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2024 (11) TMI 1412 - AT - IBCRejection of Section 9 application filed by the Appellant - exclusion of certain invoices under Section 10A of IBC - existence of a running account - applicability of interest under the MSME Act - HELD THAT - The Adjudicating Authority in the impugned order has noticed the details of all invoices and has come to conclusion that the invoices of 10A period are to be excluded from the claim amount and if the invoices falling under 10A period are excluded, balance amount will be Rs. 92,09,732/-. The submission of the Appellant is that since there was running account, the amount which was at the foot of the account has to be treated as balance amount due towards the Corporate Debtor and 10 A period may not be considered. Even if, the argument of the Appellant is accepted for the time being that there was running account, the invoices which fall within the 10A period has to be excluded. The acknowledgment of debt for invoices during 10A period cannot permit the Operational Creditor to maintain the application and for invoices which are under 10A period has to be excluded since Section 10A clearly bars recovery of amount for default occurred during 10A period which is statutory scheme for a purpose and object. The statutory scheme which is reflected in Section 10A cannot be allowed to be defeated, even by claim of Appellant that amount claimed being running account or any action of the Corporate Debtor of confirmation of debt. Neither there was any interest paid nor there was any agreement for interest at any point of time, hence, the Adjudicating Authority has rightly excluded the interest. In so far as interest under MSME Act is concerned, said interest can be looked into in proceeding which are initiated under the said act and that interest cannot be treated as operational debt in facts of the present case. Conclusion - i) Invoices under Section 10A are excluded from the claim amount. ii) The running account and acknowledgment of debt do not override the statutory bar of Section 10A. iii) Interest under the MSME Act is not included in the claim amount due to lack of agreement. Appeal dismissed. The judgment from the National Company Law Appellate Tribunal (NCLAT), New Delhi, involves an appeal against a decision by the Adjudicating Authority regarding a Section 9 application under the Insolvency and Bankruptcy Code, 2016. The core issues revolve around the exclusion of certain invoices under Section 10A, the existence of a running account, and the applicability of interest under the MSME Act. 1. Issues Presented and ConsideredThe judgment considers the following core legal questions:
2. Issue-Wise Detailed AnalysisIssue 1: Exclusion of Invoices under Section 10ALegal Framework and Precedents: Section 10A of the Insolvency and Bankruptcy Code, 2016, bars the initiation of insolvency proceedings for defaults occurring during a specified period. Court's Interpretation and Reasoning: The court held that invoices within the Section 10A period must be excluded, as the statutory scheme aims to prevent recovery of amounts for defaults during this period. Key Evidence and Findings: The Adjudicating Authority identified 54 invoices falling within the Section 10A period, amounting to Rs. 2,46,37,735/-. Application of Law to Facts: The court concluded that acknowledgment of debt by the Corporate Debtor does not negate the bar under Section 10A. Treatment of Competing Arguments: The Appellant's argument that acknowledgment of debt should allow inclusion of these invoices was rejected. Conclusions: The court upheld the exclusion of invoices under Section 10A, reducing the claim amount to Rs. 92,09,732/-. Issue 2: Running Account and Acknowledgment of DebtLegal Framework and Precedents: The concept of a running account involves continuous transactions between parties, where the balance is acknowledged periodically. Court's Interpretation and Reasoning: The court reasoned that even if there was a running account, invoices under the Section 10A period must still be excluded. Key Evidence and Findings: The Corporate Debtor acknowledged the debt via a balance confirmation letter. Application of Law to Facts: The acknowledgment did not affect the exclusion of invoices under Section 10A. Treatment of Competing Arguments: The Appellant's reliance on the running account and acknowledgment was insufficient to include the barred invoices. Conclusions: The court maintained that the statutory scheme of Section 10A prevails over acknowledgment of debt. Issue 3: Applicability of Interest under the MSME ActLegal Framework and Precedents: Section 15 of the MSME Act provides for statutory interest on delayed payments to MSMEs. Court's Interpretation and Reasoning: The court found no agreement on interest between the parties, and interest was not included in the balance confirmation. Key Evidence and Findings: The Adjudicating Authority noted the absence of an interest clause in certain invoices and lack of past interest charges. Application of Law to Facts: The court held that interest under the MSME Act cannot be treated as operational debt in this context. Treatment of Competing Arguments: The Appellant's claim for interest was dismissed due to the absence of an agreement and past practice. Conclusions: The court excluded interest from the claim amount, aligning with the Adjudicating Authority's findings. 3. Significant HoldingsPreserve Verbatim Quotes of Crucial Legal Reasoning: "Therefore, it cannot be successfully argued on behalf of the Operational Creditor that if the operational debt falling due within 10A period is acknowledged subsequently by the Corporate Debtor, it would be absolved of the bar under Section 10A of the Insolvency and Bankruptcy Code, 2016." "Neither there was any interest paid nor there was any agreement for interest at any point of time, hence, the Adjudicating Authority has rightly excluded the interest." Core Principles Established:
Final Determinations on Each Issue:
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