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2025 (2) TMI 961 - AT - IBCMaintainability of Section 9 of the Insolvency and Bankruptcy Code 2016 (IBC) - no interest had ever been paid by the CD to the OC nor the interest component was ever recorded in the books of accounts - HELD THAT - There is no dispute to the fact that out of total amount of Rs. 6, 13, 48, 161.98/- Rs. 4, 97, 22, 461.16 was towards the principal amount and Rs. 1, 16, 25, 700.82/- was the interest. It is also not in dispute that Respondent No. 2 has claimed the interest only on the basis of invoice in which it has been mentioned that in case of delay payment interest will be charged @ 12% or as per the agreed terms whereas no other document has been placed on record much less any purchase order or the agreement between the parties which can reflect the terms and conditions of the interest - The ledger account of the CD also reflects that principal amount claimed by the OC has been shown as nil which means that the principal amount has already been paid and has been accepted as such by the OC as the principal amount has been received without any murmur therefore the Tribunal is not correct to hold that the amount paid by the CD to the OC of Rs. 4, 97, 22, 461.16 was adjusted towards interest at the first instance by making reference to the decisions in the case of Asset Reconstruction Company India Limited 2022 (8) TMI 70 - SUPREME COURT and BHEL 2012 (10) TMI 1016 - SUPREME COURT . Whether the amount of Rs. 1, 16, 25, 700.82/- can be claimed even as an interest by the OC only on the basis of the boilerplate provision in the invoice in the absence of any agreement between the parties towards for the payment of interest or anything which may reflect it by way of email or purchase order etc.? - HELD THAT - In the case of Prashat Agarwal (Supra) it was a condition in the invoice that interest will be charged @ 18% plus GST P.A after due date of the bill and the dispute was regarding the maintainability of the application filed under Section 9 in which the amount in question was less than Rs. 1 Cr. which is the minimum threshold prescribed under Section 4. In the present case condition prescribed in the invoice is that in case of delay in payment interest will be charged at the rate of 12 @ as per the agreed terms. This clause in the invoice is totally vague because it does not specify the period within which the amount was to be paid unlike the case of Prashat Agarwal 2022 (7) TMI 835 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH in which it was prescribed that interest will be charged after due date of bill. Secondly it is mentioned in this clause that interest will be charged as per the agreed terms whereas no agreed terms have seen the light of the day to enable the OC to claim interest as a part of debt. In this regard the observation has been made in the case of Comet Performance 2025 (1) TMI 793 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH NEW DELHI - LB by a three members bench of this Court relying upon Rishabh Infra Through Hari Mohan Gupta Vs. Sadbhav Engineering Ltd. 2024 (11) TMI 1411 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI in which it has been held that invoices with interest clauses which were not part of the formal agreement are unenforceable . Conclusion - i) Interest claims based solely on invoice provisions without a formal agreement or acknowledgment are not enforceable under the IBC. ii) The IBC is intended for the resolution of debts not for the recovery of interest claims that lack a contractual basis. The impugned order is set aside - the present appeal is allowed.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
ISSUE-WISE DETAILED ANALYSIS Relevant legal framework and precedents: The legal framework involves Section 9 of the IBC, which allows an operational creditor to initiate a corporate insolvency resolution process against a corporate debtor for unpaid operational debts. The precedents considered include decisions from the Hon'ble Supreme Court and other appellate decisions regarding the enforceability of interest claims based on invoice provisions. Court's interpretation and reasoning: The Court examined whether the claim for interest constituted an operational debt under the IBC. It analyzed the provision in the invoice that stipulated interest on delayed payments and compared it with precedents where similar clauses were deemed unenforceable without an express agreement. Key evidence and findings: The evidence included the invoices issued by the OC, which contained a clause for charging interest at 12% on delayed payments. However, there was no accompanying agreement or documentation that confirmed the corporate debtor's (CD) acceptance of this interest provision. The CD had already paid the principal amount, and its ledger reflected a nil balance for the principal debt. Application of law to facts: The Court applied the principles from previous cases, such as Comet Performance Chemicals Pvt. Ltd. and Rohit Motawat, which held that interest claims without a formal agreement are not enforceable under the IBC. The Court noted that the OC's claim for interest was based solely on an invoice provision without any supporting agreement or acknowledgment from the CD. Treatment of competing arguments: The Appellant argued that the interest clause was a boilerplate provision that was never acknowledged by the CD, and no documentation supported the OC's claim for interest. The OC contended that the payment should be apportioned first towards interest based on the invoice clause and relied on precedents supporting such apportionment. However, the Court found that the invoice clause was vague and lacked specificity regarding the payment period and terms. Conclusions: The Court concluded that the application under Section 9 of the IBC was not maintainable solely for the recovery of interest, especially when the principal amount had been paid and there was no express agreement for interest payment. SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning: The Court stated, "the application for interest was not maintainable as the spirit of the legislation of the Code is for resolution of debt and not for recovery." Core principles established:
Final determinations on each issue:
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