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2019 (6) TMI 967 - Tri - Insolvency and BankruptcyInitiation of Corporate Insolvency Resolution Process - Corporate Debtor defaulted in paying an amount of ₹ 57,26,667 against the invoices raised on 04.08.2011 and 08.08.2011 by the Operational Creditor towards supply of TMT Bars - HELD THAT - As to operational debt, the consideration that goes to buyer is goods or services as the case may be, whereas the consideration comes to the seller or service provider is not the goods but money. That money value changes as time keeps running. It is understandable if goods of the same value come back, the creditor can sell the same in the market at the rate prevailing as on that day. In a situation like this, if value addition that accrues upon the money yet to be paid to such seller is not taken into consideration, it will become injustice. It may be said that since alternative remedy is available to have recourse before civil court, the creditor can proceed before civil court, because the creditor is not remediless. This argument or proposition remains right if any prohibition to claim interest by operational creditor is envisaged under the Code, as long as such prohibition is absent, the operational creditor obviously can claim interest as envisaged under Sale of Goods Act. As to material placed before this Bench, this Operational Creditor counsel having filed Purchase Orders, Invoices and the Acknowledgements reflecting that this debt is not barred by limitation and section 8 notice being served upon the debtor and the debtor having not disputed anything on the claim amount mentioned by the creditor, this Operational Creditor counsel has proved the existence of debt and default. Petition admitted - Mr. Karuppiah Muruganandan appointed as Interim Resolution Professional - Moratorium declared.
Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency & Bankruptcy Code, 2016. 2. Claim of interest on unpaid principal amount under Section 61 of the Sale of Goods Act. 3. Applicability of previous judgments on claims for interest under Section 9 of the Insolvency & Bankruptcy Code. 4. Admissibility of the petition based on the absence of the Corporate Debtor's response and acknowledgment of debt. Detailed Analysis: Initiation of CIRP under Section 9 of the Insolvency & Bankruptcy Code, 2016: The Operational Creditor filed a Company Petition under Section 9 of the Insolvency & Bankruptcy Code, 2016, against the Corporate Debtor for initiating the Corporate Insolvency Resolution Process (CIRP). The ground for the petition was the Corporate Debtor's default in paying ?57,26,667 against invoices raised for the supply of TMT Bars. The Operational Creditor claimed a principal amount of ?21,27,291 along with an interest amount of ?35,99,375 after sending a Section 8 notice dated 26.09.2018. Claim of Interest on Unpaid Principal Amount under Section 61 of the Sale of Goods Act: The Operational Creditor justified the claim of interest by citing Section 61 of the Sale of Goods Act, which entitles the seller to claim interest over the goods supplied if the payment has not been made during the credit period mentioned in the invoices. The Tribunal noted that unless there is a provision in the contract debarring the seller from claiming interest, the seller is entitled to claim interest from the date on which the price was payable. The Corporate Debtor had not disputed the interest claimed in the Section 8 notice, thus entitling the Creditor to claim interest as per the provision of law. Applicability of Previous Judgments on Claims for Interest under Section 9 of the Insolvency & Bankruptcy Code: The Tribunal referred to the case of Krishna Enterprises v. Gammon India Ltd., where it was held that a petition under Section 9 would not lie for claiming interest alone if the principal amount had already been paid and no interest was payable as per the agreement. However, the Tribunal distinguished the present case by noting that it was not a claim for simpliciter interest on delayed payment and that the Corporate Debtor had acknowledged the debt and remained absent during the hearing. Admissibility of the Petition Based on the Absence of the Corporate Debtor's Response and Acknowledgment of Debt: The Tribunal observed that the Corporate Debtor had placed purchase orders and made partial payments, acknowledging the outstanding amount of ?21,27,291. The absence of the Corporate Debtor's response to the Section 8 notice and during the hearing further supported the Operational Creditor's claim. The Tribunal emphasized that the Sale of Goods Act allows the court to award interest at a reasonable rate, even if not explicitly mentioned in the contract. Conclusion: The Tribunal admitted the petition, appointing an Interim Resolution Professional (IRP) and declaring a moratorium prohibiting various actions against the Corporate Debtor. The Tribunal directed the IRP to calculate interest on the invoice amount at the rate of 12% per annum during the verification of the Operational Creditor's claim. The Tribunal highlighted that the absence of an explicit prohibition in the Insolvency & Bankruptcy Code does not prevent the Operational Creditor from claiming interest, as supported by the Sale of Goods Act. The Tribunal deferred the admission of the petition until further orders from the Honourable President of NCLT due to a difference in opinion among the members.
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