2025 (4) TMI 515 - AT - IBC

Dismissal of application filed under Section 9 of the Insolvency and Bankruptcy Code 2016 - application filed under Section 9 was beyond the period of limitation and below the threshold of Rs. 1 Cr. excluding the amount of interest - HELD THAT - The Appellant has been non-suited by the Tribunal on the issue of limitation and that the petition is being hit by Section 4 of the Code. The Appellant in order to cross the threshold has added the component of interest making it an amount of Rs. 1, 41, 57, 817/- alleging that the interest is provided in the invoice which can be charged by the Appellant in case the payment is not made within the required time but the Appellant has failed to show that the said invoice has been signed by the CD. Thus the question arises as to whether the interest mentioned in the invoice which is not signed by the CD is a unilateral document and cannot be recovered. In this regard this Tribunal in the case of S.S Polymers Vs. Kanodia Technoplast Ltd. 2019 (11) TMI 1428 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI has held that Admittedly before the admission of an application under Section 9 of the I B Code the Corporate Debtor paid the total debt. The application was pursued for realisation of the interest amount which according to us is against the principle of the I B Code as it should be treated to be an application pursued by the Applicant with malicious intent (to realise only Interest) for any purpose other than for the Resolution of Insolvency or Liquidation of the Corporate Debtor and which is barred in view of Section 65 of the I B Code. Similarly the Hon ble Karnataka High Court in the case of Jyothi Limited Vs. Boving Fouress Limited 2000 (12) TMI 817 - HIGH COURT OF KARNATAKA regarding winding up of company has observed that the invoice having not been signed by the both parties is an unilateral document and interest cannot be claimed. Thus in view of the fact that the component interest cannot be added to be principal amount on the basis of the entry and endorsement in the invoice which is not signed by the CD the Appellant was entitled only to the principal amount which is less than Rs. 1 Cr. therefore the Appellant has failed to prove that it has crossed the threshold of Rs. 1 Cr. for maintaining the application under Section 9. Conclusion - Since the Appellant has failed to cross the threshold for maintaining the petition under Section 9 it is not required to go into the issue of limitation and the present appeal is without any substance and hence the same is hereby dismissed. Appeal dismissed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, by the Appellant was within the period of limitation.
• Whether the Appellant's claim met the threshold requirement of Rs. 1 crore as prescribed under Section 4 of the Code, considering the inclusion of interest in the claim amount.
• Whether interest mentioned in an invoice not signed by the Corporate Debtor (CD) can be considered for calculating the threshold limit.

ISSUE-WISE DETAILED ANALYSIS

Threshold Requirement under Section 4 of the Code

• Relevant legal framework and precedents: Section 4 of the Insolvency and Bankruptcy Code, 2016, stipulates that the minimum amount of default for initiating insolvency proceedings is Rs. 1 crore. The Appellant argued that the total claim, including interest, exceeded this threshold.
• Court's interpretation and reasoning: The Tribunal examined whether the interest component could be included to meet the threshold. It referred to precedents where interest on invoices, not agreed upon by both parties, was deemed a unilateral claim and thus not admissible for calculating the threshold.
• Key evidence and findings: The Appellant's invoices included a provision for interest at 12% per annum. However, the invoices were not signed by the CD, making them unilateral documents.
• Application of law to facts: The Tribunal concluded that since the invoices were not signed by the CD, the interest could not be included to meet the Rs. 1 crore threshold. The principal amount alone was Rs. 74,97,097/-, which was below the required threshold.
• Treatment of competing arguments: The Appellant's argument that interest should be considered was rejected based on the precedent that unsigned invoices are unilateral and do not constitute an agreement.
• Conclusions: The Appellant failed to meet the threshold requirement, and thus, the application under Section 9 was not maintainable.

Limitation Period

• Relevant legal framework and precedents: The limitation period for filing an application under Section 9 is three years from the date of default, as per the Limitation Act, 1993. The Appellant contended that the limitation period was extended due to the acknowledgment of debt by the Interim Resolution Professional (IRP) and the Supreme Court's exclusion of certain periods due to COVID-19.
• Court's interpretation and reasoning: The Tribunal did not delve into the limitation issue in detail, as the threshold issue was dispositive. However, it acknowledged the Appellant's argument regarding the Supreme Court's order excluding the period from 15.03.2020 to 28.02.2022 for limitation purposes.
• Key evidence and findings: The last payment from the CD was received on 05.07.2018, and the application was filed on 12.10.2021. The Appellant argued that the acknowledgment by the IRP on 14.02.2022 provided a fresh limitation period.
• Application of law to facts: The Tribunal did not make a definitive ruling on the limitation issue, as the failure to meet the threshold was sufficient to dismiss the appeal.
• Treatment of competing arguments: The Appellant's arguments regarding the extension of the limitation period were noted but not addressed in detail due to the dispositive nature of the threshold issue.
• Conclusions: The Tribunal did not need to resolve the limitation issue due to the failure to meet the threshold requirement.

SIGNIFICANT HOLDINGS

• The Tribunal held that interest mentioned in invoices not signed by the CD cannot be included to meet the threshold requirement under Section 4 of the Code. It cited precedents where such interest claims were deemed unilateral and not enforceable.
• The core principle established is that for an application under Section 9 to be maintainable, the claim must meet the prescribed threshold based solely on the principal amount unless there is mutual agreement on interest.
• The final determination was that the Appellant's application under Section 9 was dismissed due to failure to meet the Rs. 1 crore threshold, rendering the limitation issue moot.