TaxTMI 
TaxTMI 
TaxTMI 
2022 (2) TMI 936
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....he Operational Creditor. The total due is Rs. 2,62,41,032/- out of which Rs. 1,50,30,848/- forms the principal and the rest of the amount is the interest @ 24% Per Annum. 3. A demand notice was issued, for which no reply was issued by the Corporate Debtor. Hence this Petition seeking for initiating CIRP. 4. The Corporate Debtor filed counter admitting that the material was supplied by the Operational Creditor as stated in the Petition during the period from 24.02.2018 to 07.02.2019. The said materials are further sold by the Corporate Debtor to the Government. After change in the government in the year 2019 there is inordinate delay on the part of the government in clearing the bills of the Corporate Debtor, which resulted in delay in clearing the invoices of the Operational Creditor. As such few invoices were left unpaid as the Corporate Debtor did not receive the payment from the Government. The contractual obligations between the Operational Creditor and Corporate Debtor are on back to back basis and there is no agreement on interest to be levied on delayed payments, as the Operational Creditor is well aware that the Corporate Debtor supplies this material to the Government. B....
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....his Petition and not prior to that. The petition is filed in respect of both principle and the interest part of the debt. A demand notice was issued for both the principle and the interest. No reply was issued to the said notice. A perusal of the terms and conditions of invoices would show that there is a specific condition that the interest @ 24% per annum would be charged for all the delayed payments. In fact the invoices filed along with the application are not invoices but the tax invoices. Whether a stipulation in tax invoice which does not bear the signature of the Corporate Debtor would amount to an agreement for payment of interest is the question that crops up in the foremost. The Counsel for the Corporate Debtor contends that since the principal amount is cleared during the pendency of the application and before the admission of the Application, the Application cannot be pursued for the interest part alone since, the definition of operational debt under the IBC does not include interest. He also submits that there is a clear distinction drawn under IBC between a financial debt and an operational debt and there is conscious exclusion of interest under the definition of o....
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....se dealt with by the Orissa High Court and the case on hand is that they are filed under different enactments. In order to borrow the ratio of the said Judgment rendered under the Companies Act going by the definition of the operational debt under IBC there is no entitlement of interest unlike under Sections 4 & 5 of the Companies Act 1993. In the said case the court decided the interest as 12% p.a. with simple instead of 24% p.a. and fixed a time of eight weeks to pay the said amount failing which consequences as provided by law were said to be ensuing. But the National Company Law Tribunal cannot adjudicate on the rate of interest and grant time to the Corporate Debtor to pay the said interest and impose a default clause. The other judgment relied upon is reported in between Krishna Chemicals & Diamond Chemical Industries Pvt. Ltd. Vs. Orient Paper and Industries Ltd. which is also rendered in a case of winding up Petition under the Companies Act. It was held that the company is liable to be wound up for non-payment of interest under the provisions of the Act. In the said case also the principal amount was paid during the pendency of the cases but the interest amounts were not pa....
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....d be decided after appreciating the entire material on record in the light of the judgments. The second judgment is rendered by the National Company Law Appellate Tribunal, New Delhi in Company Appeal (AT) (Insolvency) No. 1227 of 2019 between S.S. Polymers Vs. Kanodia Technoplast Limited in the said case also the principal amount is paid before the admission of the Application and even after receiving the total amount the appellant therein pursued the application under Section 9 of the I & B Code for a sum towards interest. The Adjudicating Authority in the background of the said facts observed that in the absence of an agreement no such amount can be claimed. The learned Counsel for the Appellant therein relied on invoices to suggest that in invoices the claim was raised for payment of interest. The NCLAT Delhi was not inclined to accept such submission as they were one side invoices raised without any consent of the Corporate Debtor. Hence, the application which was pursued for realization of interest amount was held as being against principal of the I & B Code and as having been pursued with malicious intent. The other judgment is rendered by National Company Law Appellate Tri....
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....l debt and that the Operational Creditor refused to accept the payment on the ground that they are entitled to interest even though there is no such claim for payment of interest either in the demand notice or the Application filed in Form-5. The Judgment rendered by the National Company Law Tribunal, Chandigarh bench in Company Petition No. 8/2016 between Wanbury Ltd. Vs. Panacea Biotech Ltd. is also relied upon wherein the judgment of the Hon'ble Supreme Court which set aside the judgment of the High Court and instead of remitting the matter to the High Court disposed of by directing the Corporate Debtor to pay simple interest on the admitted sum @ 12% p.a. instead of 24% p.a. was relied upon but the Tribunal however, considering that the issue therein has to be determined in view of the provisions of the Code which has come into force with effect from 01.12.2016 has held that there is a marked difference between the definition of the term financial debt and the operational debt. Whereas under Section 5(8) the term financial debt means debt along with interest if any which is disbursed against the consideration for the time value of money, in the definition of the term opera....
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....sider reduction of the interest. It can be seen that the rate of interest specified in the subject of E-mail is 18% p.a. wherein the tax invoices on which the Operational Creditor relies stipulates interest @ 24% p.a. Hence, by virtue of the rate of interest mentioned in the E-mail the Operational Creditor would impliedly admit that the interest specified in the tax invoice is not intended to be acted upon. Whether specifying 18% interest in the E-mail would amount to an agreement or not has to be next looked into. The E-mail does not reflect that the said rate of interest was agreed by the Corporate Debtor. The only contention is that since a copy of E-mail was marked to the Corporate Debtor it stands admitted. In my considered opinion, simply because there was a request to reduce the interest it cannot be said that the Corporate Debtor has agreed that there was an agreement of interest between both of them. The judgment of NCLAT, New Delhi in M/s. Steel India did not consider E-mail as constituting an agreement. That apart the letter dated 23.04.2021 addressed by the Corporate Debtor to the Operational Creditor would show that the amounts and cheques towards the principal amount....
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....ent. There is no denial of the said fact in the rejoinder filed by the Operational Creditor. Even in the E-mail which is relied upon by the Operational Creditor it is mentioned that the principal amount would be repaid immediately after receipt of payment from the Government of Andhra Pradesh which is expected to be in three to four months. There was no dispute raised with regard to the said undertaking given by the Corporate Debtor. The fact that the payment to the Operational Creditor is contingent on receiving the amounts from the Government would show that the Corporate Debtor is not an insolvent. Hence, on that ground also the Application fails. So far as the aspect of malicious prosecution is concerned, this Tribunal is inclined to accept the argument of the Operational Creditor's Counsel that since the interest part of the debt is as huge as more than Rs. 1 Crore it cannot be said that the application is being pursued with malicious intention. He contends that in the judgments cited by the Corporate Debtors the amount of interest was meagre when compared to the amount of interest involved in this case and hence, it was held that the prosecution for interest was maliciou....