Appellate Tribunal upholds rejection of appeal in Corporate Insolvency case emphasizing valid operational debt claim

The Appellate Tribunal dismissed the appeal in a case involving an application for Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code 2016. The rejection was based on the nature of the claim, specifically the dispute over interest amount and delayed payments, with the Tribunal emphasizing the requirement for a valid operational debt claim beyond mere interest on loans. The decision upheld the Adjudicating Authority's ruling due to the pre-existing dispute and lack of concrete evidence supporting the interest claim as part of operational debt.

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Issues:
1. Application filed under Section 9 of the Insolvency and Bankruptcy Code 2016 for Corporate Insolvency Resolution Process.
2. Dispute regarding outstanding interest amount and delayed payments.
3. Rejection of the petition by the Adjudicating Authority based on pre-existing dispute and nature of the claim.
4. Interpretation of "Operational Debt" and eligibility of interest on loan as part of it.

Analysis:
1. The appeal stemmed from an application filed under Section 9 of the Insolvency and Bankruptcy Code 2016 by the Appellant, seeking Corporate Insolvency Resolution Process against the corporate debtor due to default in payment amounting to Rs. 22,64,054, inclusive of interest. The Appellant supplied steel bars to the Corporate Debtor for construction activities, with invoices raised for the transactions.

2. The Adjudicating Authority rejected the petition citing the outstanding amount as interest-only for delayed payments from 2015 to 2018 and a pre-existing dispute raised by the Corporate Debtor after receiving the demand notice. The Respondent argued that interest on loan alone does not qualify as "Operational Debt" under the I & B Code.

3. The Appellate Tribunal referenced previous judgments to highlight that pursuing insolvency proceedings solely for interest amounts, without aiming for resolution or liquidation, goes against the Code's principles. The Respondent disputed the interest claim, stating a pre-existing disagreement before the demand notices were issued.

4. The Appellant contended that the Corporate Debtor agreed to pay 2% interest on delayed payments exceeding 60 days, supported by an email quoting the terms. However, the Tribunal noted the absence of concrete evidence proving the Corporate Debtor's acceptance of the interest terms. The invoices did not specify the interest clause, leading to the rejection of the application.

In conclusion, the Appellate Tribunal dismissed the appeal, emphasizing the need for a valid operational debt claim beyond mere interest on loans. The decision upheld the Adjudicating Authority's ruling due to the pre-existing dispute and the lack of substantial evidence supporting the interest claim as part of operational debt.

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