Pearl Narang is a final year law student of B.B.A.LL.B (Hons.) at Chandigarh University, Mohali and is currently interning as a Trainee in Business World Legal Community. She is also pursuing a diploma in Contract Drafting, Negotiation and Dispute Resolution. She is passionate about both law and writing.
NCLAT Upholds NCLT’s Order Stating March Notification Was Only ‘prospective in nature’ and Not a ‘retrospective’ one.
NCLAT held that in the absence of express words to the contrary, the NCLT had "unerringly" come to the conclusion that the March notification was only ‘prospective in nature’ and not a ‘retrospective’ one.
An appeal was filed against an order by National Company Law Tribunal, Kolkata. Through the order, a corporate insolvency resolution process was initiated against Corporate Debtor, Om Boseco Rail Products Ltd.
Appellant argued that NCLT had committed an error in Law and on facts while passing the impugned order.
It was stated that the Section 9 plea against the Corporate Debtor was no longer maintainable because of the amendment to Section 4 of IBC, which increased the minimum default threshold to Rs 1 crore from Rs 1 lakh. Arguing that the amendment had a retrospective effect, the Appellant stated that all pending applications under Sections 7 or 9 and 10, which do not meet the new threshold, ought to be dismissed.
Operational Creditor's submissions
On the other hand, the Operational Creditor submitted that the notification could not have a retrospective effect because Section 9 IBC provides a substantive right to file an application to initiate CIRP and this right can not be taken away on a future date with retrospective effect. In addition to this, when a statute is passed that changes the procedure and creates new rights and liabilities, it must be construed to be prospective in operation unless otherwise provided, either expressly or by necessary implication as per decisions.
March Notification is prospective in nature and does not apply to pending applications
Noting the arguments, the Appellate Tribunal held that the March Notification on increasing the minimum amount of default under Insolvency & Bankruptcy Code to Rs 1 crore is prospective in nature and does not apply to pending applications. The Tribunal observed that from the tenor, spirit and the plain words employed in the Notification, one could not infer an intention to take or make it retrospective.
Justice Venugopal M, Member (Judicial); VP Singh, Member (Technical) and Shreesha Merla, Member (Technical) passed the judgment and dismissed the appeal.
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