RAMESH KYMAL versus M/S SIEMENS GAMESA RENEWABLE POWER PVT. LTD. on 9 February 2021

[2021] 3 S.C.R. 983

RAMESH KYMAL

v.

M/S SIEMENS GAMESA RENEWABLE POWER PVT. LTD.

(Civil Appeal No. 4050 of 2020)

FEBRUARY 09, 2021

[DR DHANANJAYA Y. CHANDRACHUD ANDM. R. SHAH, JJ.]

Insolvency and Bankruptcy Code, 2016 – Embargo in s.10A– Applicability of – Application u/s.9 filed before 05 June 2020, inrespect of a default which had occurred after 25 March 2020 –Maintainability of, in view of insertion of s.10A(inserted by Act 17of 2020) with retrospective effect from 05 June 2020 – Applicationheld not maintainable by NCLT – Decision affirmed by NCLAT –On appeal, held:Language of the provision is not always decisiveof its prospective or retrospective application rather its object mustalso be taken into account – Expression “from such date” in s.10Aevidently refers to 25 March 2020 which was consciously providedby the legislature since it coincides with the date on which thenational lockdown was declared due to the onset of the Covid-19pandemic – Substantive part of s.10A is to be construedharmoniously with the first proviso and the explanation – Expression“shall ever be filed” in the proviso is a clear indicator that theintent of the legislature is to bar the institution of any applicationfor the commencement of the Corporate Insolvency ResolutionProcess (CIRP) in respect of a default which has occurred on orafter 25 March 2020 for a period of six months, extendable up toone year as notified – Conclusion of NCLAT affirmed – Interpretationof Statutes – Harmonious, Purposive Construction.

Insolvency and Bankruptcy Code, 2016 – s.10A – Object of– Discussed.

Insolvency and Bankruptcy Code, 2016 – ss.5(11), (12), 7(6),8, 9(6), 10(5) – Difference between “initiation date” and“insolvency commencement date” – Discussed.

Insolvency and Bankruptcy Code, 2016 – ss.8(1), 9 – Dateof default –Attempt to set back the date of default from 30 April2020 to either 21 January 2020 or 23 March 2020 –

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AHeld:Untenable, as it is contrary to the disclosure made by theappellant in the demand notice issued in pursuance of the provisionsof s.8(1) and s.9 –Insolvency and Bankruptcy (Application toAdjudicating Authority) Rules, 2016 – r.5.

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“shall be filed” in first proviso to s.10A–Plea of the appellantis that the said expression indicates prospective nature of theprovision so as to apply only to the applications filed after 05 June2020, the date on which the provision was inserted– Held: Rejected–Insolvency and Bankruptcy Code, 2016 – s.10A.C“from such date” in s.10A –Intention of Legislature –Discussed – Insolvency and Bankruptcy Code, 2016 – s.10A.

Dismissing the appeal, the Court

HELD: 1.1 The attempt to set back the date of default toeither 21 January 2020 or 23 March 2020 is plainly untenable forDthe reason that it is contrary to the disclosure made by theappellant in the demand notice which has been issued inpursuance of the provisions of Section 8(1) and Section 9 of theIBC.[Para 10][990-F-G]

Conclusion

1.2 The financial distress caused by the outbreak of Covid-E19 provides the backdrop to the insertion of Section 10A. Theunderlying rationale for the insertion of Section 10A has beenexplained in the recitals to the Ordinance. Section 10A is prefacedwith a non-obstante provision which has the effect of overridingSections 7, 9 and 10. The proviso to Section 10A stipulates thatF“no application shall ever be filed” for the initiation of the CIRPof a corporate debtor “for the said default occurring during thesaid period”. The explanation which has been inserted for theremoval of doubts clarifies that Section 10A shall not apply to anydefault which has been committed under Sections 7, 9 and 10before 25 March 2020.Section 10A makes a reference to theGinitiation of the CIRP. Clauses (11) and (12) of Section 5 of theIBC define two distinct concepts. Section 5(11) stipulates thatthe date on which a financial creditor, corporate applicant oroperational creditor makes an application to the adjudicatingauthority for initiating the CIRP is the “initiation date”.HDistinguished from this is the “insolvency commencement date”, RAMESH KYMAL v. M/S SIEMENS GAMESA RENEWABLE POWERPVT LTD.

