Operational Creditor Misleads Court To Evade Prohibition Under Section 10A Of IBC, NCLT Mumbai Imposes Cost of Rs. 25,000/-

“Further, with distress it is noted that despite the clear language of the Section 10A of the Code, the Operational Creditor sought to initiate the CIRP against the Corporate Debtor in clear disregard to the Provisions of the Code and by mentioning misleading facts in Part-IV of the petition. At Point No.2 of Part IV, despite mentioning that the Corporate Debtor had issued various purchase orders dated 08.09.2020, 02.10.2020, 12.10.2020 and 19.10.2020, Operational Creditor has mentioned that “Several Invoices were raised from August, 2020 onwards till September 2021………. The attempt of the Operational Creditor in mentioning such incorrect facts is nothing but an attempt to take undue advantage of the present proceedings”.

Background Facts

Oswal Minerals Limited (“Operational Creditor”) filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) against Vidhi Minerals & Alloys Pvt. Ltd. (“Corporate Debtor”) for an alleged debt of Rs. 3,14,94,938/-.

The invoices based on which the debt was claimed were raised between 24.09.2020 to 03.11.2020.

Section 10A of IBC prohibits initiation of CIRP in respect of defaults which occurred between 25.03.2020 and 25.03.2021. The provision specifically bars creditors from filing any application seeking CIRP by stating that “no application shall ever be filed for initiation of corporate insolvency resolution process of a corporate debtor for the said default occurring during the said period.”

NCLT Verdict

The Bench noted that the Operational Creditor in Part IV of the petition has stated that invoices were raised from August 2020 to September 2021, however, in actual the invoices were raised within the prohibited period given in Section 10A. Hence, the Operational Creditor disregarded Section 10A of IBC and misled the Court through incorrect facts.

“Further, with distress it is noted that despite the clear language of the Section 10A of the Code, the Operational Creditor sought to initiate the CIRP against the Corporate Debtor in clear disregard to the Provisions of the Code and by mentioning misleading facts in Part-IV of the petition. At Point No.2 of Part IV, despite mentioning that the Corporate Debtor had issued various purchase orders dated 08.09.2020, 02.10.2020, 12.10.2020 and 19.10.2020, Operational Creditor has mentioned that “Several Invoices were raised from August, 2020 onwards till September 2021”. However, the facts mentioned hereinabove clearly bring out that all the Invoices were raised before 03.11.2020 and only two debit notes of miniscule amount were issued on 31.03.2021 & 30.09.2021 of Rs. 10,125/- and Rs. 4527/- respectively. The attempt of the Operational Creditor in mentioning such incorrect facts is nothing but an attempt to take undue advantage of the present proceedings.”

The Bench imposed a cost of Rs. 25,000/- on the Operational Creditor for stating incorrect facts and taking undue advantage of IBC proceedings. The petition has been dismissed in view of the prohibition under Section 10A of IBC.

“In view of the above, the above Company Petition is dismissed with cost of Rs. 25,000/- on the Operational Creditor payable to the Bharat Kosh within two weeks from the date of the order.”

Case Title: Oswal Minerals Limited v Vidhi Minerals & Alloys Private Limited

Case No.: CP (IB) NO. 414 OF 2023

Counsel For Petitioner: Adv. Christople D’souza a/w Ms. Malika Shirzade i/b M/s ALMT Legal Sameer.

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