Analysis Of Skillstech Services Pvt Ltd v. Registrar, NCLT, New Delhi On Notification dated 24th March, 2020

Background: The Central government has brought in various relief measures in view of COVID-19 regarding statutory and regulatory compliance matters. One of the said measures was the Notification dated 24th March, 2020 whereunder the threshold of default under section 4 of the Insolvency and Bankruptcy Code, 2016 (“IB Code”) was increased from INR 1 lakh to INR 1 crore. This was done to prevent triggering of insolvency proceedings against companies in general and MSME companies in particular at a time when it is already facing financial stress on account of COVID-19 and restrictions imposed to prevent its spread. The judgment of the Hon’ble Delhi High Court in the matter of Skillstech Services Pvt. Ltd v. Registrar, NCLT New Delhi is a landmark judgment as regards the operation of the said Notification dated 24th March, 2020.

1. Whether the Registrar of the Hon’ble Adjudicating Authority has the power to decide whether an Application meets the pecuniary threshold notified under the Notification dated 24th March, 2020?

The High Court in its judgment held that the power to decide whether an Application meets the pecuniary threshold notified under the Notification dated 24th March, 2020 lies only with the Bench of the Hon’ble Adjudicating Authority and not with the Registrar. Hence, the Registrar in an administrative capacity can not reject listing of any Application on account of alleged failure to meet the pecuniary threshold. The Hon’ble High Court while holding as above also noted that the Registrar has no power to decide whether the Notification increasing the default threshold is applicable in a given case or not, and the said power is vested solely with the Hon’ble Bench.

2. What is the impact of the Hon’ble High Court’s ruling on filing and listing of Applications filed under the IB Code?

The judgment has given relief to the creditors of defaulting entities to the extent that the Applications of these creditors will not be shot down at the first instance by the registry of the Hon’ble Adjudicating Authority. The effect of the decision of the Hon’ble Delhi High Court will mean that all applications, whether filed before or after the said Notification dated 24th March, 2020 which may be seen to be below the threshold limit will be placed before the Hon’ble Bench of the Adjudicating Authority for adjudication, subject of course to fulfilment of other mandatory requisites of filing.

3. Whether the Notification dated 24th March, 2020 is retrospectively applicable to Applications filed prior to 24.3.2020?

While the Hon’ble Delhi High Court did not express its views on the question of applicability of the Notification dated 24th March, 2020 to prior filed Applications, it held that the said question is also to be decided by the Bench of the Hon’ble Adjudicating Authority and not the Registrar.

 

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