2026 (3) TMI 108 - AT - IBC

Transfer of winding up proceedings requires fresh IBC admission and meeting the applicable statutory threshold on conversion.

Transferred winding up petitions converted into insolvency applications must be adjudicated afresh under the Insolvency and Bankruptcy Code and satisfy ... Maintainability of the Section 9 application on the ground that there is a pre-existing dispute - Transfer of winding-up proceedings to the Tribunal to be dealt with under the I&B Code - admission of a Section 9 application subject to satisfaction of statutory parameters including threshold - applicability of amended threshold for initiation of insolvency proceedings determined as on conversion date - unilateral invoice term for interest unenforceable in absence of agreement or acceptance - remedial direction to pay deposited amount with interest Transfer of winding-up proceedings to the Tribunal to be dealt with under the I&B Code - admission of a Section 9 application subject to satisfaction of statutory parameters including threshold - Whether a winding-up petition transferred to the NCLT must be mechanically admitted on the basis of the High Court's earlier admission or must be examined afresh under the I&B Code for admission of Section 9 application. - HELD THAT: - The Tribunal held that transfer of an admitted winding-up petition to the NCLT does not mandate mechanical admission under Section 9. Proceedings transferred under the proviso to Section 434(1)(c) are to be dealt with by the Tribunal as applications under the I&B Code, and the NCLT must examine and apply the statutory parameters for admission of a Section 9 application. Reliance on Supreme Court in A. Navinchandra Steels (P) Ltd. vs. Srei Equipment Finance Ltd. [2021 (3) TMI 38 - SUPREME COURT], was recorded to the effect that Section 7/9 proceedings are independent and must be decided on the I&B Code's parameters despite prior winding-up proceedings or earlier orders of the Company Court. The Adjudicating Authority's earlier direction that the applicant satisfy the bench about maintainability (including threshold) was correctly required by law, and prior admission in winding-up cannot obviate this requirement. [Paras 20, 21, 22, 24] After transfer, the NCLT must examine and decide the converted Section 9 application in accordance with the I&B Code and its admissibility criteria; prior admission in winding-up does not automatically result in admission under Section 9. Applicability of amended threshold for initiation of insolvency proceedings determined as on conversion date - admission of a Section 9 application subject to satisfaction of statutory parameters including threshold - Which threshold (Rs. 1 Lakh or Rs. 1 Crore) applies to the Section 9 application converted from the winding-up petition. - HELD THAT: - The Tribunal held that the relevant threshold is to be assessed as on the date the winding-up petition was converted into a Section 9 application. Since the conversion occurred after the legislative amendment raising the minimum default threshold, the Rs. 1 Crore threshold (as applicable w.e.f. 24.03.2020) governs eligibility. The legislative scheme and Rule 5 of the Transfer Rules do not permit reliance on the earlier threshold applicable at the time of initial filing of the winding-up petition; the Operational Creditor therefore had to demonstrate that the debt exceeded Rs. 1 Crore when the petition was converted into Section 9 proceedings. [Paras 26, 27, 28] Threshold applicable to the converted Section 9 application is Rs. 1 Crore and the Operational Creditor was required to satisfy that threshold. Unilateral invoice term for interest unenforceable in absence of agreement or acceptance - admission of a Section 9 application subject to satisfaction of statutory parameters including threshold - Whether the Operational Creditor's claim to include interest at 24% per annum (as per invoice note) can be included in the debt for meeting the threshold. - HELD THAT: - The Tribunal found that the claim for interest at 24% was a unilateral term in invoices and there was no agreement or evidence that the Corporate Debtor accepted liability for such interest or had paid interest at that rate. Precedent of the Tribunal was relied on to hold that invoice terms alone do not bind the Corporate Debtor on the question of interest unless there is an express agreement or other material showing acceptance. In the absence of such agreement or evidence of acceptance, the interest claim could not be included in the admitted debt. Consequently, without the interest component the principal debt of Rs. 7,62,500/- fell well short of the Rs. 1 Crore threshold. [Paras 30, 31, 32, 33, 34] Interest at 24% cannot be included in the debt without evidence of agreement or acceptance; excluding interest, the debt did not satisfy the Rs. 1 Crore threshold. Pre-existing dispute defence and bonafides of dispute - Whether the Corporate Debtor had a pre-existing bona fide dispute such as to require rejection of the Section 9 application. - HELD THAT: - The Tribunal examined the account confirmation dated 03.03.2004, signed by the Corporate Debtor confirming the outstanding amount, and the later letter dated 24.05.2004 which complained about invoice rates. The Tribunal held that the later letter did not amount to a pre-existing bonafide dispute, particularly given the account confirmation and the invoice condition that claims must be notified within 48 hours. The High Court's earlier finding that the dispute was not bonafide was noted and the Tribunal agreed that the defence amounted to a sham/illusionary claim rather than a genuine pre-existing dispute. [Paras 36, 37, 38, 39, 40] The claim of a pre-existing dispute was not bona fide and did not justify rejection of the application on that ground. Remedial direction to pay deposited amount with interest - Whether the Corporate Debtor should be directed to pay the amount earlier ordered by the High Court to be paid to the Operational Creditor and, if so, with what interest and terms. - HELD THAT: - The