Pre-COVID Loan Default Cannot Be Shielded by Section 10A: NCLAT Delhi Rules in Sushma Paranjpe vs Rohan Developers Private Limited
1. Background and Context
The NCLAT Delhi, in Sushma Paranjpe vs Rohan Developers Private Limited [Company Appeal (AT)(Insolvency) No. 520 of 2023, decided on 06.12.2023], examined a critical question arising under Section 10A of the Insolvency and Bankruptcy Code, 2016 — whether a loan recall notice issued during the COVID-19 suspension period can be treated as the trigger for default, thereby barring an insolvency application, even when the underlying default had commenced well before 25 March 2020.
The matter arose from an order of the National Company Law Tribunal, Mumbai Bench-IV, dated 3 March 2023, which dismissed the appellant's Section 7 application filed against Rohan Developers Private Limited. The NCLAT set aside that dismissal and remanded the matter for fresh adjudication on merits.
2. Genesis of the Financial Relationship
The financial relationship between the parties dates to 2008, when the appellant's deceased husband, Shri Vijay N. Paranjpe, paid Rs. 4 crore to Rohan Developers Private Limited as earnest money towards an advance sale consideration for the booking of a flat. The corporate debtor was engaged in real estate development. When the project showed no meaningful progress up to 2011, Shri Vijay N. Paranjpe sought a refund of the amount. The corporate debtor, rather than returning the funds, gave an assurance to repay the sum along with interest at 12% per annum.
Following this understanding, the Rs. 4 crore came to be mutually treated as an unsecured loan and was reflected as such in the books of account of the corporate debtor. The corporate debtor regularly paid interest on this sum, deducted tax at source, and periodically sought account confirmations from Shri Vijay N. Paranjpe — a course of conduct that, in the appellant's submission, effectively transformed her husband's status from that of a homebuyer to a financial creditor.
3. Sequence of Events Leading to the Insolvency Application
Interest payments were made by the corporate debtor through FY 2015-16 without dispute. On 31 March 2017, the corporate debtor addressed a communication to Shri Vijay N. Paranjpe citing financial constraints and requesting a waiver of interest — a request that was declined.
The appellant's case is that following this declined request, the corporate debtor defaulted on interest payments beginning October 2017, with defaults continuing through FY 2017-18 to FY 2020-21, barring a partial payment made in September 2018. Shri Vijay N. Paranjpe passed away on 21 October 2018, following which the loan amount was transferred into the appellant's name. An account confirmation for FY 2019-20 signed by the corporate debtor reflected the loan in the appellant's name.
The appellant issued a demand letter dated 1 February 2021 claiming a total of Rs. 6,20,01,000/- — comprising principal of Rs. 4,09,00,000/- and interest of Rs. 2,11,01,000/-. When the amount remained unpaid, she filed a Section 7 application under the Insolvency and Bankruptcy Code, 2016 on 6 October 2021, citing default as having occurred in FY 2016-17, more particularly on 1 October 2017.
4. The NCLT's Reasoning for Dismissal
The NCLT Mumbai Bench-IV dismissed the application by treating the demand letter of 1 February 2021 as the operative trigger for default. The relevant portion of the impugned order, as extracted by the NCLAT, reads: