IBC One Crore Threshold and Section 10A: Solved Cases

Two numbers sit at the gate of every CIRP: the minimum default of one crore rupees, and the protected period from 25 March 2020 to 24 March 2021. Questions test whether the student can add up the amount in default correctly, leaving out what is not yet due, time-barred or protected, and whether the default falls inside or outside the section 10A window. Each answer below shows the working.

1. The Law in Brief

• Section 4. Part II applies where the minimum amount of default is one lakh rupees, or a higher amount up to one crore rupees notified by the Central Government; one crore rupees was notified on 24 March 2020, and ten lakh rupees for pre-pack.
• Amount in default. The sum due and unpaid, including contractual interest that has fallen due, not the total outstanding loan; defaults owed to several financial creditors filing jointly may be added together.
• Section 10A. No application under sections 7, 9 or 10 shall ever be filed for a default arising on or after 25 March 2020 for the period notified, which ended on 24 March 2021; defaults before 25 March 2020 are not affected.

Figure 1: Where the default falls in time

2. How Is the Amount in Default Calculated?

• Issue. What amount is in default for the purposes of section 4, and whether it reaches one crore rupees.
• Law. Default under section 3(12) means non-payment of debt when the whole or any part or instalment has become due and payable. The threshold applies to the amount in default, not the total loan. Contractual interest that has fallen due is part of the amount in default. Future instalments become due only if the loan is recalled under the agreement.
• Application. Only the instalment of ₹50 lakh and interest of ₹30 lakh had fallen due, a total of ₹80 lakh. The remaining ₹9.5 crore was not yet payable because the bank had not recalled the loan.
• Conclusion. The default is ₹80 lakh, below the threshold, and the application is not maintainable. If the bank had validly recalled the loan, the entire outstanding amount would have become due, the default would exceed one crore rupees, and the application would lie.

Figure 2: What counts towards the threshold

3. Can a Section 10A Default Ever Found a CIRP?

• Issue. Whether section 10A bars an application founded partly on a default during the protected period and partly on a later default.
• Law. Section 10A provides that no application shall ever be filed for a default arising on or after 25 March 2020 for the notified period, which ended on 24 March 2021. The bar attaches to the default, not to the debt or the debtor, and continuing non-payment does not move a protected default out of the period. A fresh default after 24 March 2021 may found an application.
• Application. The ₹3 crore default of 1 August 2020 can never found an application. The ₹1.2 crore that fell due on 1 June 2021 is a fresh default outside the period and by itself exceeds one crore rupees. The July 2023 filing is within three years of that default.
• Conclusion. The application is maintainable on the June 2021 default of ₹1.2 crore, but not on the protected default of ₹3 crore. Once a CIRP begins, however, CD Finance may claim its entire debt, including the protected amount, since section 10A bars only initiation and does not extinguish the debt.

4. Does Section 10A Bar Applications Filed before 5 June 2020?

• Issue. Whether section 10A bars an application filed before 5 June 2020 for a default arising after 25 March 2020.
• Law. In Ramesh Kymal v Siemens Gamesa Renewable Power (2021), the Supreme Court held that the cut-off date in section 10A is 25 March 2020, the date of default, and not the date of the ordinance. Read with the word ever in the proviso and the Explanation, an application filed before 5 June 2020 for a default after 25 March 2020 is not maintainable.
• Application. EF Ltd's default arose on 1 April 2020, within the protected period. The date of GH Ltd's filing does not matter.
• Conclusion. The application is not maintainable and must be rejected. GH Ltd may sue or arbitrate for the price, and may apply under section 9 only on a later default outside the period.

5. Does the One Crore Threshold Apply to Earlier Applications?

• Issue. Whether the higher threshold notified on 24 March 2020 applies to applications filed before that date.
• Law. In Madhusudan Tantia v Amit Choraria (2022), the Supreme Court held that the notification raising the threshold is prospective, and applications filed before 24 March 2020 are governed by the threshold of one lakh rupees.
• Application. KL Ltd filed on 10 February 2020, before the notification. Its default of ₹40 lakh exceeded the threshold of one lakh rupees then in force, and the default of November 2019 is outside the section 10A period.
• Conclusion. The application is maintainable and must be decided on its merits, including any pre-existing dispute.

6. Frequently Asked Questions

Can operational creditors add their claims together to reach one crore rupees?

Section 9 does not expressly provide for joint applications as section 7 does, and tribunals have generally been reluctant to allow separate operational creditors to combine distinct claims.

Does section 10A extinguish the debt?

No. It bars only an insolvency application for that default; the creditor may still sue, arbitrate, approach the DRT or use SARFAESI.

What is the minimum default for the pre-packaged process?

Ten lakh rupees, notified in April 2021 for MSMEs.

7. Related Topics

• Topic 15: Section 10A. The COVID-19 suspension.
• Topic 19: Minimum Default. The one crore threshold.
• Topic 104: Corporate and Personal Guarantors under IBC. Corporate and personal guarantors.