which is the date on which the application for initiating the CIRPunder Sections 7, 9 or 10, as the case may be, is admitted by theAdjudicating Authority.The substantive part of Section 10Aadverts to an application for the initiation of the CIRP. It stipulatesthat for any default arising on or after 25 March 2020, noapplication for initiating the CIRP of a corporate debtor shall befiled for a period of six months or such further period notexceeding one year “from such date” as may be notified in thisbehalf. The expression “from such date” is evidently intendedto refer to 25 March 2020 so that for a period of six months(extendable to one year by notification) no application for theinitiation of the CIRP can be filed. The date of 25 March 2020has consciously been provided by the legislature in the recitalsto the Ordinance and Section 10A, since it coincides with thedate on which the national lockdown was declared in India due tothe onset of the Covid-19 pandemic. [Para 15-17, 19-21][992-C-D; 993-A-E, H; 994-A-C, D-E]

Sardar Inder Singh v. State of Rajasthan [1957] SCR605 – relied on.

1.3 The language of the provision is not always decisive toarrive at a determination whether the provision if applicableprospectively or retrospectively. The onset of the Covid-19pandemic is a cataclysmic event which has serious repercussionson the financial health of corporate enterprises. The Ordinanceand the Amending Act enacted by Parliament, adopt 25 March2020 as the cut-off date. The proviso to Section 10A stipulatesthat “no application shall ever be filed” for the initiation of theCIRP “for the said default occurring during the said period”. Theexpression “shall ever be filed” is a clear indicator that the intentof the legislature is to bar the institution of any application forthe commencement of the CIRP in respect of a default which hasoccurred on or after 25 March 2020 for a period of six months,extendable up to one year as notified. The substantive part ofSection 10A is to be construed harmoniously with the first provisoand the explanation. Reading the provisions together, it is evidentthat Parliament intended to impose a bar on the filing ofapplications for the commencement of the CIRP in respect of a A

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Acorporate debtor for a default occurring on or after 25 March2020; the embargo remaining in force for a period of six months,extendable to one year. The correct interpretation of Section 10Acannot be merely based on the language of the provision; ratherit must take into account the object of the Ordinance and theextraordinary circumstances in which it was promulgated.BHowever, the retrospective bar on the filing of applications forthe commencement of CIRP during the stipulated period doesnot extinguish the debt owed by the corporate debtor or the rightof creditors to recover it. Section 10A does not contain anyrequirement that the Adjudicating Authority must launch into anCenquiry into whether, and if so to what extent, the financial healthof the corporate debtor was affected by the onset of the Covid-19pandemic. Parliament has stepped in legislatively because of thewidespread distress caused by an unheralded public health crisis.Hence, the embargo contained in Section 10A must receive apurposive construction which will advance the object which wasDsought to be achieved by enacting the provision. [Paras 22-25][996-B-C, G-H; 997-A-H; 999-A-B]

Swiss Ribbons (P) Ltd. v. Union of India (2019) 4 SCC17 : [2019] 3 SCR 535 – relied on.

EPrinciples of Statutory Interpretation (1st edn., LexisNexis 2015) by Justice G.P. Singh – referred to.

1.4 The date of the initiation of the CIRP is the date onwhich a financial creditor, operational creditor or corporateapplicant makes an application to the adjudicating authority forFinitiating the process. On the other hand, the insolvencycommencement date is the date of the admission of theapplication. This distinction is also evident from the provisionsof sub-section (6) of Section 7, sub-section (6) of Section 9 andsub-section (5) of Section 10. NCLAT has explained the differencebetween the initiation of the CIRP and its commencementGsuccinctly. The conclusion of the NCLAT is affirmed. [Paras 26,27][999-B-D, 1000-B]

Case Law Reference

RAMESH KYMAL v. M/S SIEMENS GAMESA RENEWABLE POWERPVT LTD.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4050of 2020.

From the Judgment and Order dated 19.10.2020 passed by theNational Company Law Appellate Tribunal, New Delhi in CompanyAppeal (AT) (Insolvency) No. 701 of 2020.

