2019 (5) TMI 516 - Tri - Insolvency and Bankruptcy

Dismissal of Insolvency Application due to Payment, Excessive Interest Claim Unsupported by Agreement

The tribunal dismissed the application to initiate the Corporate Insolvency Resolution Process against the respondent company, as the principal amount had ... Initiation of corporate insolvency resolution process - Operational debt - claim of interest on the basis of terms mentioned in the Invoice - sub-section (21) of Section 5 of Insolvency & Bankruptcy Code, 2016 - HELD THAT:- In the instant appeal, admittedly, the principal amount has been paid before effective hearing of the petition. Especially when the applicant has not entered into any agreement regarding payment of interest, claim of the applicant for 24% interest per annum does not hold valid ground to file the instant application. Petition dismissed. Issues Involved:1. Initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016.2. Claim of outstanding principal amount and interest on delayed payments.3. Validity of interest rate claimed and its enforceability.4. Financial stability and credibility of the respondent company.5. Admissibility of invoices as contractual agreements.Analysis:1. Initiation of Corporate Insolvency Resolution Process:The application was filed by M/s. Trinity Services (India) Private Limited to initiate the Corporate Insolvency Resolution Process (CIRP) against M/s. TBEA Green Energy (India) Private Ltd. under Section 9 of the Insolvency and Bankruptcy Code, 2016. The applicant claimed outstanding dues for supplies and services rendered between January 2012 and January 2014.2. Claim of Outstanding Principal Amount and Interest:The applicant asserted that despite partial payments amounting to Rs. 1,80,52,711/-, an outstanding principal amount of Rs. 25,42,163.31 remained unpaid. Additionally, the applicant claimed interest at 24% per annum, totaling Rs. 32,32,356/-, due to delayed payments. The respondent had made payments of Rs. 22,57,434/- on 11.01.2018 and Rs. 3,00,000/- on 12.04.2018, covering the principal amount before the effective hearing.3. Validity of Interest Rate Claimed:The tribunal scrutinized the invoices and found that only three invoices contained a clause stipulating 20% interest for delayed payments, contrary to the applicant’s claim of 24% interest on all invoices. The tribunal referenced the Hon'ble Supreme Court's decision in Oil & Natural Gas Commission v. M.C. Clelland Engineers S.A., which held that interest on delayed payments becomes part of the principal amount. However, the tribunal noted that the applicant’s claim of 24% interest was not supported by an agreement between the parties and was deemed exorbitant and unreasonable.4. Financial Stability and Credibility of the Respondent:The respondent argued that the insolvency process was wrongly initiated, asserting financial stability and credibility, as evidenced by the payments made. The tribunal found that the respondent had released significant payments amounting to approximately Rs. 2.00 crores during the relevant period, indicating financial stability.5. Admissibility of Invoices as Contractual Agreements:The tribunal considered the applicant’s reliance on the invoices as contractual agreements. The tribunal referred to the Bombay High Court’s decision in Jatin Koticha v. VFC Industries (P.) Ltd., which held that invoices are treated as written contracts, binding the parties to the terms, including interest on delayed payments. However, the tribunal found that the applicant’s claim of 24% interest was not supported by the invoices or any agreement between the parties.Conclusion:The tribunal concluded that the principal amount had been paid before the effective hearing and that the claim for 24% interest was not maintainable under the Insolvency and Bankruptcy Code. The tribunal referenced the Hon'ble NCLAT’s decision in Gammon India Ltd. v. Krishna Enterprises, which stated that in the absence of an agreement, interest claims could not be the basis for initiating CIRP. Consequently, the application was dismissed, and the petition was disposed of with no order as to costs.