Operational debt and statutory interest on unpaid sale price can support insolvency admission, subject to reasonableness and proof of default.

Interest on unpaid sale price may be claimed by an operational creditor where the commercial supply transaction is undisputed and no contractual bar exists; the note states that statutory interest under the Sale of Goods Act can form part of the debt, though an excessive rate may be moderated to a reasonable level. It also records that purchase orders, invoices and repeated acknowledgments supported proof of operational debt and default, so the insolvency petition was considered fit for admission under the Insolvency and Bankruptcy Code, subject to limitation being satisfied. The text further notes that the matter was ultimately deferred because of a difference of opinion.

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Issues: (i) Whether interest on unpaid sale price could be claimed by an operational creditor and treated as part of the debt for the purposes of a petition under the Insolvency and Bankruptcy Code, 2016; (ii) Whether the company petition deserved admission on the basis of the materials showing debt and default.

Issue (i): Whether interest on unpaid sale price could be claimed by an operational creditor and treated as part of the debt for the purposes of a petition under the Insolvency and Bankruptcy Code, 2016.

Analysis: The unpaid invoices arose from a commercial supply transaction and the debtor had acknowledged the outstanding amount on several occasions. In the absence of a contractual bar, the seller was held entitled to claim interest on the unpaid price under section 61 of the Sale of Goods Act. The absence of an express interest clause in the invoices did not disable the creditor from seeking reasonable interest, and the Code was read as not prohibiting such claim. The rate claimed at 24% was found excessive in the absence of agreement, and interest was reduced to 12% per annum for verification of the claim.

Conclusion: The operational creditor was held entitled to claim interest on the unpaid principal amount, though at a reduced rate of 12% per annum.

Issue (ii): Whether the company petition deserved admission on the basis of the materials showing debt and default.

Analysis: The purchase orders, invoices, and repeated acknowledgments established an unpaid operational debt and default, and the claim was treated as within limitation. The petition was therefore held to satisfy the requirements for admission under section 9 of the Insolvency and Bankruptcy Code, 2016, and moratorium and appointment of an interim resolution professional were directed. However, the order records that the Member differed, and admission was deferred for reference by the orders of the President of the National Company Law Tribunal.

Conclusion: On the reasoning contained in the order, the petition was found fit for admission, but the matter was ultimately deferred because of the difference of opinion.

Final Conclusion: The order contains a reasoned view supporting admission of the insolvency petition and recognition of interest on the unpaid operational debt, but no final majority disposal resulted because the matter was deferred for reference on account of differing opinions.

Ratio Decidendi: In a commercial supply transaction, statutory interest may be claimed on unpaid price in the absence of a contractual prohibition, and such claim may support proof of operational debt and default; however, a difference of opinion preventing common disposal leaves the matter without a final majority outcome.

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