Neeraj Kishan Kaul, Arvindh Pandian, Sr. Advs., JeevanandhamRajagopal, S. Aravindan, Ms. Varsha Raghavan, Deepak Joshi andGoutham Shivshankar, Advs. for the Appellant.

Gopal Jain, Sr. Adv., Samudra Sarangi, Azmat Hayat Amanullah,Ms. Shruti Raina and Ms. Srishti Khare, Advs. for the Respondent.

The Judgment of the Court was delivered by DR DHANANJAYA Y CHANDRACHUD, J.

1. The appellate jurisdiction of this Court under Section 62 of theInsolvency and Bankruptcy Code, 2016 (“IBC”) has been invoked tochallenge the judgement and order of the National Company LawAppellate Tribunal (“NCLAT” or “Appellate Tribunal”) dated19 October 2020. The NCLAT affirmed the decision of the NationalCompany Law Tribunal (“NCLT” or “Adjudication Authority”)dated 9 July 2020, holding that in view of the provisions of Section 10A,which have been inserted by Act 17 of 2020 (the “Amending Act”)with retrospective effect from 5 June 2020, the application filed by theappellant as an operational creditor under Section 9 was not maintainable.

2. Some of the salient facts set out in the appeal are being advertedto in order to indicate the broad contours of the controversy. The issueinvolved raises a question of law. Hence, while setting out the facts asset up in the appeal, we need to clarify that the factual dispute has notarisen for adjudication.

3. The appellant claims that a sum of INR 104,11,76,479 is dueand payable to him pursuant to his resignation “from all capacities heldby him in the respondent in accordance with the various EmploymentAgreements/Incentive Agreements” entered into by him with therespondent during his tenure as Chairman and Managing Director. Theappellant entered into an Employment Agreement with the respondenton 16 July 2009. Another Employment Agreement was entered into on16 December 2013, effective from 1 January 2014, which supersededthe previous agreement. The Employment Agreement dated A

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A16 December 2013 was coupled with an Incentive Agreement signedon the same date. The Incentive Agreement is stated to have beenamended and restated on 17 April 2015, along with a further amendmentthrough a Side Letter dated 20 April 2015. Further, the new EmploymentAgreement was amended through a Letter Amendment No. 1 dated17 April 2015.B

4. On 21 January 2020, the appellant submitted his resignation tothe respondent and its parent entity, detailing the entitlements which heclaimed under the Employment and Incentive Agreements. On28 January 2020, the respondent acknowledged receipt of the letter ofresignation and requested the appellant to continue in employment beyondCthe 60 days’ notice period stipulated in the Employment Agreement.According to the appellant, he agreed to continue to provide his servicesto the respondent till 30 April 2020. There was an exchange ofcommunications between the parties and, according to the appellant,by an email dated 27 March 2020, the respondent confirmed theDpayments which were due and payable to him under the letter ofresignation (except for point 12). The appellant is stated to have addresseda final reminder by an email dated 27 April 2020, three days prior to theextended notice period came to an end.

5. On 28 April 2020, a termination letter was addressed to theEappellant. The appellant issued a demand notice on 30 April 2020 inForm 3 of the IBC. The demand notice specified that the date of defaultwas 30 April 2020.

6. On 11 May 2020, the appellant filed an application[1] under Section9 of the IBC on the ground that there was a default in the payment of hisFoperational dues. During the pendency of the application, an Ordinance[2]was promulgated by the President of India on 5 June 2020 by whichSection 10A was inserted into the IBC. Section 10A reads as follows:

“10A. Suspension of initiation of corporate insolvencyresolution process.— Notwithstanding anything contained inGsections 7, 9 and 10, no application for initiation of corporateinsolvency resolution process of a corporate debtor shall be filed,for any default arising on or after 25[th]March, 2020 for a period H

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2 Ordinance 9 of 2020 (the “Ordinance”)

of six months or such further period, not exceeding one year fromsuch date, as may be notified in this behalf:

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

Explanation – For the removal of doubts, it is hereby clarified thatthe provisions of this section shall not apply to any defaultcommitted under the said sections before 25[th]March, 2020.”

