2025 (1) TMI 793 - AT - IBC

Dismissal of Section 9 Petition against the Respondent on the ground that debt claimed is below the threshold limit and the interest amount is disputed - interest component claimed by the Appellant can be included as part of the operational debt under Section 5(21) of the IBC or not - claims and counter claims of the threshold limit under Section 4 of the IBC - Exclusion of Claims falling within the Section 10 A period - Pendency of Commercial Suit between the parties. Claims and counter claims of the threshold limit under Section 4 of the IBC - HELD THAT - Section 5(21) of IBC Code provides that operational debt means a claim in respect of the provision of goods or services including employment or a debt in respect of the 4 payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority; of the IBC restricts claims to those arising from goods or services, and interest is recoverable only when expressly agreed upon by the parties. In the absence of such agreement, the interest component cannot be considered part of the operational debt. Consequently, without interest the outstanding principal amount alone is Rs 60,44,800/- and is well below the threshold of Rs 1 crore specified under Section 4 of the IBC. No interest can be charged against the supply of goods and services for delayed payments until and unless there is an express agreement between the parties - there are justification in the claim of the Respondent that the interest claim was unilaterally imposed and lacked any contractual basis. Exclusion of Claims falling within the Section 10 A period - HELD THAT - The Respondent has placed his reliance on the judgment of this Tribunal in DECOR PAPER MILLS LTD. VERSUS MAHASHAKTI PLASTO PVT. LTD. 2024 (11) TMI 1412 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI LB which establishes that invoices falling within the 10 A period must be excluded from default claims. Therefore, the Application filed by the Appellant under Section 9 is not maintainable on this count also, as the default amount is below the statutory threshold - it is to be noted that even if the dispute relating to invoices falling within 10 A period is not raised by the Respondent, as is being argued by the Appellant, it is not a bar as it is the duty of the Adjudicating Authority to scrutinise whether the invoices are barred by law or not. Pendency of Commercial Suit between the parties - HELD THAT - The Appellant filed a Commercial Suit for the same claim on 01.05.2023, prior to issuing the Demand Notice on 23.08.2023. The Corporate Debtor had in his reply to the demand notice had clearly brought out the existence of pre-existing dispute as well as the pendency of this suit. Due to a pre-existing dispute between the parties, such a petition cannot be entertained under Section 8 of the Code. Therefore, the Appeal is not maintainable on this count also. Conclusion - The debt claim was below the statutory threshold; interest was not contractually justified; claims within the Section 10 A period were excluded; the pending commercial suit barred the insolvency application. Section 9 Petition is not maintainable on multiple counts - appeal dismissed.

1. ISSUES PRESENTED and CONSIDERED

The legal judgment primarily revolves around the following core issues:

Whether the debt claimed by the Appellant meets the statutory threshold limit under Section 4 of the Insolvency and Bankruptcy Code (IBC), 2016?
Whether the interest component claimed by the Appellant can be included as part of the operational debt under Section 5(21) of the IBC?
Whether the claims related to invoices falling within the Section 10 A period are barred from forming the basis of an insolvency application?
Whether the pendency of a commercial suit between the parties precludes the initiation of insolvency proceedings under Section 9 of the IBC?

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Statutory Threshold Limit

Relevant Legal Framework and Precedents: Section 4 of the IBC specifies the minimum threshold limit for initiating insolvency proceedings. The threshold is set at Rs 1 crore.
Court's Interpretation and Reasoning: The court examined whether the total outstanding amount, including interest, met the threshold. It was determined that without the interest component, the principal amount was below the threshold.
Key Evidence and Findings: The principal amount claimed was Rs 60,44,800, which is below the Rs 1 crore threshold.
Application of Law to Facts: The court concluded that the claim did not meet the statutory requirement due to the exclusion of the interest component.
Treatment of Competing Arguments: The Appellant argued for the inclusion of interest to meet the threshold, while the Respondent contended that without an express agreement, interest should not be included.
Conclusions: The court upheld the Respondent's position, finding the claim below the threshold.

Issue 2: Inclusion of Interest Component

Relevant Legal Framework and Precedents: Section 5(21) of the IBC defines operational debt and does not inherently include interest unless expressly agreed upon by the parties.
Court's Interpretation and Reasoning: The court found that interest was not part of the formal agreement and thus could not be included in the operational debt.
Key Evidence and Findings: No express agreement existed for charging interest on delayed payments.
Application of Law to Facts: The unilateral inclusion of a 24% interest rate by the Appellant was deemed unenforceable.
Treatment of Competing Arguments: The Appellant argued for the enforceability of interest based on invoice terms, while the Respondent cited lack of mutual agreement.
Conclusions: The court concluded that the interest claim was not contractually justified.

Issue 3: Section 10 A Period Claims

Relevant Legal Framework and Precedents: Section 10 A of the IBC bars insolvency proceedings for defaults occurring during a specified restricted period.
Court's Interpretation and Reasoning: The court determined that invoices falling within this period could not be considered for insolvency claims.
Key Evidence and Findings: Invoices dated between 29.11.2019 and 07.02.2020 were identified as falling within the restricted period.
Application of Law to Facts: The court excluded these invoices from the default claim, reducing the admissible amount further below the threshold.
Treatment of Competing Arguments: The Appellant's failure to dispute the 10 A period was deemed irrelevant as the law operates automatically.
Conclusions: The court upheld the exclusion of these claims under Section 10 A.

Issue 4: Pendency of Commercial Suit

Relevant Legal Framework and Precedents: Section 8 of the IBC addresses the existence of pre-existing disputes, which can bar insolvency proceedings.
Court's Interpretation and Reasoning: The court noted the pendency of a commercial suit filed prior to the demand notice, indicating a pre-existing dispute.
Key Evidence and Findings: The commercial suit was filed on 01.05.2023, before the demand notice dated 23.08.2023.
Application of Law to Facts: The court found the existence of a pre-existing dispute, rendering the insolvency application under Section 9 non-maintainable.
Treatment of Competing Arguments: The Respondent highlighted the suit's pendency, while the Appellant's arguments were dismissed.
Conclusions: The court concluded that the insolvency application could not proceed due to the pending suit.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "No interest can be charged against the supply of goods and services for delayed payments until and unless there is an express agreement between the parties."
Core Principles Established: Interest claims require express mutual agreement; claims within the Section 10 A period are barred; pre-existing disputes prevent insolvency proceedings.
Final Determinations on Each Issue: The debt claim was below the statutory threshold; interest was not contractually justified; claims within the Section 10 A period were excluded; the pending commercial suit barred the insolvency application.

In conclusion, the Appellate Tribunal upheld the Adjudicating Authority's decision to dismiss the Section 9 Petition, finding it non-maintainable on multiple grounds, including the lack of a valid interest claim, exclusion of Section 10 A period claims, and the pendency of a commercial suit.

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