Interest Claims Under MSMED Act Can't Be Added To Principal Amount: NCLT Mumbai

The National Company Law Tribunal (NCLT), Mumbai Bench of Justice V. G. Bisht (Retd.) (Judicial Member) and Sh. Prabhat Kumar (Technical Member) has held that since the NCLT under the IBC is not competent to adjudicate interest claims under the MSMED Act, such interest claims cannot be added to the principal amount to meet the threshold limit for filing an insolvency petition. The present application has been filed under section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. The Applicant submitted that Operational Creditor, being a registered MSME entity is entitled to claim interest at the rate of 18% per annum on any outstanding dues in the event of the delayed payment by the Corporate Debtor beyond the agreed credit period or the statutory period prescribed under the Micro, Small and Medium Enterprises (MSME) Act, 2006. Per contra, the Corporate Debtor submitted that it is essentially a civil suit for recovery of money against a going concern, and is thus not maintainable before this Forum. It was further submitted that the Operational Creditor did not claim MSME status in the original Petition and attempt to invoke Section 16 of the MSMED Act, 2006 at this belated stage appears afterthought and mala fide intention to claim interest under the MSME Act. The NCLT is not an appropriate forum to consider the issue pertaining to the interest claimed by the Appellant under Section 16 of the MSMED Act. The Tribunal noted the decision of the National Company Law Appellate Tribunal (NCLAT) in Rishabh Infra v. Sadbhav Engineering Ltd. where it was held that invoices which have been sent by the Operational Creditor containing the term of interest cannot be operated against the Corporate Debtor unless there is an agreement for interest or any other document showing that the Corporate Debtor has accepted the obligation for interest. The Tribunal further relied on the NCLAT judgment in SNJ Synthetics Ltd. vs. Pepsico India Holdings Pvt. Ltd. where it was held that the objective of the IBC is resolution. It cannot be used as a forum for recovery of debt. Insolvency proceedings cannot be initiated solely based on unsubstantiated interest claims under the MSMED Act or Interest Act. Since the principal amount claimed in the present petition was below the threshold limit of 1 crore and the interest claims under the MSMED Act could not be adjudicated by the NCLT under the IBC, the petition was found non-maintainable and accordingly dismissed. Case Title: Shree Jajoo Instrument Manufacturing Corporation Versus Tapasya Engineering Works Private Limited Case Number:CP (IB) / 1055 (MB) 2024 Order Date: 15/07/2025 Click Here To Download Order

Interest Claims Under MSMED Act Can't Be Added To Principal Amount: NCLT Mumbai

Mohd Malik Chauhan

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