7. The respondent filed an application[3] seeking the dismissal ofthe appellant’s application on the basis of the newly inserted provisionsof Section 10A. The NCLT upheld the submission of the respondent,holding that a bar has been created by the newly inserted provisions ofSection 10A. This decision has been upheld in appeal by the NCLAT.

8. The issue which falls for determination in this appeal is whetherthe provisions of Section 10A stand attracted to an application underSection 9 which was filed before 5 June 2020 (the date on which theprovision came into force) in respect of a default which has occurredafter 25 March 2020. Before proceeding to discuss the rival submissions,it is necessary to preface the discussion with reference to three significantdates which have a bearing on the present proceedings:

•30 April 2020 – date of default as set up in Form 3; •11 May 2020 – date of institution of the application under Section9; and •5 June 2020 – date on which Section 10A was inserted in theIBC.

9. The date of default is crystalized as 30 April 2020 in the demandnotice issued by the appellant in Form 3, which is prescribed under Rule5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority)Rules, 2016. The statutory form provides for a disclosure of the particularsof the operational debt. The disclosure which has been made by theappellant includes the amount claimed in default and the date of default,as tabulated below:

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A2.AMOUNT CLAIMED TO BE I9NINR 104,28, 76,479/- (Indian RuppesDEFAULT AND THE DATE ONOne Hundred and Four Crores TwentyWHICH THE DEFAULT OCCURREDEight Lakhs Seventy Six Thousand Four[ATTACH THE WORKINGS FORHundred and Seventy Nine only) as onCOMPUTATION OF - *DEFAULT30.04.2020 along with interest @ 18%IN TABULAR FORM](eighteen percent) p.a. till the date ofrealisation of entire payment.)B

10. Sub-Section(1) of Section 8 of 1BC stipulates:

“8. Insolvency resolution by operational creditor.—(1) anoperational creditor may, on the occurrence of a default, deliver ademand notice of the unpaid operational debt or a copy of anCinvoice demanding payment of the amount involved in the defaultto the corporate debtor in such form and manner as may beprescribed.”

Under Section 9(1), the operational creditor may file an applicationbefore the Adjudicating Authority for initiating the Corporate InsolvencyDResolution Process (“CIRP”), after the expiry of a period of ten daysfrom the date of delivery of the notice (or invoice demanding payment)under sub-Section (1) of Section 8, if the operational creditor does notreceive payment from the corporate debtor or a notice of the disputeunder sub-Section (2) of Section 8. The appellant having specified 30EApril 2020 as the date of default, this appeal must proceed on that basis.It is necessary to make this clear at the outset because an attempt hasbeen made during the course of the submissions by Mr Neeraj KishanKaul, learned Senior Counsel appearing on behalf of the appellant, tosubmit that though the demand notice mentions the date of default as30 April 2020, the “actual first date of default” was 21 January 2020Fwhen the letter of resignation was tendered and that the “second date ofdefault’ was 23 March 2020 when the sixty days’ notice period from theletter of resignation submitted by the appellant concluded. This attemptto set back the date of default to either 21 January 2020 or 23 March2020 is plainly untenable for the reason that it is contrary to the disclosureGmade by the appellant in the demand notice which has been issued inpursuance of the provisions of Section 8(1) and Section 9 of the IBC.The demand notice triggers further actions which are adopted towardsthe initiation of the insolvency resolution process. The question whichneeds to be resolved is whether Section 10A would stand attracted to asituation such as the present where the application under Section 9 wasH

filed prior to 5 June 2020, when Section 10A was inserted, and in respectof a default which has taken place after 25 March 2020.

11. Mr Neeraj Kishan Kaul submits that:

(i) Section 10A creates a bar to the ‘filing of applications’ underSections 7, 9 and 10 in relation to defaults committed on orafter 25 March 2020 for a period of six months, which canbe extended up to one year;

(ii) The Ordinance and the Act which replaced it do not providefor the retrospective application of Section 10A eitherexpressly or by necessary implication to applications whichhad already been filed and were pending on 5 June 2020;

(iii) Section 10A prohibits the filing of a fresh application inrelation to defaults occurring on or after 25 March 2020,once Section 10A has been notified (i.e., after 5 June 2020);

(iv) Section 10A uses the expressions “shall be filed” and “shallever filed” which are indicative of the prospective natureof the statutory provision in its application to proceedingswhich were initiated after 5 June 2020; and (v) The IBCmakes a clear distinction between the “initiation date” underSection 5(11) and the “insolvency commencement date”under Section 5(12).