Tribunal noted the High Court order of 04.04.2006 directing payment of the deposited amount and the subsequent dismissal of the Corporate Debtor's appeal that left the Operational Creditor entitled to the deposit. Observing that the Operational Creditor had been deprived of the amount, the Tribunal directed the Corporate Debtor to pay the deposited sum with compound interest at 12% per annum from 04.04.2006 until payment, but permitted the Corporate Debtor to withdraw the deposited sum from the High Court and pay the same (with interest) to the Operational Creditor within 30 days. This remedial direction was treated as independent of the Section 9 admission analysis. [Paras 41, 42, 43] The Corporate Debtor is directed to pay the deposited amount to the Operational Creditor with compound interest at 12% from 04.04.2006; the deposit may be withdrawn and paid within 30 days. Final Conclusion: The appeal is allowed: the NCLT order admitting the Section 9 application is set aside because the converted application did not meet the Rs. 1 Crore threshold (interest claimed at 24% cannot be included without agreement); the Corporate Debtor is directed to pay the previously ordered deposit to the Operational Creditor with compound interest @12% from 04.04.2006 within 30 days; parties to bear their own costs. Issues: (i) Whether NCLT, on transfer of a winding-up petition already admitted by a High Court, must proceed from the stage of admission or re-examine admission under the Insolvency and Bankruptcy Code when the petition is converted into a Section 9 application; (ii) Whether the operational creditor must satisfy the statutory parameters for admission of a Section 9 application after such transfer; (iii) Whether the threshold amount applicable to the transferred petition converted into Section 9 in 2022 is Rs. 1 Lakh or Rs. 1 Crore; (iv) Whether interest claimed unilaterally at 24% per annum can be included in computing the debt for meeting the threshold; (v) Whether there existed a pre-existing dispute justifying rejection of the Section 9 application.Issue (i): Whether NCLT, on transfer of a winding-up petition admitted by the High Court, must re-examine admission under the IBC or proceed from the stage of admission.Analysis: The transfer proviso to Section 434(1)(c) and Rule 5 of the Transfer Rules permit transfer of winding-up proceedings to the Tribunal, to be dealt with under the Code. Authoritative decisions hold that petitions transferred must be considered under the IBC; Section 7 and Section 9 proceedings are independent and require adjudication on the IBC parameters even if a winding-up petition was earlier admitted by a court.Conclusion: After transfer, NCLT must examine the petition under the IBC provisions and is not bound to mechanically treat prior High Court admission as automatic admission under Section 9.Issue (ii): Whether the operational creditor must satisfy the statutory parameters for admission of a Section 9 application after transfer.Analysis: The Transfer Rules and the order directing conversion and compliance require submission of information necessary for admission under Sections 7/8/9. Precedent confirms that transferred matters converted to Section 9 must satisfy all parameters for admission under the Code.Conclusion: The operational creditor must satisfy all parameters for admission of the Section 9 application, including the threshold requirement.Issue (iii): Applicable threshold amount for the Section 9 application converted in 2022 - Rs. 1 Lakh or Rs. 1 Crore.Analysis: The statutory threshold under Section 4 of the IBC was increased to Rs. 1 Crore effective 24.03.2020. The petition was converted into a Section 9 application after that date (conversion in 2022), and the adjudicating order directed the applicant to satisfy maintainability under the amended Section 4.Conclusion: The threshold applicable to the converted Section 9 application is Rs. 1 Crore and the operational creditor must fulfil that threshold.Issue (iv): Whether unilateral claim of interest at 24% per annum can be included in the debt for meeting the threshold.Analysis: Invoices unilaterally stating an interest term do not establish an agreed contractual obligation to pay interest unless there is agreement, acceptance, or conduct showing acceptance. Tribunal precedent rejects addition of unilateral interest claims in absence of contractual acceptance; inclusion of such interest for threshold computation is impermissible if not proved.Conclusion: Interest at 24% per annum, being unaccepted and unproved, cannot be included in the debt; the debt remains the principal of Rs. 7,62,500 which does not meet the Rs. 1 Crore threshold.Issue (v): Whether there was a pre-existing dispute warranting rejection of the Section 9 application.Analysis: The corporate debtor executed an account confirmation acknowledging outstanding of Rs. 7,62,500 as on 28.02.2004. A subsequent reconciliation-letter months later alleging exaggerated rates did not provide particulars nor was a claim raised within contractual timelines; earlier judicial findings regarded the dispute as not bona fide. Precedent and record indicate that the post-confirmation letter did not constitute a bona fide pre-existing dispute.Conclusion: No pre-existing bona fide dispute existed; the objection of pre-existing dispute is rejected.Final Conclusion: On transfer and conversion of the winding-up petition into a Section 9 application after the amendment raising the threshold, the Tribunal must apply the IBC admission criteria; the operational creditor failed to prove an agreed interest component and failed to meet the Rs. 1 Crore threshold, warranting setting aside of the admission order.Ratio Decidendi: A winding-up petition transferred to the NCLT and converted into an insolvency application must be adjudicated under the Insolvency and Bankruptcy Code and meet the Code's admission requirements in force on conversion; unilateral invoice terms for interest cannot be added to the debt for threshold computation absent agreement or acceptance by the corporate debtor.