Section 9 Petition Not Maintainable If Principal Amount Repaid During Pendency Of Petition: NCLT Bengaluru Reiterates

Background Facts

The petitioner is a Proprietor of D.R Garg Enterprises (“Operational Creditor”) which supplied Timber, Plywood, Flush Door and H/w accessories to M/s Buildment Pvt Ltd (“Corporate Debtor”) against purchase orders. The payment was to be made within 60 days of receipt of material and if the non-payment exceeded 100 days, the Corporate Debtor was liable to pay interest @ 1.5% per month. The last invoice was issued on 08.01.2020, after which till 05.04.2021, repeated emails and reminders were sent to the Corporate Debtor for repayment. A Demand Notice was served on 05.04.2021 for an outstanding amount of 1.38 crores, which was not replied to by the Corporate Debtor.

No reply was filed by the Corporate Debtor but during the pendency of the petition, the principal amount was repaid by the Corporate Debtor with the last payment of 14 lakhs made on 24.01.2023. Thus only the interest component worth 34 lakhs remained unpaid.

Observations of the Tribunal

The Tribunal observed since the Principal Amount has entirely been paid during the pendency of the petition and since the issue is only regarding the outstanding interest, the petition under Section 9 of IBC is not maintainable. The Tribunal relied on the NCLAT judgement of Rohit Motawat v. Madhu Sharma”, Comp. App.(AT) (Ins) No. 1152 of 2022 which ruled that a section 9 application regarding only the interest component is not maintainable as “the spirit of the legislation of the Code is for ‘resolution of debt’ and not for recovery”

With the aforesaid observations, the Tribunal dismissed the petition.

Case:Ramesh Kumar Garg vs M/s Buildmet Pvt Ltd

Case No.:CP (IB) No.109/BB/2021

Counsels for the Petitioner; Mr. Rahul Agarwal

Counsel for the Respondent : Mr. Naman Jhabakh

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