If Interest On Principal Amount Crosses Threshold Limit, Application U/S 7 Of IBC Can Be Admitted: NCLAT

The NCLAT Delhi bench of Justice Yogesh Khanna (Judicial Member) and Mr. Ajai Das Mehrotra (Technical Member) has affirmed that if interest on the principle amount disbursed to the corporate debtor crosses the threshold limit as provided under section 4 of the IBC, application under section 7 of the code can be admitted as interest is considered to be a disbursal against time value of money under section 5(8) of the code. In this case, although the principal amount was not claimed but the interest claimed crossed the threshold limit. Brief Facts This appeal has been filed by the Suspended Director of M/s Evyavan Merchantile Private Limited(Corporate Debtor) against an order passed by the NLCT, Mumbai by which an application under section 7 against the corporate debtor was admitted. The Financial Creditor is a Non-Banking Financial Company and is engaged in the activities of financing and investment in shares/securities. In its ordinary course of business, the Financial Creditor is also engaged in providing loan funding in lieu of interest. The Financial Creditor, on being approach by Corporate Debtor had, disbursed a sum of Rs. 7,00,00,000/- (7 crores) on different dates between 18.08.2016 and 31.03.2017. The Corporate Debtor never disputed its liability in respect of the said loan and had in fact repaid an amount of Rs. 1.90 crore during the period 23.08.2016 to 04.07.2018. The said repayment was towards the principal amount. The Corporate Debtor had not paid any amount towards interest though it has deducted TDS which is also reflected in Form 26AS of Income Tax Department as Tax deducted at source on behalf of the Financial Creditor.The total amount of debt and interest payable by the Corporate Debtor as on 31.03.2022 amounts to Rs. 7,81,73,014/-. Contentions The appellant submitted that no loan agreement or contract was executed between the parties and there was no agreed date for repayment of amount received from the Financial Creditor and that there was no demand on behalf of the petitioner in respect of the alleged loan amount. The demand letter issued by the Financial Creditor on 27.01.2019 is only regarding payment of interest. It was further submitted that there was no agreement, the demand for interest is illegal and contrary to the law and that the TDS was deducted and deposited by the Corporate Debtor at the request of the Financial Creditor so that they can put their accounts in order and that application under Section 7 is filed on 30.05.2022 which is beyond 3 years of disbursal of funds and is time barred. Per contra, the respondents submitted that sum of Rs. 7 crores was advanced and disbursed to the Corporate Debtor between 18.08.2016 to 31.03.2017. The Corporate Debtor had deposited TDS which reflects that the transaction was in fact on loan transaction. Decision of the Tribunal: As per provisions of Section 5(8) of IBC, 2016, financial debt means a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money. In the present case money has been disbursed to the Corporate Debtor towards time value of money and interest is shown as due in the ledger accounts of the Corporate Debtor. The total interest due is more than Rs. 1 crore and was demanded by the Financial Creditor through letter dated 22.01.2019 which was not paid by the Corporate Debtor. Thus, the debt of above Rs. 1 crore was due, was demanded and was payable which was not paid by the Corporate Debtor. It was observed that “the ingredients of petition under Section 7 of the IBC, 2016, mainly existence of debt, and default are established in this case, and the Corporate Debtor was eligible to be admitted in CIRP on application under Section 7 of IBC, 2016.” The tribunal while rejecting the contention with respect to limitation noted that the application under Section 7 of the IBC, 2016 was filed on 30.05.2022. The Appellant itself as Director of the Corporate Debtor had acknowledged the debt in the ledger accounts of Financial Year 2016-17, 2017- 18 and 2018-19 through confirmation of accounts including the last dated 01.04.2019 appearing at page 104 of the Appeal Paper Book. The three year period, since the acknowledgement, expired on 31.03.2022. However, the tribunal observed that “as per the direction of the Hon'ble Supreme Court in Suo Moto Writ Petition No. 3 of 2020 decided on 10.01.2022, the period from 15.03.2020 till 28.02.2022 is to be excluded for counting of limitation under any law. Excluding the said period, the present petition under Section 7 was filed within the limitation period by the Financial Creditor.” It was observed that the Ld. NCLT has rightly admitted the Corporate Debtor in CIRP on an application under Section 7 of IBC, 2016 filed by the Financial Creditor. Accordingly, the present appeal was dismissed. Case Title: Mrs. Rita Kedia Versus...

If Interest On Principal Amount Crosses Threshold Limit, Application U/S 7 Of IBC Can Be Admitted: NCLAT

Mohd Malik Chauhan

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