Increased Threshold To Trigger Insolvency Doesn’t Apply Retrospectively, Says NCLT Kolkata
Kolkata NCLT ruled that the revised minimum threshold to trigger insolvency proceedings will not apply on a retrospective basis.
The Kolkata bench of the National Company Law Tribunal ruled that the revised minimum threshold to trigger insolvency proceedings against companies will not apply on a retrospective basis.
The bench comprising judicial member Jinan KR also said that the increased default threshold of Rs 1 crore wouldn’t be applicable for insolvency applications that have been filed and are pending admission.
The order came after Om Besco Rail Products Ltd. challenged an insolvency resolution application by its operational creditor Foseco India Ltd., on the grounds that the increased thresholds applied on a retrospective basis.
Foseco India had moved the tribunal in 2019, after the Kolkata-based railway components maker defaulted on payments exceeding Rs 90 lakh.
In March, the government raised the threshold for default under the Insolvency and Bankruptcy Code, to Rs 1 crore from Rs 1 lakh, to avoid avoid large-scale insolvencies due to financial stress caused by the Covid-19 disruption. On May 17, the government also suspended the initiation of fresh insolvency proceedings for a period of one year, as an additional measure to shield companies impacted by the coronavirus pandemic.
The NCLT bench observed that it is a settled judicial position that the law is presumed to apply on a prospective basis if there is no indication of any retrospective application.
The tribunal admitted the insolvency application, imposed a moratorium, and approved the appointment of an interim resolution professional.