The NCLT Chennai Bench has held that the 24 March 2020 notification issued by the Central Government under section 4 of the I&B Code, wherein the minimum threshold limit of Rs. One lakh rupees was raised to One crore rupees is prospective in nature and will not apply to pending proceedings.
The order was made in the context of an application filed by a Corporate Debtor (CD) praying for withdrawal of an order dated 5 May 2020 passed by the Adjudicating Authority (AA) admitting an application filed by the operational creditor (OC) under section 9 of the Code. The CD argued that since the amount claimed by the OC fell below the One Crore threshold the Tribunal should recall its order of admission and dismiss the petition as not maintainable.
The AA held that it did not have the power to recall or review its order under Section 420 of the Companies Act, 2013 or under Rule 11 of the NCLT Rules, 2016 (inherent powers of the Tribunal). The proper recourse for the aggrieved party would be to appeal to the Appellate Tribunal u/s 61 of the IB Code, instead of filing an application for recall of its Order. The AA referred to and relied on judicial pronouncements by the Apex Court on the prospective effect of the applicability of a Notification issued by the Central Government under the statute itself and held that the instant Notification was prospective in nature and was applicable only from 24 March 2020 onward. It also noted that no issue was raised by the parties, especially the CD, between the reserving of the order on 4 March 2020 and passing of the order on 5 May 2020 questioning the jurisdiction of the Tribunal and therefore it did not make a suo moto mention of the same in the order. The law prevalent on the date of filing of the main company petition, final hearing and reserving of Order on 4 March 2020 required only the pecuniary limit of Rs. 1 lakh for maintaining a petition u/s 9 of the Code and hence, the Tribunal at the time of pronouncement did not lack pecuniary jurisdiction.
NCLT Chennai is the second bench, after the Kolkata Bench (in the matter of Foseco India Limited vs Om Boseco Rail Products Limited dated 20 May 2020) to hold that the notification will apply prospectively.
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