Legal Provisions Involved: Section 7, Section 10A, Section 12A, Section 31 of the Insolvency and Bankruptcy Code, 2016
Judgement by: Supreme Court of India
Bench: Justice Surya Kant (CJI), Justice Joymalya Bagchi, Justice Vipul M. Pancholi
Facts
Hiranmaye Energy Ltd. availed a term loan from REC Ltd. for setting up a thermal power plant at Haldia, West Bengal. The account was classified as NPA due to default. The restructuring proposals failed as the Corporate Debtor could not fulfil pre-implementation conditions and REC Ltd. filed a Section 7 application, which was admitted by NCLT Kolkata.
Key Legal Provisions
Section 7, Section 10A, Section 12A, Section 31 of the Insolvency and Bankruptcy Code, 2016
Issues raised
- Whether the date of default fell within the Section 10A bar period?
- Whether the restructuring proposals novated the original loan agreement?
Arguments of the case
The Appellants argued that the restructuring proposals reset the repayment schedule, bringing the default within the Section 10A window and acceptance of Rs. 50 crore by REC Ltd. amounted to deemed approval of the restructuring proposal. The Respondent on the other hand argued that restructuring proposals never became binding as pre-implementation conditions were not fulfilled.
Judgement
The Supreme Court held that Section 10A bar was inapplicable as the original default dated 31.03.2018 predated the COVID-19 moratorium period. The Court upheld that the restructuring proposals did not fructify into valid agreements as pre-implementation conditions remained unfulfilled.
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