Case Number: Civil Appeal No. 4050 of 2020

Judges Name: Hon’ble Judges Dr Dhananjaya Y Chandrachud J, MR Shah J 

Order dated: 09.02.2021

“Newly inserted Section 10A IBC through the Ordinance has come into effect on 5th June, 2020 is retrospective but it shall not operate in respect of any default committed prior to 25th March, 2020”

Facts of the case:

• Mr.Ramesh Kymal entered into an Employment Agreement with the M/s. Siemens Gamesa Renewable Power Pvt. Ltd. on 16.07.2009. Another Employment Agreement was entered into on 16.12.2013, effective from 01.01.2014, which superseded the previous agreement.
• The Employment agreement dated 16.12.2013 was coupled with an Incentive Agreement signed on the same date. The Incentive Agreement is stated to have been amended and restated on 17.04.2015, along with a further amendment through a Side Letter dated 20.04.2015. Further, the new Employment Agreement was amended through a Letter Amendment No. 1 dated 17.04.2015.
• Mr.Ramesh Kymal submitted his resignation on 21.01.2020 to the respondent and its parent entity, detailing the entitlements which he claimed under the Employment and Incentive Agreements. M/s. Siemens Gamesa Renewable Power Pvt. Ltd acknowledged receipt of the letter of resignation and requested Mr.Ramesh to continue in employment beyond the 60 days’ notice period stipulated in the Employment Agreement. M/s. Siemens Gamesa Renewable Power Pvt. Ltd by its email dated 27 March 2020, confirmed the payments which were due and payable to him under the letter of resignation.
• On 11.05.2020, Ramesh filed an application under Section 9 of the IBC on the ground that there was a default in the payment of his operational dues. During the pendency of the application, an Ordinance was promulgated by the President of India on 5 June 2020 by which Section 10A was inserted into the IBC.
• The Hon’ble NCLT held that a bar has been created by the newly inserted provisions of Section 10A.
• In Appeal the Hon’ble NCLAT upheld the decision of the NCLT.

Issue:

Whether the provisions of Section 10A stand attracted to an application under Section 9 which was filed before 5 June 2020 (the date on which the provision came into force) in respect of a default which has occurred after 25 March 2020?

Supreme Court held:

• The Supreme Court observed that the proviso to Section 10A stipulates that “no application shall ever be filed” for the initiation of the CIRP of a corporate debtor “for the said default occurring during the said period”. The explanation which has been inserted for the removal of doubts clarifies that Section 10A shall not apply to any default which has been committed under Sections 7, 9 and 10 before 25 March 2020.
• The Court held that adopting the construction which has been suggested by the Ramesh Kymal would defeat the object and intent underlying the insertion of Section 10A.
• The court held that reading the provisions together, it is evident that Parliament intended to impose a bar on the filing of applications for the commencement of the CIRP in respect of a corporate debtor for a default occurring on or after 25 March 2020; the embargo remaining in force for a period of six months, extendable to one year.
• The court clarified that the correct interpretation of Section 10A cannot be merely based on the language of the provision; rather it must take into account the object of the Ordinance and the extraordinary circumstances in which it was promulgated.
• Therefore, the Hon’ble Supreme court affirmed the decision of the NCLAT and dismissed the appeal.