Post-restructuring defaults outside Section 10A COVID window trigger CIRP admission under IBC Section 7; parallel SARFAESI/arbitration proceedings permitted.

ORDER

PER Bidisha Banerjee, Member (Judicial):

1. The Court congregated through hybrid mode.

2. Heard the Learned Counsels for both the parties.

3. Factual matrix:

The instant company petition has been filed under Section 7 of the Insolvency and Bankruptcy Code, for brevity I&B Code, read with Rule 4 of the Insolvency and Bankruptcy (Application to the Adjudicating Authority) Rules, 2016, by “Aditya Birla Finance Limited” hereinafter referred to as “Financial Creditor”/ “Applicant” against “Saket Infra Developers Pvt Ltd ”, hereinafter referred to as “Corporate Debtor”/ “Respondent” seeking direction to initiate Corporate Insolvency Resolution Process (for brevity “CIRP”) in respect of the Corporate Debtor due to a default in repayment of a financial debt amounting to Rs.8,18,00,000/-.

4. Submissions of the Ld. Counsel for the Applicant

4.1 It is submitted that the Financial Creditor has disbursed an aggregate sum of Rs. 8,18,00,000/- under multiple sanction letters and loan agreements between 2016 and 2021, including restructured and fresh facilities, which constitute “financial debt” within the meaning of Section 5(8) of the Code.

4.2 It is claimed that the Corporate Debtor has committed default in repayment of the said financial debt and the loan account has rightly been classified as NPA on 13 November 2023 after the dues remained unpaid for more than 90 days. It is pointed out that as on 28 November 2023, an amount of Rs. 7,88,20,657.67/- is due and payable and the default is continuing.

4.3 It is further submitted that the reliance of the Corporate Debtor on 15 March 2021 and 04 January 2021 as alleged dates of default is misconceived. Those dates pertain either to the pre- restructuring facilities or to the interest-capitalisation account created in December 2020 during the COVID moratorium. The Corporate Debtor itself requested restructuring, and after the restructuring under sanction letter dated 06 July 2021 and agreement dated 14 July 2021, the relevant cause of action is the subsequent default culminating in NPA on 13 November 2023. Therefore, Section 10A is not attracted.

4.4 That it is further submitted that Section 10A was introduced as a temporary protective measure to bar filing of CIRP applications for defaults arising during the COVID-19 suspension window between 25 March 2020 and 25 March 2021. It does not grant permanent immunity nor does its bar initiation of CIRP for defaults which occur after expiry of the suspension period or for continuing defaults that extend beyond such period. The present default, being of 2023, falls clearly outside the Section 10A window. 

4.5 It is submitted that the Corporate Debtor’s attempt to rely on an old NeSL Record of Default showing 15 March 2021 is selective and misleading, as the Section 7 petition is based on the post- restructuring facilities and the continuing default reflected in the statements of account for 2023.

4.6 It is claimed that there is no concealment or suppression by the Financial Creditor. All sanction letters, restructuring documents, loan agreements, statements of account and NeSL records have been placed on record. The petition has been filed in good faith and strictly in accordance with law, meeting all requirements of Section 7 read with the applicable rules.

4.7 It is further submitted that the proceedings under SARFAESI Act, under Section 9 of the Arbitration and Conciliation Act, and under IBC are distinct statutory remedies and are neither mutually exclusive nor barred by the doctrine of election. Each statute has a different o