Adjudicating Authority Cannot Suo Moto Amend Date Of Default In Insolvency Application Unless Amendment Application Is Filed: NCLAT
Mohd Malik Chauhan
3 April 2025 2:00 PM
The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Ashok Bhushan (Judicial Member), Mr. Arun Baroka (Technical Member) and Mr. Barun Mitra (Technical Member) has held that the Adjudicating Authority cannot suo moto amend the date of default mentioned in the insolvency application unless an amendment application is filed; otherwise, it would tantamount...
The National Company Law Appellate Tribunal (NCLAT) New Delhi bench of Justice Ashok Bhushan (Judicial Member), Mr. Arun Baroka (Technical Member) and Mr. Barun Mitra (Technical Member) has held that the Adjudicating Authority cannot suo moto amend the date of default mentioned in the insolvency application unless an amendment application is filed; otherwise, it would tantamount to exceeding its jurisdiction, which is not permissible in law.
Brief Facts:
A petition under section 9 of the Insolvency and Bankruptcy Code, 2016 (Code) was filed by Royal Construction-Operational Creditor seeking initiation of Corporate Insolvency Resolution Process (CIRP) against Gannon Dunkerley & Company Ltd.-Corporate Debtor for an alleged outstanding debt of ₹10.18 crore arising out of multiple work orders issued by the Corporate Debtor between 2009 and 2018.
The Adjudicating Authority dismissed the petition on grounds of pre-existing dispute and on grounds that the date of default fell within the Section 10A of the Code period rendering the petition non-maintainable. Against this order, the present appeal has been filed.
Contentions:
The Appellant submitted that the Appellant had successfully executed and completed the assigned work. However, the Corporate Debtor made only partial payments and failed to clear the full dues despite repeated reminders from the Operational Creditor.
It was further argued that the Adjudicating Authority should have considered their pleadings and examined the documents on record to determine the actual date of default instead of relying on the date of default reflected in the demand notice by the Appellant by mistake.
Observations:
The Tribunal observed that the dates of default for the outstanding debt are 3 May 2020, 15 August 2020 and 1 January 2021 as stated by the Operational Creditor. These dates are further mentioned in Form 3 of the demand notice dated 27 January 2022.
The Tribunal further observed that in the present case, the defaults occurred between3 March 2020 and 1 January 2021 which clearly fall within the prohibited period under section 10A of the code. As per section 10A and the judgment of the Supreme Court in Ramesh Kymal, defaults during this period cannot form basis for the purpose of initiating the insolvency proceedings and such defaults cannot also be considered in the calculation of debt and default.
Based on the above, the Tribunal held that no liability can be fastened on the Corporate Debtor for default committed during Section 10A period. The Adjudicating Authority has therefore not committed any error in holding the Section 9 application as non-maintainable.
The Tribunal also observed that the Appellant's arguments that the Adjudicating Authority should have modified the date of default cannot be accepted. If any change was required, the onus was on the Appellant to seek permission to file an amendment application. The Adjudicating Authority cannot suo moto amend the date of default without any amendment application filed in this behalf as it would tantamount to exceeding its jurisdiction.
Accordingly, the present appeal was dismissed.
Case Title: Royal Construction Versus Gannon Dunkerley & Company Limited
Case Number:Company Appeal (AT) (Insolvency) No. 393 of 2025
Order Date: 01/04/2025
For Appellant : Mr. Yashwardhan, Mr. S. Sukumaran, Mr. Anand Sukumar and Mr. Pranav Das, Advocates.
For Respondent : Mr. Amir Arsiwala and Mr. Rahul Gupta, Advocates.