2021 (5) TMI 545 - Tri - Insolvency and Bankruptcy

Tribunal rejects application under Insolvency Code Section 9, stresses need for detailed trial

The Tribunal dismissed the application under Section 9 of the Insolvency and Bankruptcy Code, emphasizing the necessity for a detailed trial to ascertain ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - interest on delayed payment - existence of debt and dispute or not - suppression of material facts - HELD THAT:- It is clearly brought to our notice that the amount claimed by the applicant is based on the delayed payment of the invoice and interest thereon at the rate of 24% per annum. The applicant relies only on the document at page No. 11 filed along with the application in which there is no seal of the Corporate Debtor. Whether the Applicant is entitled to claim interest at the rate of 24% per annum based on the invoice during business transaction between the parties is the subject matter of the trial and cannot be decided in summary suit. This Adjudicating Authority cannot isolate one invoice and conclude that amount is due and payable - whether the applicant is entitled to the interest at the rate of 24% per annum cannot be decided, without trial based on the invoice which is not signed by the Corporate Debtor in token of acceptance. There are several other transactions and business dealings but the applicant has filed only one invoice. Hence, there is clearly suppression of material facts. Whether Operational Creditor is entitled to claim 'interest on the delayed payment'? - what is the rate of interest the applicant is entitled to and from which period is the amount, if any, is due and payable? - HELD THAT:- It cannot be concluded that based on the copy of invoice that applicant is entitled for the interest at the rate of 24% per annum since it is the subject matter of the City Civil Court to adduce evidence and detailed trial is required to conclude whether any interest is due and payable by the Corporate Debtor to the Operational Creditor, under invoice. Application dismissed. Issues:Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process based on default by the Corporate Debtor. Dispute regarding the claimed amount and interest rate of 24% per annum. Allegations of suppression of material facts by the Operational Creditor. Payment made by the Corporate Debtor during the pendency of the proceedings. Entitlement of the Operational Creditor to claim interest on delayed payment and the rate of interest.Analysis:The application was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of Corporate Insolvency Resolution Process against the Corporate Debtor for defaulting an amount along with interest at 24% per annum. The Operational Creditor claimed a total amount due, including interest, based on invoices and a demand notice sent to the Corporate Debtor. However, the Corporate Debtor disputed the claim, alleging suppression of material facts and stating that payments were made towards the outstanding amount.The Corporate Debtor contended that payments were made during the pendency of the proceedings, reducing the outstanding balance. The Corporate Debtor argued that the Operational Creditor's claim of interest at 24% per annum was not valid as there was no contractual stipulation on the payment period. The Corporate Debtor maintained that all payments related to the disputed invoice were settled between the parties, and no outstanding dues existed.The Tribunal noted that the Operational Creditor's claim was based on delayed payment and interest at 24% per annum, but the validity of claiming interest at this rate required a detailed trial. The Tribunal emphasized that the matter of interest could not be summarily decided based on a single unsigned invoice without considering other transactions and business dealings between the parties. Therefore, the Tribunal dismissed the application, stating that the issue of interest entitlement required a comprehensive trial in the City Civil Court.In conclusion, the Tribunal dismissed the application under Section 9, highlighting the need for a detailed trial to determine the validity of the Operational Creditor's claim for interest on delayed payment. The judgment underscored the importance of considering all relevant transactions and agreements between the parties before deciding on the interest rate and amount due, emphasizing the need for a comprehensive legal process to resolve the dispute effectively.