12. On the above premises, it has been submitted that Section10A will have no application. Mr Kaul also urged that in each case it isnecessary for the Court and the tribunals to deduce as to whether thecause of financial distress is or is not attributable to the Covid-19 pandemic.In the present case, it was asserted that the onset of Covid-19, whichwas the reason for the insertion of Section 10A, has nothing to do withthe default of the respondent to pay the outstanding operational debt ofthe appellant, which owes its existence even before the onset of thepandemic. Hence, it has been submitted that the event of default(30 April 2020) in the notice of demand cannot be read in isolation.

13. Opposing the above submissions, it has been urged byMr Gopal Jain, learned Senior Counsel on behalf of the respondent, that:

(i) The legislative intent in the insertion of Section 10A wasto deal with an extraordinary event, the outbreak of A

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ACovid-19 pandemic, which led to financial distress faced bycorporate entities;

(ii) Section 10A is prefaced with a non-obstante clause whichoverrides Sections 7, 9 and 10; and (iii) Section 10A providesa cut-off date of 25 March 2020 and it is evident from theBsubstantive part of the provision, as well as from the provisoand the explanation, that no application can be filed for theinitiation of the CIRP for a default occurring on and after25 March 2020, for a period of six months or as extendedupon a notification.

C14. The rival submissions can now be considered.

15. The financial distress caused by the outbreak of Covid-19provides the backdrop to the insertion of Section 10A. The underlyingrationale for the insertion of Section 10A has been explained in the recitalsto the Ordinance, which are extracted below:

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AND WHEREAS COVID-19 pandemic has impacted business,financial markets and economy all over the world, including India,and created uncertainty and stress for business for reasons beyondtheir control; E

AND WHEREAS a nationwide lockdown is in force since25th March, 2020 to combat the spread of COVID-19 whichhas added to disruption of normal business operations; AND WHEREAS it is difficult to find adequate number ofresolution applicants to rescue the corporate person whoFmay default in discharge of their debt obligation; AND WHEREAS it is considered expedient to suspend undersections 7, 9 and I 0 of the Insolvency and Bankruptcy Code,2016 to prevent corporate persons which are experiencingdistress on account of unprecedented situation. being pushedGinto insolvency proceedings under the Court for some time;

AND WHEREAS it is considered expedient to exclude thedefaults arising on account of unprecedented situation forthe purposes of insolvency proceeding under this Code;”

16. Section 10A is prefaced with a non-obstante provision whichhas the effect of overriding Sections 7, 9 and 10. Section 10A providesthat:

(i) no application for the initiation of the CIRP by a corporatedebtor shall be filed;

(ii) for any default arising on or after 25 March 2020; and

(iii) for a period of six months or such further period not exceedingone year from such date as may be notified in this behalf.

The proviso to Section 10A stipulates that “no application shallever be filed” for the initiation of the CIRP of a corporate debtor “forthe said default occurring during the said period”. The explanation whichhas been inserted for the removal of doubts clarifies that Section 10Ashall not apply to any default which has been committed under Sections7, 9 and 10 before 25 March 2020.

17. Section 10A makes a reference to the initiation of the CIRP.Clauses (11) and (12) of Section 5 of the IBC define two distinctconcepts, namely:

(i) the initiation date; and

(ii) the insolvency commencement date.

18. The “initiation date” is defined in Section 5(11) in the followingterms:

“5(11) “initiation date” means the date on which a financial creditor,corporate applicant or operational creditor, as the case may be,makes an application to the Adjudicating Authority for initiatingcorporate insolvency resolution process;”

The expression “insolvency commencement date” is defined inSection 5(12) in the following terms:

“5(12) “insolvency commencement date” means the date ofadmission of an application for initiating corporate insolvencyresolution process by the Adjudicating Authority under sections 7,9 or section 10, as the case may be:”

19. Section 5(11) stipulates that the date on which a financialcreditor, corporate applicant or operational creditor makes an applicationto the adjudicating authority for initiating the CIRP is the “initiation date”.

