr. Ashish Verma, Member (Technical)
OMKARA ASSET RECONSTRUCTION PRIVATE LIMITED – Appellant
Versus
MADHUSUDAN MOTORS PRIVATE LIMITED – Respondent
Company Application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 | IA NO. 121/2024 | CP (IB) NO.57/ALD/2023

Advocates:
For the Financial Creditor: Sh. Namit Suri, Ms. Surabhi Sinha, Sh. Ravi Kapoor
For the Corporate Debtor: Sh. Rishav Ambastha, Sh. Shubham Agarwal, Proxy for Sh. Rahul Agarwal

Amendments to change dates of default in insolvency petitions are barred under Section 10A when the initial default occurred within the prohibited period.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 60(5) - Amendment of date of default - Application filed by Financial Creditor for rectification of date of default from 07.03.2021 to 25.07.2022; when the Corporate Debtor defaulted in payment after notice under Section 13(2) - Default occurred during timeframe of Section 10A, leading to bar on initiation of CIRP. (Paras 12-20)

(B) Legal Principles - The default can only be recorded as the date it initially occurred, and cannot be changed by a subsequent demand notice or amendment unless it meets statutory criteria. (Paras 10-19)

Facts of the case:
The Financial Creditor availed a loan and assigned after default occurred. The review of existing default versus new claims led to the application for amendment for rectifying default date.

Findings of Court:
The request to amend default date was dismissed as the original default had occurred within a prohibited period under Section 10A, thereby restricting further applications under the Code.

Issues: Whether the amendment to change the original date of default, which falls within the embargo period of Section 10A, was maintainable.

Ratio Decidendi: The court ruled that once a default occurs within the prohibitive period under Section 10A, an application cannot modify this date to create eligibility for filing under the Code.

Result: Application dismissed.

Table of Content
1. application for amendment filed due to initial default. (Para 1 , 2)
2. corporate debtor's objection against amendment for circumventing laws. (Para 3 , 4 , 5)
3. court reviews implications of ongoing default. (Para 7 , 8)
4. interpretation of section 10a in the context of the proceedings. (Para 9 , 10 , 11)
5. court finds refusal of amendment, upholding section 10a's intent. (Para 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20)

ORDER

1. The Application has been filed by the Applicant, M/s Omkara Assets Reconstruction Private Ltd on 14.02.2024 under Section 60 (5) of the Insolvency and Bankruptcy Code, 2016 (herein after referred as “the Code”) read with Rule 11 of the NCLT Rules, 2016 seeking amendment & rectification of date of default i.e. from 07.03.02021 to 25.07.2021 in the Application/Petition filed by it u/s 7 of the Code on 13.03.2023. In this Application, following prayers are made:-

a) Allow the present Application;

b) Pass an order allowing the application on behalf of Omkara Assets Reconstruction Pvt. Ltd seeking amendment & rectification of date of default i.e. from 07.03.2021 to 25.07.2022 committed by the Corporate Debtor and leave to file additional documents;

c) Take on record the amended Section 7 Application;

d) Pass any other and/or further order(s), as this Hon'ble Court may deem fit and proper in the interest of justice.

2. Briefly stated facts as averred in this Application justifying for seeking the amendment and rectification as mentioned above in the date of default in Part IV of the Application filed under section 7 are that, -

(i) A loan facility totaling to Rs. 7,00,00,000/- was availed by M/s Madhusudan Motors Private Limited (hereinafter referred to as "Respondent/Corporate Debtor") from the Lender Bank. Since the Corporate Debtor failed to honor the financial debt obligation and defaulted in making payment towards the outstanding dues, the account of the Corporate Debtor was declared as Non-Performing Account (NPA) on 05.06.2021 by the Lender Bank in accordance with the prudential norms of the Reserve Bank of India.

(ii) Subsequently, the Lender Bank with Assignment Agreement dated 30.09.2021 assigned the account of the Corporate Debtor to the Applicant and thereafter, the outstanding debt which was earlier due to the Lender Bank became the debt of the Applicant.

(iii) The debt under consideration came to the Applicant as contended by it only on 30.09.2021 after entering into the assignment agreement with the Lender Bank. Since no amount was paid by the Corporate Debtor to the Applicant, the Applicant issued a demand notice dated 21.05.2022 under Section 13(2) read with Section 13(8) of SARFAESI Act, 2002 , to call upon the Corporate Debtor to pay a sum of Rs. 5,10,07,306.06 along with future interest and other charges accruing thereto till the date of repayment of entire sum within 60 days from the date of the receipt of the said Section 13(2) Notice.

(iv) However, despite the service of the Notice under Section 13(2) on 25.05.2022, no payment was made by the Corporate Debtor even after the expiry of the said period of 60 days on 25.07.2022, hence the Applicant regarded this non-payment as default committed by the Corporate Debtor, which is continuing in nature.

(v) As pointed by the Applicant that after the default committed by the Corporate Debtor on 25.07.2022 in not responding to the notice u/s 13(2), the captioned petition bearing CP IB No. 57/ALD/2023 was filed by the Applicant on 13.03.2023 u/s 7 against the Corporate Debtor for initiation of Corporate Insolvency Resolution Process (hereinafter referred as “CIRP”) for default committed by the Corporate Debtor in repayment of aforesaid credit facilities availed from the Lende Bank, which was later on assigned to the Applicant vide an Assignment Agreement dated 30.09.2021. The captioned petition u/s 7 is pending for adjudication before this Adjudicating Authority.

(vi) In the said captioned petition, as contended by the Applicant, the date

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