Interest Cannot Be Raised Unilaterally In Insolvency Petition, Without Prior Intimation To Corporate Debtor: NCLT Bengaluru

The National Company Law Tribunal (NCLT), Bengaluru, comprising Shri K. Biswal (Judicial Member) and Shri Manoj Kumar Dubey (Technical Member), dismissed a petition under section 9 of the Insolvency and Bankruptcy Code (IBC). The petition was filed by Janus GBAC Ltd. (operational creditor) against Beloorbayir Biotech Ltd. (corporate debtor). The NCLT observed that no interest can be claimed in the petition when it has not been agreed upon in an agreement. Brief Facts The corporate debtor was admitted into insolvency under section 9 of the IBC. The amount to the tune Rs. USD 140,513.09 along with interest of Rs. USD 35,212 was claimed by the operational creditor. However, if the interest is excluded from the claimed amount, the amount to be claimed stood to the tune of Rs. USD 105,300. This petition was filed on July 27, 2023. Contentions The operational creditor contended that corporate debtor defaulted in clearing its liabilities to the tune Rs. USD 140,513.09 along with interest of Rs. USD 35,212. This amount exceeded the threshold limit under section 4 of the IBC to initiate CIRP. It was further argued that goods were supplied and mediation was attempted under section 12A of the Commercial Court Act, 2015 still the corporate debtor remained unresponsive and failed to pay the outstanding dues. It was further submitted that the interest amount can be claimed because delayed payment caused financial loss. The operational creditor relied on the Supreme Court judgment in and claimed their petition was within period of limitation. Per Contra, the corporate debtor contended that the principal debt was only to the tune Rs. USD 105,300 which did not cross the threshold limit under section 4 of the IBC rendering the present petition not maintainable. It was submitted that the interest amount cannot be claimed as there was no agreement to that effect nor was there any such clause in invoice raised. The NCLAT judgment in Mr Prashant Agarwal v. Vikar Parasrampuria 2022 SCC OnLine NCLT 3781,was cited in which it was held that interest can only be claimed when it is substantiated. It was further argued that the operational creditor manipulated the date of default to seek extension of the period of limitation and meet the threshold limit. Issue Before NCLT Whether interest amount can be clubbed with the principal when there is no express agreement or clause in the invoice showing the same. NCLT's Analysis The NCLT referred to the judgements of the NCLAT in Mr. Prashat Agarwal v. Vikash Parasrampuria & Ors and Krishna Enterprises v. Gammon India Ltd wherein it was established that interest can be claimed along with the principal amount when it has been mentioned in an agreement or invoices issued to the debtor. The Tribunal further observed that no interest was mentioned in the invoices raised by the operational creditor nor was it agreed upon in e-mail communications. It was held as under: “Keeping in view the decisions laid by the Hon'ble NCLAT in Mr. Prashat Agarwal v. Vikash Parasrampuria & Ors [ vide Order dated: 15/07/2022 Company Appeal (AT) (Ins) No. 690 of 2022] and Krishna Enterprises v/s. Gammon India Ltd. [vide Order dated 27.07.2018 in Company Appeal (AT)(Insolvency) No.144 of 2018] also the principle Case followed by the Co-ordinate benches of Mumbai Bench in Tushar Harshadrai Mehta v. Samarth Softech Solution Pvt Ltd (vide Order dated 22/03/2024, in CP(IB) 311/MB/2023) and Kolkata Bench in Gandhar Oil Refinery (India) Ltd. Vs. City Oil Pvt. Ltd (vide Order dated 10/04/2023, in C.P. (IB) No. 150/KB/2021) , wherein it was explicitly held that for any creditor to claim the interest in the default amount the same should be reflected in either the agreement or the invoices raised against the Corporate Debtor”. The NCLT further noted that invoice raised on March 3, 2020 had not become due yet as agreement allowed time period of 7 days to make the payment. Consequently, it was held that if this invoice to the tune Rs. 14,064.34 is excluded from the claimed amount, the amount claimed falls way below the threshold limit under section 4 of the IBC. It was observed as under: “Additionally, on perusal of the Petition it is observed that the last invoice was raised on 15/03/2020 for a payment of USD 14,064.30, which as per the agreement becomes due after 7 days, hence as on the date of default mentioned, the said invoice was not 'due' to be paid, so there is no question of any default for this invoice.Considering the above facts, the said amount of USD 14,064.30 is required to be excluded from the principal amount which would render the impugned amount to be further below the threshold”. The NCLT further noted that the payment became due on March 3, 2020 for which the limitation period expired on March 14, 2023. The Supreme Court in M. A. Nos.21 of 2022/665 of 2021 in suo motu Writ Petition (c) No.3 of 2020...

Interest Cannot Be Raised Unilaterally In Insolvency Petition, Without Prior Intimation To Corporate Debtor: NCLT Bengaluru

Mohd Malik Chauhan

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