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ADistinguished from this is the “insolvency commencement date”, whichis the date on which the application for initiating the CIRP under Sections7, 9 or 10, as the case may be, is admitted by the Adjudicating Authority.

20. The substantive part of Section 10A adverts to an applicationfor the initiation of the CIRP. It stipulates that for any default arising onBor after 25 March 2020, no application for initiating the CIRP of acorporate debtor shall be filed for a period of six months or such furtherperiod not exceeding one year “from such date” as may be notified inthis behalf. The expression “from such date” is evidently intended torefer to 25 March 2020 so that for a period of six months (extendable toone year by notification) no application for the initiation of the CIRP canCbe filed. The submission of the appellant is that the expression “shallbe filed” is indicative of a legislative intent to make the provisionprospective so as to apply only to those applications which were filedafter 5 June 2020 when the provision was inserted. Such a constructioncannot be accepted.D21. The date of 25 March 2020 has consciously been provided bythe legislature in the recitals to the Ordinance and Section 10A, since itcoincides with the date on which the national lockdown was declared inIndia due to the onset of the Covid-19 pandemic. In Sardar Inder Singhvs State of Rajasthan[4], the Rajpramukh promulgated the RajasthanE(Protection of Tenants) Ordinance (9 of 1949) on 21 June 1949 which,inter alia, provided for the reinstatement of tenants who had been inoccupation on 1 April 1948 but had been subsequently dispossessed.When it was challenged before the Supreme Court, the Constitutionbench, speaking through Justice T L Venkatarama Ayyar, relied on therecital in its preamble[5 ]while interpreting its provisions. The Court heldFthat:

‘‘11. In the present case, the preamble to the Ordinanceclearly recites the state of facts which necessitated theenactment of the law in question, and Section 3 fixed theduration of the Act as two years, on an understanding of theGsituation as it then existed. At the same time, it conferred a power 4 1957 SCR 605

5 “Whereas with a view to putting a check on the growing tendency of landholders toeject or dispossess tenants from their holdings, and in the wider national interest ofincreasing the production of foodgrains, it is expedient to make provisions for theHprotection of tenants in Rajasthan from ejectment or dispossession from their holdings.”

on the Rajpramukh to extend the life of the Ordinance beyondthat period, if the state of affairs then should require it. Whensuch extension is decided by the Rajpramukh and notified, thelaw that will operate is the law which was enacted by the legislativeauthority in respect of “place, person, laws, powers”, and it isclearly conditional and not delegated legislation as laid down inQueen v. Burah [(1877-8) 5 IA 178, 180, 194, 195] and must, inconsequence, be held to be valid…

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(4) We shall next consider the contention that the provisions ofthe Ordinance are repugnant to Article 14 of the Constitution,and that it must therefore be held to have become void. In theargument before us, the attack was mainly directed againstSections 7(1) and 15 of the Ordinance. The contention withreference to Section 7(1) is that under that section landlords whohad tenants on their lands on April 1, 1948, were subjected tovarious restrictions in the enjoyment of their rights as owners,while other landlords were free from similar restrictions. Thereis no substance in this contention. The preamble to theOrdinance recites that there was a growing tendency onthe part of the landholders to eject tenants, and that it wastherefore expedient to enact a law for giving themprotection; and for granting relief to them, the Legislaturehad necessarily to decide from what date the law should begiven operation, and it decided that it should be from April1, 1948. That is a matter exclusively for the Legislatureto determine, and the propriety of that determination is notopen to question in courts. We should add that the petitionerssought to dispute the correctness of the recitals in the preamble.This they clearly cannot do. Vide the observations of Holmes, J.in Block v. Hirsh [(1920) 65 LEd 865 : (1920) 256 US 135].

