2019 (11) TMI 1428 - AT - Insolvency and Bankruptcy

Appeal dismissed: Interest beyond insolvency resolution prohibited under I&B Code

S.S. Polymers Versus Kanodia Technoplast Limited

The appeal under Section 9 of the Insolvency and Bankruptcy Code was rejected by the Adjudicating Authority due to the absence of debt payable and ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - application was rejected on the ground that there is no debt payable and there is no default - HELD THAT:- Admittedly, before the admission of an application under Section 9 of the I&B Code, the ‘Corporate Debtor’ paid the total debt. The application was pursued for realisation of the interest amount, which, according to us is against the principle of the I&B Code, as it should be treated to be an application pursued by the Applicant with malicious intent (to realise only Interest) for any purpose other than for the Resolution of Insolvency, or Liquidation of the ‘Corporate Debtor’ and which is barred in view of Section 65 of the I&B Code. Appeal dismissed. Issues:1. Rejection of application under Section 9 of the Insolvency and Bankruptcy Code, 2016.2. Interpretation of debt payable and default under Section 9.3. Claim for interest amount after total debt payment by the Corporate Debtor.4. Validity of Invoices raised without consent for interest payment.5. Malicious intent in pursuing application for interest amount post-debt payment.6. Application of Section 65 of the Insolvency and Bankruptcy Code.Issue 1: Rejection of application under Section 9 of the Insolvency and Bankruptcy Code, 2016:The Appellant, S.S. Polymers, filed an application under Section 9 of the I&B Code against M/s Kanodia Technoplast Limited for initiation of Corporate Insolvency Resolution Process. The Adjudicating Authority rejected the application citing the absence of debt payable and default.Issue 2: Interpretation of debt payable and default under Section 9:The Appellant argued that the rejection was based on the wrong presumption of no agreement between the parties. It was contended that for an application under Section 9, the presence of an agreement is not necessary; rather, the focus should be on the existence of debt payable and default, supported by any relevant record as per Form 5 of the Insolvency and Bankruptcy Board of India.Issue 3: Claim for interest amount after total debt payment by the Corporate Debtor:Despite the Corporate Debtor clearing the total debt before the admission of the application, the Appellant pursued the case for an additional interest amount of Rs. 2,16,155. The Adjudicating Authority viewed this pursuit as against the I&B Code's principles, considering it a malicious intent to realize interest beyond the resolution of insolvency or liquidation, which is prohibited under Section 65 of the I&B Code.Issue 4: Validity of Invoices raised without consent for interest payment:The Counsel for the Appellant relied on invoices to support the claim for interest payment. However, the Tribunal dismissed this argument, stating that the invoices were unilaterally raised without the Corporate Debtor's consent, thus not carrying legal weight in the absence of a mutual agreement.Issue 5: Malicious intent in pursuing application for interest amount post-debt payment:The Tribunal found no merit in the appeal, concluding that the pursuit of the interest amount after the total debt payment was indicative of a malicious intent contrary to the objectives of the I&B Code. Such actions were deemed inappropriate for the resolution of insolvency or liquidation proceedings.Issue 6: Application of Section 65 of the Insolvency and Bankruptcy Code:In light of the pursuit of interest post-debt payment being considered malicious, the Tribunal dismissed the appeal, emphasizing the application of Section 65 of the I&B Code to prevent actions aimed solely at realizing interest amounts beyond the scope of insolvency resolution or liquidation proceedings.This detailed analysis of the judgment highlights the key issues addressed by the National Company Law Appellate Tribunal concerning the rejection of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016, and the subsequent considerations regarding debt, default, interest claims, and malicious intent in pursuing legal actions.