Application U/S 9 Of IBC Cannot Be Admitted For Invoices Covered By Prohibited Period U/S 10A Of Code: NCLAT

The NCLAT New Delhi bench of Justice Ashok Bhushan (Judicial Member), Mr. Barun Mitra (Technical Member) and Arun Baroka (Technical Member) has affirmed that application under section 9 of the code cannot be admitted for the invoices covered by prohibited period under section 10A of the code. Brief Facts This Appeal has been filed against order passed by the Adjudicating Authority dated 06.09.2024 by which application under section 9 of the code filed by the Appellant was rejected. The Adjudicating Authority by the impugned order has held that the amount of invoices covered under Section 10A has to be excluded and there is no agreement for interest and the amount which is claimed is reduced to Rs.92,09,732/-, which is less than the threshold limit of Rs.1 Crore and Section 9 application cannot be admitted. Contentions: The appellant submitted that there was running account between the parties and in view of the fact that there was running account and the Corporate Debtor has acknowledgment the payment by the balance confirmation, amount which is to be accepted is that amount which is at the foot of the running account. It was further submitted that the Operational Creditor was a MSME and under Section 15 of the MSME Act, they were entitled for statutory interest and in event such interest is added, the claim amount will be more than Rs.1 Crore. Decision of The Tribunal: The Adjudicating Authority in the impugned order has noticed the details of all invoices in Para 14 of the judgment 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/-. After pursuing the observations of the Adjudicating Authority, it was noted that 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. It was further noted that 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. It was further noted that 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, the tribunal observed that “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.” Case Title: Decor Paper Mills Ltd. Versus Mahashakti Plasto Pvt. Ltd. Case Number: Company Appeal (AT) (Insolvency) No. 2022 of 2024 & I.A. No. 7591 of 2024 Date Of Judgment: 26/11/2024 Click Here To Read/Download The Order

Application U/S 9 Of IBC Cannot Be Admitted For Invoices Covered By Prohibited Period U/S 10A Of Code: NCLAT

Mohd Malik Chauhan

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