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Initiation and Commencement of the CIRP are different: Supreme Court of India

The initiation and the commencement of the Corporate Insolvency Resolution Process are two different things. The ‘initiation date’ is referred to as the filing of application by the eligible applicant, whereas the ‘commencement date’ refers to passing of order of admission of application by the Adjudicating Authority. This assertion was made by the Supreme Court of India presided over by J. Dr Dhananjaya Y Chandrachud and J. M. R. Shah in the case of Ramesh Kymal vs. M/s Siemens Gamesa Renewable Power Pvt Ltd. [Civil Appeal No. 4050 of 2020].

The appellant claimed that a sum of INR 104,11,76,479 was due and payable to him pursuant to his resignation “from all capacities held by him in the respondent in accordance with the various Employment Agreements/Incentive Agreements” entered into by him with the respondent during his tenure as Chairman and Managing Director. The appellant entered into an Employment Agreement with the respondent and signed another Employment Agreement coupled with an Incentive Agreement which superseded it. The new Employment Agreement was amended after which the appellant submitted his resignation to the respondent. The respondent acknowledged receipt of the letter of resignation and requested the appellant to continue in employment beyond the 60 days’ notice period. They communicated via mail, the respondent confirmed the payments which were due and payable to him under the letter of resignation. Finally, a termination letter was addressed to the appellant. The appellant issued a demand notice which specified that the date of default was 30th April and filed an application under Section 9 of the IBC for default in the payment of his operational dues on May 11th. During the pendency of the application, an Ordinance was promulgated by the President by which Section 10A was inserted into the IBC. The respondent filed an application seeking the dismissal of the appellant’s application on the basis of the newly inserted provisions of Section 10A. The NCLT upheld the submission of the respondent, holding that a bar had been created by the newly inserted provisions of Section 10A. This decision was upheld in appeal by the NCLAT.

The NCLAT observed, “Reading the two definition clauses in juxtaposition, it emerges that while the first viz. ‘initiation date’ is referable to filing of application by the eligible applicant, the later viz. ‘commencement date’ refers to passing of order of admission of application by the Adjudicating Authority. The ‘initiation date’ ascribes a role to the eligible applicant whereas the ‘commencement date rests upon exercise of power vested in the Adjudicating Authority. Adopting this interpretation would leave no scope for initiation of CIRP of a Corporate Debtor at the instance of eligible applicant in respect of Default arising on or after 25th March, 2020 as the provision engrafted in Section 10A clearly bars filing of such application by the eligible applicant for initiation of CIRP of Corporate Debtor in respect of such default. The bar created is retrospective as the cut-off date has been fixed as 25th March, 2020 while the newly inserted Section 10A introduced through the Ordinance has come into effect on 5th June, 2020.”  The honorable Supreme Court further held, “We are in agreement with the view which has been taken by the NCLAT for the reasons which have been set out earlier in the course of this judgment. We affirm the conclusion of the NCLAT.”

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