2020 (8) TMI 578 - AT - Insolvency and Bankruptcy

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

M/s Steel India Versus Theme Developers Pvt. Ltd.

The Appellate Tribunal dismissed the appeal in a case involving an application for Corporate Insolvency Resolution Process under Section 9 of the ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - realization of interest on delayed payments - HELD THAT:- Admittedly, the outstanding amount against the “Corporate Debtor‟ is towards interest amount of ₹ 22,64,054/-, for delayed payment against the goods sold and delivered. It is evident from the particulars of claims annexed with the Appeal as Annexure A2. In case of SBF PHARMA VERSUS GUJARAT LIQUI PHARMACAPS PVT. LTD. [2019 (11) TMI 1431 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI], this Appellate Tribunal rejected the Petition for the realization of only interest amount, on the ground that the Petition is filed for other than for the Resolution of Insolvency or liquidation. The respondent further contends that, the claim of interest alone on loan, does not clarify as an “Operational Debt‟ under the “I & B Code‟. It is settled that the charging of interest, ought to be an actionable claim, enforceable under law, provided it was properly agreed upon between the parties. In this case, Learned Counsel for the Appellant submits that the email dated 05th September 2015, relates to the quotation only. It is pertinent to mention that “Operational Creditor‟ issued first demand notice on 28th December 2018. Based on this first demand notice. The “Corporate Debtor‟ made the payment of the principal amount, and only an interest amount of ₹ 22,64,054/- remained outstanding towards interest, for which the “Corporate Debtor‟ raised the dispute. After that, the “Operational Creditor‟ issued the demand notice on 15th January 2019 Application for initiation of corporate insolvency resolution process under Section 9 of the I & B Code was filed before the Adjudicating Authority. Before the issuance of the second demand notice, the dispute relating to the payment of interest was existing. Therefore, the Adjudicating Authority rejected the Application by the Impugned Order. It is also pertinent to allege that the outstanding amount is towards interest on the delayed payments, for which there was a pre-existing dispute, before issuance of demand notice. The alleged claim amount, towards interest on loan alone, cannot be termed as an “Operational Debt‟ - Appeal dismissed. 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.