An application under S.7 of the Insolvency and Bankruptcy Code is not maintainable if the underlying default occurred during the period specified in S.10A, and a subsequent arbitral award does not create a fresh cause of action to bypass this permanent statutory bar.

ORDER

1. Background

1.1. The present Application is filed by NKGSB Co-operative Bank Ltd (Financial Creditor/Applicant) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (Code), read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for initiating the Corporate Insolvency Resolution Process (CIRP), declaring moratorium and for appointment of Interim Resolution Professional (IRP), in respect of KSM Multitrade LLP (Corporate Debtor).

1.2. The total amount claimed to be in default as per Part IV of the Application is Rs.7,55,25,988.27/- (Seven Crore Fifty-Five Lakh Twenty-Five Thousand Nine Hundred and Eighty-Eight Rupees and Twenty-Seven Paise) which includes principal amount of Rs. 4,64,16,622.60/- (Four Crore Sixty-Four Lakh Sixteen Thousand Six Hundred and Twenty-Two Rupees and Sixty Paise) and interest thereon @ 11% p.a. amounting to Rs. 2,91,09,365.70 (Two Crore Ninety-One Lakh Nine Thousand Three Hundred and Sixty-Five Rupees and Seventy Paise).

1.3. The Corporate Debtor was incorporated on 30.10.2012, having LLPIN: AAB-1882, under the Limited Liability Partnership Act, 2008. The registered address of the Corporate Debtor is at 2nd Floor, National Insurance Building, 204 Dr. DN Road, Fort, Mumbai City, Mumbai, Maharashtra- 400001. Therefore, this Bench has the jurisdiction to deal with this Application.

2. Submissions of the Financial Creditor

2.1. The Financial Creditor submits that, at the request of the Corporate Debtor, a cash credit facility of Rs. 4,50,00,000/- was sanctioned to the Corporate Debtor vide Sanction Letter dated 01.09.2018. Pursuant to the sanction of the said facility, the Corporate Debtor utilised the sanctioned cash credit facility from time to time.

2.2. Subsequently, as per the directives of the Reserve Bank of India, during the COVID-19 Pandemic, the Applicant was directed to provide an Interest Moratorium from March 2020 to August 2020, and accordingly, the Financial Creditor sanctioned a Funded Interest Term Loan.

2.3. The Applicant states that the default first occurred when the loan account of the Corporate Debtor was classified as a Non-Performing Asset, i.e., on 31st October 2020. Since the Corporate Debtor’s breach is continuous, the Default has continued thereafter, inasmuch as, even after classification of the Account as a Non-Performing Asset, the Corporate Debtor has made on-account payments from time to time, thereby defaulting on the balance amounts that remained due and payable. The Last such on-account payment was made on 20.11.2023 for Rs. 2,50,000/-.

2.4. The Applicant also submits that the Corporate Debtor has also defaulted on 28.03.2024, when the Ld. Arbitrator Mr. S.V. Tinaikar in Arbitration Case No. ARB/NKGSB/006 of 2021 passed an Arbitral Award in favour of the Financial Creditor, and when the Corporate Debtor failed to comply with the requisition contained in the said Award, it has therefore defaulted in terms of the provisions of the Code.

2.5. Pursuant to the liberty granted by the Tribunal, the Applicant filed an affidavit dated 08.01.2025 stating that the date of default is 28.03.2024 when the Arbitration Award was passed in favour of the Applicant. In support of the same, the Applicant has annexed a copy of the Record of Default issued by the National E-Governance Services Limited (NeSL).

3. Contentions of Corporate Debtor

3.1. The Corporate Debtor, through its designated partner, filed a reply affidavit dated 12.07.2025.

3.2. The Corporate Debtor submits that the Application is barred under Section 10A of the Code as per the date of default mentioned in Part IV of the Application, and the Financial Creditor itself ad