The New Delhi Bench of the National Company Law Appellate Tribunal ( NCLAT ) held that the Loan Recall Notice is not relevant date of default under the Insolvency and Bankruptcy Code, 2016 (IBC).
The present Appeal has been preferred under Section 61 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the (“IBC Code”) against the Impugned Order (“Impugned Order”) passed by the Hon’ble National Company Law Tribunal ( NCLT ), in the matter titled as “State Bank of India Vs. Jabalpur MSW Pvt. Ltd.”, admitting the Application filed by the Respondent No. 1 i.e. State Bank of India under Section 7 of the IBC Code against Jabalpur MSW Private Limited (“Corporate Debtor”). The Appeal has been filed by Mr. Milind Kashiram Jadhav, the Suspended Director of the Corporate Debtor: Jabalpur MSW Private Limited.
The counsel for the appellant submitted that the Loan Recall notice dated 11.08.2020 should have been preceded by an Event of Default notice specifying a Cure Period in terms of the “Event of Default” as specified under the aforementioned Sanction Letter. However, the Financial Creditor has failed to provide the same as per the terms of the Sanction Letter. Even if the Loan Recall Notice is considered to the be the Event of Default notice, then the date of default would only be after 7 days from the receipt thereof.
Thus, at best, considering the date of the Loan Recall Notice, the total outstanding due amount under the Sanction Letter fell due and payable on 18.08.2020 i.e. 7 days from the Loan Recall Notice and any failure to pay the outstanding dues on 18.08.2020 would constitute as a default.
The counsel for the respondent submitted that The Loan Recall Notice dated 11.08.2020 was issued only to provide the CD with one more chance to make payment of all the outstanding dues, and was rather issued because the loan accounts of the CD were classified as NPA on 27.09.2019. Thus, the NPA Date of 27.09.2019 was true and correct date of default for all intents and purposes including the Section 7 IBC Application. Sufficient time and opportunity were granted to the CD for making payment of the outstanding debt.
A Three Member Bench comprising Justice Ashok Bhushan, Chairperson, Barun Mitra, Member (Technical) and Arun Baroka, Member (Technical) observed that “Consequently, the reliance on the date of NPA declaration (27.09.2019) by the Adjudicating Authority instead of the date of recall (18.08.2020), is therefore correct and also supported by the judicial precedents and also the facts in the instant case. And as the date of recall [11.08.2020] cannot be taken as the date of default, therefore Appellant cannot get any advantage of the10A period under IBC.”
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