If default was committed prior to Section 10A period, the liability of interest which accrued during Section 10A period should not be excluded for the calculation of threshold limit | The right of appropriation lies with Creditor if Debtor does not indicate in what manner the debt is to be discharged – Beetel Teletech Ltd. Vs. Arcelia IT Services Pvt. Ltd. – NCLAT New Delhi
Hon’ble NCLAT held that:
(i) A plain reading of Section 10A signifies that no application/ proceedings under Sections 7, 9 and 10 can be initiated for any default in payment which is committed during Section 10A period. Thus, what is essentially barred is initiation of CIRP proceedings when the Corporate Debtor commits any default during the Section 10A period. However, if the default is committed prior to the Section 10A period and continues in the Section 10A period, this statutory provision does not put any bar on the initiation of CIRP proceedings.
(ii) The aim and objective of Section 10A was to protect a Corporate Debtor from the filing of any insolvency application against it for any default committed during the period when Covid-19 pandemic was prevailing. It was never intended to cover any default which occurred before Section 10A period and continuing thereafter.
(iii) If the debtor makes any payment without any appropriation, then the creditor can use his discretion to wipe out any of the remaining debt(s) which is/are due. The right of appropriation lies with the creditor if the debtor does not indicate in what manner the debt is to be discharged.
(iv) In a debt where the principal amount is outstanding and interest has also accrued on the debt, sums paid by the debtor is applied by the creditor first to the interest.
