Later Default After Repayment Extension Cannot Revive COVID-Period Insolvency Claim: NCLT Mumbai

The National Company Law Tribunal (NCLT) at Mumbai has recently held that a creditor cannot rely on a later failure to repay after giving a company extra time when the original default occurred during the COVID-19 period.

A bench of Judicial Member Nilesh Sharma and Technical Member Sameer Kakar ruled that extending the repayment period does not erase or extinguish the original default.

“Moreover we are of the view that as according to proviso to Section 10A, no application shall ever be filed for initiation of Corporate Insolvency Resolution Process of Corporate Debtor for the default, which has occurred during the Section 10A period, by granting extension for making payment, the original default does not get erased or extinguished giving the option to the creditor to file an application for initiation of CIRP against the CD based on the fact that during the extended period of payment/repayment, the Respondent had failed to clear the default. In case the said interpretation is made, in our opinion, the same would be contrary to intent of the legislature as stated in proviso to Section 10A which states that for default under Section 10A period no such Application can ever be filed” the tribunal observed.

The ruling came while the bench dismissed two applications filed by Shaanxi Baoguang Import & Export Co. Ltd. in its insolvency proceedings against Stelmec Limited.

The case concerned several unpaid invoices that fell due between March 25, 2020, and March 24, 2021, during the period when insolvency proceedings for such defaults were barred.

Shaanxi had filed the insolvency petition in February 2025, citing March 29, 2020, as the date of default.

Shaanxi later relied on September 2021 emails in which it claimed Stelmec had agreed to repay the dues over a year, starting October 2021. The first payment was due on October 31, 2021.

Based on this communication, the company tried to change the default date to October 31, 2021, arguing that Stelmec's failure to make that payment amounted to a fresh default. The tribunal rejected the amendment, noting that Shaanxi already had the September 10 email and its attachment when it filed the insolvency petition.

The documents remained with Shaanxi until the petition was reserved for orders on June 23, 2026. The attachment, however, had not been placed on record before the matter was reserved.

The tribunal relied on the NCLAT's judgment in Loramitra Rath v. JM Financial Asset Reconstruction Co. Ltd. The judgment holds that applications seeking to introduce material already available to a party are ordinarily not entertained after final arguments have concluded and the matter has been reserved for judgment.

The bench also rejected the applications on merits. Relying on the Supreme Court's ruling in Ramesh Kymal v. Siemens Gamesa Renewable Power Pvt. Ltd., it held that where the date of default falls within the Section 10A period, no insolvency petition can be filed for that default.

The tribunal further held that allowing a creditor to rely on a failure to repay during an extended payment period would be contrary to the legislative intent behind Section 10A. The original default would remain one for which an insolvency application could not be filed.

The application seeking to change the date of default was dismissed. The separate application seeking to de-reserve the main insolvency petition was also dismissed as infructuous.

The tribunal also imposed ₹1 lakh in costs on Shaanxi. It directed the amount to be deposited in the Prime Minister Relief Fund within seven days, observing that the applicant's conduct had resulted in loss of judicial time

For Applicant in both IA: Advocates Shadab Jan along with Advocate Tanis Amin imstructed by Vidhi Partners