The National Company Law Tribunal (NCLT) Kochi bench's ruling that the March 24 notification raising the threshold limit for insolvency proceedings to Rupees One Crore will only apply prospectively was overturned by the Kerala High Court. The NCLT ruled in the instance of M/s Tharakan Web Innovations Pvt Ltd v. Cyriac Njavally that a corporate debtor is not protected when the default occurred before the COVID-19 epidemic because of the March 24 Notification, which increased the minimum threshold for insolvency proceedings.
In the instant case titled Tharakan Web Innovations Pvt. Ltd. v. National Company Law Tribunal, the issue raised for clarification before the High Court of Kerala was:
Whether the applicability of the threshold limit of Rs 1 Crore is valid or not?
With regard to this issue, on the question of whether the threshold limit of Z1 crore would apply on or after March 24, 2020, the Kerala High Court ruled that it would. Once the Government has exercised this power by issuing a notification setting the minimum amount of default as Z1 Crore, the section will need to be read by replacing the words "one lakh rupees" with "rupees one crore." Once that is the case, Part II's application is removed with effect from March 24, 2020, for defaults smaller than Z1 Crore, and no applications can be submitted after that date.
The Court categorically stated that,
“The power to increase the minimum amount of default is vested with the Central Government by way of delegated legislation. A delegated legislation passed by the executive, unlike an Ordinance passed by Legislature does not have an object clause or any scope for stating reasons which reflect the intention of the Legislature in its action. Hence, it is pertinent to bring on record the Ordinance 9/2020 dated 05.06.2020 wherein the legislature while suspending Sections 7,9 and 10 of the 1&B Code”.