12. A more substantial contention is the one based on Section15, which authorises the Government to exempt any person orclass of persons from the operation of the Act. It is argued thatthat section does not lay down the principles on which exemptioncould be granted, and that the decision ofthe matter is left tothe unfettered and uncanalised discretion of the Government, andis therefore repugnant to Article 14. It is true that that section AB

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Adoes not itself indicate the grounds on which exemptioncould be granted, but the preamble to the Ordinance setsout with sufficient clearness the policy of the legislature;and as that governs Section 15 of the Ordinance, the decision ofthe Government thereunder cannot be said to be unguided…”

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22. The language of the provision is not always decisive to arriveat a determination whether the provision if applicable prospectively orretrospectively. Justice G.P. Singh in his authoritative commentary onthe interpretation of statutes, Principles of Statutory Interpretation[6],Chas stated that:

“In deciding the question of applicability of a particular statute topast events, the language used is no doubt the most importantfactor to be taken into account; but it cannot be stated as aninflexible rule that use of present tense or present perfecttense is decisive of the matter that the statute does notDdraw upon past events for its operation. Thus, the words “adebtor commits an act of bankruptcy” were held to apply to actsof bankruptcy committed before the operation of the Act. Thewords “if a person has been convicted” were construed to includeanterior convictions. The words “has made”, “has ceased”, “hasEfailed” and “has become”, may denote events happening beforeor after coming into force of the statute and all that is necessaryis that the event must have taken place at the time when action onthat account is taken under the statute……And the word “is”though normally referring to the present often has a future meaningFand may also have a past signification in the sense of “has been.The real issue in each case is as to the dominant intentionof the Legislature to be gathered from the language used,the object indicated, the nature of rights affected, and thecircumstances under which the statute is passed.”

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23. Adopting the construction which has been suggested by theappellant would defeat the object and intent underlying the insertion ofSection 10A. The onset of the Covid-19 pandemic is a cataclysmic event H6. G.P. Singh, Principles of Statutory Interpretation (1st edn., Lexis Nexis 2015)

which has serious repercussions on the financial health of corporateenterprises. The Ordinance and the Amending Act enacted byParliament, adopt 25 March 2020 as the cut-off date. The proviso toSection 10A stipulates that “no application shall ever be filed” for theinitiation of the CIRP “for the said default occurring during the saidperiod”. The expression “shall ever be filed” is a clear indicator thatthe intent of the legislature is to bar the institution of any applicationfor the commencement of the CIRP in respect of a default which hasoccurred on or after 25 March 2020 for a period of six months, extendableup to one year as notified. The explanation which has been introduced toremove doubts places the matter beyond doubt by clarifying that thestatutory provision shall not apply to any default before 25 March 2020.The substantive part of Section 10A is to be construed harmoniouslywith the first proviso and the explanation. Reading the provisions together,it is evident that Parliament intended to impose a bar on the filing ofapplications for the commencement of the CIRP in respect of a corporatedebtor for a default occurring on or after 25 March 2020; the embargoremaining in force for a period of six months, extendable to one year.Acceptance of the submission of the appellant would defeat the verypurpose and object underlying the insertion of Section 10A. For, it wouldleave a whole class of corporate debtors where the default has occurredon or after 25 March 2020 outside the pale of protection because theapplication was filed before 5 June 2020.

24. We have already clarified that the correct interpretation ofSection 10A cannot be merely based on the language of the provision;rather it must take into account the object of the Ordinance and theextraordinary circumstances in which it was promulgated. It must benoted, however, that the retrospective bar on the filing of applicationsfor the commencement of CIRP during the stipulated period does notextinguish the debt owed by the corporate debtor or the right of creditorsto recover it.

25. Section 10A does not contain any requirement that theAdjudicating Authority must launch into an enquiry into whether, andif so to what extent, the financial health of the corporate debtor wasaffected by the onset of the Covid-19 pandemic. Parliament has steppedin legislatively because of the widespread distress caused by anunheralded public health crisis. It was cognizant of the fact that resolutionapplicants may not come forth to take up the process of the resolution AB

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Aof insolvencies (this as we have seen was referred to in the recitals tothe Ordinance), which would lead to instances of the corporate debtorsgoing under liquidation and no longer remaining a going concern. Thiswould go against the very object of the IBC, as has been noted by atwo-Judge bench of this Court in its judgment in Swiss Ribbons (P)Ltd. v. Union of India[7]. Speaking through Justice Rohinton F Nariman,Bthe Court held as follows:

