The New Delhi Principal Bench of the National Company Law Appellate Tribunal (NCLAT) has ruled that RBI’s deferment of interest recovery on working capital facilities postponed the ‘due and payable’ date, and that the 90-day Ad-Hoc facility expired on March 25, 2020, attracting the permanent statutory bar. The Appellate Tribunal held that the statutory definition of ‘default’ under Section 3(12) of the IBC requires the debt to be both ‘due’ and ‘payable’, and mere accrual or book entry, without present enforceability, does not constitute default.
For the Cash Credit facility, the Tribunal held that although interest was debited on Feb 29, 2020, and nominally payable on March 10, 2020, the RBI COVID-19 Circulars dated March 27, 2020, and May 23, 2020, interdicted recovery of interest on CC/OD facilities from March 01, 2020, to Aug 31, 2020, rendering the debt not ‘due and payable’ on the claimed default date. For the Ad-Hoc facility, applying Section 9 of the General Clauses Act, 1897, the Tribunal excluded the date of disbursement i.e., Dec 26, 2019, and computed the 90-day period to expire on March 25, 2020, with default crystallising only on March 26, 2020, squarely within the Section 10A protected period.
The Tribunal also held that the textual distinction between ‘moratorium’ for term loans and ‘deferment’ for CC/OD facilities in the RBI Circulars does not alter the substantive Section 3(12) inquiry, since the ‘due and payable’ requirement must be satisfied regardless of the label attached to the regulatory relief.
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The Division Bench comprising Justice Mohammad Faiz Alam Khan (Judicial Member) and Naresh Salecha (Technical Member) noted that the Bank’s own pleadings disclosed internal inconsistencies. While asserting that the account was ‘regular’ as on Feb 29, 2020, and protected from NPA downgrading until Aug 31, 2020, under RBI directions, the Bank simultaneously claimed that the very interest debited in that period had crystallised into a default on March 10, 2020.
The Tribunal observed that no demand was made by the Bank prior to the claimed date of default, and the recall notice was issued only on Jan 02, 2023. The Bank itself renewed the Cash Credit facility of Rs. 52 crores and executed a fresh Working Capital Consortium Agreement on Nov 06, 2020, along with an Equitable Mortgage deed, well after the alleged default dates. The Bank also converted interest into a Funded Interest Term Loan (FITL) of Rs. 3.16 crores on Sep 09, 2020, covering interest for March-August 2020, while expressly excluding the February 2020 interest now claimed to be in default.
The Tribunal further noted that the Bank’s own contemporaneous letter dated March 21, 2020, recorded the Ad-Hoc facility closure date as March 26, 2020, contradicting the subsequently pleaded date of March 24, 2020. The NCLT’s own order dated July 03, 2025, had recorded that the 90-day period for the Ad-Hoc facility expired on March 25, 2020, which falls within the prohibited period.
Briefly, Central Bank of India, as financial creditor, filed a Section 7 application under the Insolvency and Bankruptcy Code, 2016 against Superfine Metals Pvt Ltd. (the Corporate Debtor) seeking initiation of the Corporate Insolvency Resolution Process (CIRP). In its original Form-1 dated Feb 04, 2023, and the NeSL report, the Bank recorded Nov 29, 2020, as the date of default, which coincided with the NPA classification date and squarely fell within the Section 10A protected period.
After the Corporate Debtor raised the Section 10A bar in its reply dated Aug 29, 2023, the Bank sought and obtained permission to amend the Section 7 application, substituting the date of default as March 10, 2020, for the Cash Credit facility and March 24, 2020, for the Ad-Hoc Cash Credit facility, both allegedly outside the Section 10A window. The NCLT, Mumbai admitted the Section 7 application, prompting the ex-director of the Corporate Debtor to file the present appeal before the NCLAT.
