Gangadhar A. Kotian Suspended Director of Bombay Rayon Clothing Ltd Vs Catalyst Trusteeship Ltd (NCLAT Delhi)
NCLAT Delhi held that default occurred on 25th March 2023 which is well beyond the outer limit of section 10A of the Insolvency and Bankruptcy Code, 2016 which squarely brings the claim within the permissible scope of Section 7 of the IBC. Thus, admission of section 7 application justified.
Facts- The present appeal filed under Section 61(1) of Insolvency and Bankruptcy Code 2016 by the Appellant arises out of the Order dated 24.04.2025 passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench-II). By the impugned order, the Adjudicating Authority has admitted the Section 7 application of IBC filed by Catalyst Trusteeship Ltd-Financial Creditor. Aggrieved by the impugned order, the present appeal has been preferred by the Appellant- Suspended Director of Bombay Rayon Clothing Ltd.-Corporate Debtor.
Conclusion- Held that there is no provision under Section 10A of the IBC that prohibits parties from entering into a valid debt restructuring arrangement during or after the Section 10A suspension period. The impugned order has correctly noted at paragraph 4.9 that Section 10A was introduced to provide temporary relief during the COVID-19 pandemic which did not curtail the substantive contractual rights of parties to restructure their debts. From a reading of the Part-IV, it becomes clear that this was not a case of invocation of debt during Section 10A period. In the present case, the relevant default occurred on 25 March 2023 which was well beyond the outer limit of Section 10A, which squarely brings the claim within the permissible scope of Section 7 of the IBC. The Appellant has expressly admitted debt and default in their pleadings at page 21-22 of APB and the guarantee being a continuing nature, admission of the Section 7 application by the Adjudicating Authority is well justified.