“27. As is discernible, the Preamble gives an insight into what issought to be achieved by the Code. The Code is first and[7] (2019)4 SCC 17foremost, a Code for reorganisation and insolvencyresolution of corporate debtors. Unless such reorganisation isCeffected in a time-bound manner, the value of the assets of suchpersons will deplete. Therefore, maximisation of value of the assetsof such persons so that they are efficiently run as going concernsis another very important objective of the Code. This, in turn, willpromote entrepreneurship as the persons in management of theDcorporate debtor are removed and replaced by entrepreneurs.When, therefore, a resolution plan takes off and the corporatedebtor is brought back into the economic mainstream, it is able torepay its debts, which, in turn, enhances the viability of credit inthe hands of banks and financial institutions. Above all, ultimately,the interests of all stakeholders are looked after as the corporateEdebtor itself becomes a beneficiary of the resolution scheme—workers are paid, the creditors in the long run will be repaid infull, and shareholders/investors are able to maximise theirinvestment. Timely resolution of a corporate debtor who is in thered, by an effective legal framework, would go a long way toFsupport the development of credit markets. Since more investmentcan be made with funds that have come back into the economy,business then eases up, which leads, overall, to higher economicgrowth and development of the Indian economy. What isinteresting to note is that the Preamble does not, in any manner,refer to liquidation, which is only availed of as a last resort if thereGis either no resolution plan or the resolution plans submitted arenot up to the mark. Even in liquidation, the liquidator can sell thebusiness of the corporate debtor as a going concern. (See ArcelorMittal [ArcelorMittal (India) (P) Ltd. v. Satish KumarGupta, (2019) 2 SCC 1] at para 83, fn 3).”

Hence, the embargo contained in Section 10A must receive apurposive construction which will advance the object which was soughtto be achieved by enacting the provision. We are therefore unable toaccept the contention of the appellant.

26. The date of the initiation of the CIRP is the date on which afinancial creditor, operational creditor or corporate applicant makes anapplication to the adjudicating authority for initiating the process. Onthe other hand, the insolvency commencement date is the date of theadmission of the application. This distinction is also evident from theprovisions of sub-section (6) of Section 7, sub-section (6) of Section 9and sub-section (5) of Section 10. Section 7 deals with the initiation ofthe CIRP by a financial creditor; Section 8 provides for the insolvencyresolution by an operational creditor; Section 9 provides for the applicationfor initiation of the CIRP by an operational creditor; and Section 10provides for the initiation of the CIRP by a corporate applicant. NCLAThas explained the difference between the initiation of the CIRP and itscommencement succinctly, when it observed:

“13. Reading the two definition clauses in juxtaposition, it emergesthat while the first viz. ‘initiation date’ is referable to filing ofapplication by the eligible applicant, the later viz. ‘commencementdate’ refers to passing of order of admission of application by theAdjudicating Authority. The ‘initiation date’ ascribes a role to theeligible applicant whereas the ‘commencement date rests uponexercise of power vested in the Adjudicating Authority. Adoptingthis interpretation would leave no scope for initiation of CIRP of aCorporate Debtor at the instance of eligible applicant in respectof Default arising on or after 25th March, 2020 as the provisionengrafted in Section 10A clearly bars filing of such applicationby the eligible applicant for initiation of CIRP of Corporate Debtorin respect of such default. The bar created is retrospective as thecut-off date has been fixed as 25th March, 2020 while the newlyinserted Section 10A introduced through the Ordinance has comeinto effect on 5th June, 2020. The object of the legislation hasbeen to suspend operation of Sections 7, 9 & 10 in respect ofdefaults arising on or after 25th March, 2020 i.e. the date on whichNationwide lockdown was enforced disrupting normal business A

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Aoperations and impacting the economy globally. Indeed, theexplanation removes the doubtby clarifying that such bar shall notoperate in respect of any default committed prior to 25th March,2020.”

27. We are in agreement with the view which has been taken byBthe NCLAT for the reasons which have been set out earlier in the courseof this judgment. We affirm the conclusion of the NCLAT. The appealis accordingly dismissed. There shall be no order as to costs.

28. Pending application(s), if any, stand disposed of.

CDivya Pandey

Appeal dismissed.

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