Application for Corporate Insolvency Rejected: No Default Found

The tribunal dismissed the application for initiating Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor as the principal amount was deposited with the Registrar, NCLT, and there was no default of operational debt. The Operational Creditor was advised to pursue the recovery of interest separately through legal channels. The main application was dismissed, and the Operational Creditor was permitted to collect the deposited demand draft from the Registrar, NCLT.

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Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of Insolvency and Bankruptcy Code, 2016.
2. Dispute regarding the quality of goods supplied.
3. Inclusion of interest in the definition of operational debt under IBC.

Issue-wise Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of Insolvency and Bankruptcy Code, 2016:
The petition was filed by the Operational Creditor for the initiation of CIRP against the Corporate Debtor due to non-payment of dues. The Operational Creditor supplied various paper materials to the Corporate Debtor from June 2017 to June 2018, with invoices allowing a credit period of 30 to 60 days. Despite multiple reminders and part payments, a principal amount of Rs. 8,04,540/- remained outstanding. The Corporate Debtor acknowledged the outstanding amount but did not file a reply to the application. However, they deposited a demand draft of Rs. 8,04,540/- before the Registrar, NCLT, which was considered in the judgment.

2. Dispute regarding the quality of goods supplied:
The Corporate Debtor raised a dispute regarding the quality of the goods supplied, claiming that the paper quality was less than the agreed 180 GSM. This issue was mentioned in their reply to the demand notice, stating that the materials were rejected by their quality control department. The Corporate Debtor agreed to utilize the materials for certain clients with a standard demurrage of 30% of the total invoice amount. The tribunal noted that the Operational Creditor did not address this quality dispute in their application, indicating that the dispute was validly raised by the Corporate Debtor.

3. Inclusion of interest in the definition of operational debt under IBC:
The Operational Creditor claimed interest on the outstanding amount, arguing that the invoices stipulated an interest rate of 2% per month on delayed payments. The tribunal examined the definitions of "financial debt" and "operational debt" under Sections 5(8) and 5(21) of IBC, respectively. It concluded that while financial debt includes interest, operational debt does not. The tribunal referred to the Supreme Court's decision in Natha Devi Vs. Radha Rani Gupta, emphasizing that every part of the statute should have effect, and the omission of the word "interest" in the definition of operational debt was intentional by the legislature. Therefore, the tribunal held that interest cannot be included in the defaulted amount for operational debt.

Conclusion:
The tribunal found that the Corporate Debtor had already deposited the principal amount of Rs. 8,04,540/- with the Registrar, NCLT, and there was no default of operational debt as per Section 3(12) of IBC. Consequently, the tribunal dismissed the application for initiating CIRP against the Corporate Debtor. The Operational Creditor was advised to pursue the recovery of interest through appropriate legal channels. The main application was dismissed, and the Operational Creditor was allowed to collect the deposited demand draft from the Registrar, NCLT.

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