2018 (12) TMI 1682 - Tri - Insolvency and Bankruptcy

Admissibility of application - Initiation of Corporate Insolvency Resolution Process - non-payment of interest amount on the original debt, outstanding towards goods supplied to the Corporate Debtor - agreement to pay interest on the late payment or not - whether the dispute of paying interest was raised by the Corporate Debtor and such dispute is pending or not? - section 9 of Insolvency Bankruptcy Code, 2016. HELD THAT - Section 3(11) of I B Code defines debt as debt means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt. So, once it is found that the Corporate Debtor was liable to pay interest on delayed payment, it can safely be held that the amount towards interest is also the debt recoverable from the Corporate Debtor. The Corporate Debtor, M/S. Eastern Coalfields Limited is liable to pay interest to the Operational Creditor, that has not been paid in spite of demand. The Operational Creditor complied with other requirements under section 9(3)(b) and 9(3)(c) of the I B Code. This fact is also otherwise not in dispute. As the application is complete in all respects, this application is allowed. Application admitted - moratorium declared.

Summary

Issues:
- Application under section 9 of Insolvency & Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process (CIRP) due to non-payment of interest by the Corporate Debtor.
- Dispute over the liability to pay interest on the original debt.
- Interpretation of agreements and invoices regarding interest payment.
- Compliance with statutory requirements under the I&B Code for initiating CIRP.

Analysis:
1. The Operational Creditor filed an application against the Corporate Debtor for non-payment of interest on the original debt, even though the principal amount was settled pending the application.
2. The Operational Creditor claimed that the terms of payment, including interest on delayed payment, were clearly mentioned in invoices and a separate agreement, which the Corporate Debtor had accepted by signing the documents.
3. The Corporate Debtor argued that the purchase orders did not mention interest on overdue amounts and that the Operational Creditor had not raised the issue of interest payment in earlier correspondences.
4. The main dispute revolved around whether there was a valid agreement to pay interest on late payments and if the Corporate Debtor had disputed the interest payment.
5. The Tribunal analyzed the definitions of debt and operational debt under the I&B Code to establish that interest payable on delayed payment constitutes part of the debt owed by the Corporate Debtor.
6. The Tribunal found that the invoices clearly stated the interest terms, which were accepted by the Corporate Debtor, while purchase orders did not negate the interest payment clause.
7. The Corporate Debtor's arguments regarding the merger scheme conditions and indemnity bond were deemed irrelevant, and the Tribunal ruled in favor of the Operational Creditor, holding the Corporate Debtor liable to pay the outstanding interest.
8. The Tribunal admitted the application under Section 9 of the I&B Code, initiating the Corporate Insolvency Resolution Process for the Corporate Debtor, and declared a moratorium on certain actions as per the Code.
9. An Interim Resolution Professional was appointed to oversee the resolution process and convene a Committee of Creditors for formulating a resolution plan within the stipulated timeline.
10. The Tribunal directed the Registry to communicate the order to the relevant parties and scheduled a progress report filing for a future date to monitor the resolution process.