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2017 (6) TMI 187 - Tri - Insolvency and BankruptcyClaim of interest - whether claim falls within the term debt which the respondent is liable to pay failing which the petitioner is entitled to an order of admission in terms of section 9 of the Code and for recommending the appointment of the Insolvency Resolution Professional? - Held that - It is never the intention of legislature under the Code that the Tribunal should determine the rate of interest and grant time to the company to pay the amount as per the directions. It is clearly intended that an application filed under section 9 of the Act is either to be admitted or rejected within a period of 14 days of the receipt of the application. There is no scope of passing an interim order like the one suggested by the learned counsel for the applicant/petitioner. As the entire amount of debt as per the intention of the legislature under the Code having been paid by way of cheques the instant petition is rejected. However in case the cheques issued by the respondent are dishonoured the petitioner would be at liberty to file a fresh petition if so advised or take other appropriate steps in accordance with the Law. Certified copy of the order be sent to both the parties by speed post.
Issues Involved:
1. Inability of the Respondent Company to pay the debt. 2. Transfer of the petition to the Tribunal under the Companies (Transfer of Pending Proceedings) Rules, 2016. 3. Determination of whether the interest on the principal amount falls within the term 'debt' under the Insolvency and Bankruptcy Code, 2016. 4. Compliance with procedural requirements for the application under the Insolvency and Bankruptcy Code, 2016. 5. Consideration of the Supreme Court judgment in Vijay Industries Vs. NATL Technologies Limited. 6. Determination of the rate of interest and its applicability under the Insolvency and Bankruptcy Code, 2016. Detailed Analysis: 1. Inability of the Respondent Company to Pay the Debt: The petitioner filed a company petition for winding up of the Respondent Company due to its inability to pay the debt under section 433(e) of the Companies Act, 1956, after serving a notice of demand as per section 434 of the Act. The petitioner claimed an outstanding amount of ?49,45,331.86 as principal and ?10,52,106.78 as interest at 24% p.a. up to 30.11.2014. The respondent admitted to paying the balance amount of ?34,85,548.86 in 12 installments. 2. Transfer of the Petition to the Tribunal: The petition was transferred to the Tribunal under Rule 5 of the Companies (Transfer of Pending Proceedings) Rules, 2016, which came into effect on 15.12.2016. The petition was to be treated as an application under sections 8 and 9 of the Insolvency and Bankruptcy Code, 2016 (the 'Code'). 3. Determination of Whether Interest Falls Within the Term 'Debt': The primary issue was whether the interest on the principal amount falls within the term 'debt' under the Code. The petitioner argued that the interest is part of the debt, citing the Supreme Court judgment in Vijay Industries Vs. NATL Technologies Limited, which held that failure to pay agreed or statutory interest would come within the purview of the word 'debt'. 4. Compliance with Procedural Requirements: The petitioner complied with procedural requirements by filing an affidavit in Form No.5, giving all particulars required, and removing defects as directed by the Tribunal. The petitioner stated that the outstanding principal amount as of 16.03.2017 was ?20,85,273.03, with interest outstanding at ?21,36,518.70. 5. Consideration of Supreme Court Judgment: The Tribunal considered the Supreme Court judgment in Vijay Industries, where it was held that interest payable on the sum due would be a debt under sections 433 and 434 of the Companies Act, 1956. The Supreme Court directed the respondent company to pay simple interest at 12% p.a. on the admitted sum instead of 24% p.a. 6. Determination of Rate of Interest and Its Applicability: The Tribunal noted that the definition of 'operational debt' under section 5(21) of the Code does not include the term 'interest'. The invoices filed by the petitioner did not contain any clause for payment of interest, and the interest claim was a unilateral act of the petitioner. The Tribunal held that it is not the intention of the legislature under the Code for the Tribunal to determine the rate of interest and grant time for payment. Conclusion: The Tribunal concluded that the entire amount of 'debt' as per the Code had been paid by the respondent through cheques. The petition was rejected, but the petitioner was granted liberty to file a fresh petition or take appropriate steps if the cheques were dishonored.
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