TaxTMI 
TaxTMI 
2026 (3) TMI 108
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....e Operational Creditor. Appellant aggrieved by the impugned order has come up in this appeal. 2. On 23.01.2026, an interim order was passed directing the Resolution Professional to collate the claims but not to take any further steps. Brief facts of the case necessary to be noticed for deciding this appeal are: 2.1 The Operational Creditor - M/s Falcon Industries supplied various products beginning from May, 2002. Various invoices were issued by the Operational Creditor to the Corporate Debtor - M/s Geeta Prints Ltd. 2.2 A letter dated 03.03.2004 was issued by the Operational Creditor for account confirmation to the Corporate Debtor mentioning an outstanding amount of Rs. 7,62,500/- as on 28.02.2004. The account confirmation was duly signed by the Corporate Debtor. A letter dated 24.05.2004 was written by the Corporate Debtor to the Operational Creditor on the subject of reconciliation of accounts, it was mentioned in the letter that rates in the invoices were exaggerated and was not commensurate with the items and their quality. 2.3 On 09.09.2004, the Operational Creditor sent a notice under section 433 and 434 of the Companies Act, 1956 to the Corporate Debtor informi....
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....t. Publication was made in the newspaper as per order admitting Company Petition. Affidavit of reply was filed. The Company Petition was taken thereafter by the High Court on 25.11.2021 and the Hon'ble High Court referring to the judgment of Hon'ble Supreme Court in Action Ispat and Power Pvt. Ltd. vs. Shyam Metalics and Energy Ltd., (2021) 2 SCC 641, transferred the Company Petition to NCLT, Ahmedabad Bench. In Para 8 of the order, transferring the Company Petition, following was observed: "8. In view of the above Company Petition No. 240 of 2004 and Company Petition No. 241 of 2004 is accordingly transferred to the National Company Law Tribunal, Ahmedabad Bench. Registry forward the papers to the Tribunal within period of four weeks from today along with order. Tribunal to do the needful in accordance with law to proceed with the matter from the stage at which it is transferred." 2.11 Subsequent to the above order of the Gujarat High Court, the Operational Creditor filed an application to initiate Corporate Insolvency Resolution Process under the I&B Code by application dated 24.02.2022. In Part-IV of the application while giving particulars of the debt, Principal Amo....
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..... The total Principal Amount claimed in the application in Winding up proceeding as well as in application under Section 9 is Rs. 7,62,500/-. The Operational Creditor has added 24% interest compounded quarterly, which is impermissible. It is submitted that threshold for filing Section 9 application w.e.f. 04.03.2020 is Rs. 1 Crore. Application did not fulfil the threshold, hence, was liable to be rejected on this ground alone. The Adjudicating Authority itself has passed order directing the Appellant to satisfy maintainability of the application including the threshold. The Adjudicating Authority, however, without appropriately considering the issue of maintainability has admitted Section 9 application, which needs to be interfered with. No interest amount could be added in the debt. NCLT is not bound by any previous admission by the High Court while adjudicating Winding up petition. Admission of the Winding up petition by the High Court does not tantamount to admission of Section 9 application. There has to be judicial determination of debt and default in Section 7 or Section 9 application. The NCLT could not have mechanically admitted Section 9 application. The Corporate Debtor i....
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....the Winding Up Petition, which was already admitted by the High Court of Gujarat, the Adjudicating Authority while hearing the Section 9 application has to proceed from the stage i.e. from the stage of admission or has to pass an order of admission on Section 7 application? II. Whether the Operational Creditor who has converted Winding Up Petition in Section 9 application by filing Form-5 has to satisfy necessary conditions for admission of Section 9 application? III. Whether threshold for TP No.02(Ahm)2022 transferred by the High Court to the NCLT shall be Rs. 1 Lakh or the Operational Creditor had to fulfil the threshold of Rs. 1 Crore as applicable w.e.f. 04.03.2020? IV. Whether the application filed by the Operational Creditor, the threshold of Rs. 1 Crore was met on adding interest @ 24% per annum claimed by the Appellant? V. Whether there was pre-existing dispute between the parties so as to reject the application filed by the Operational Creditor? Question No. I and II 8. From the facts as noticed above, we have noticed that the Winding Up Petition - C.P. No.240 of 2004 was filed by the Operational Creditor in the High Court of Gujar....
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....itted. Thus, in a winding up proceeding where the petition has not been served in terms of Rule 26 of the Companies (Court) Rules, 1959 preadmission stage, given the beneficial result of the application of the Code, such winding up proceeding is compulsorily transferable to the NCLT to be resolved under the Code. Even post issue of notice and pre admission, the same result would ensue. However, post admission of winding up petition and after the assets of the company sought to be wound up become in custodia legis and are taken over by the Company Liquidator, section 290 of the Companies Act, 2013 would indicate that the Company Liquidator may carry on the business of the company, so far as may be necessary, for the beneficial winding up of the company, and may even sell the company as a going concern. So long as no actual sales of the immovable or movable properties have taken place, nothing irreversible is done which would warrant Company Court staying its hands on a transfer application made to it by a creditor or any party to the proceedings. It is only where the winding up proceedings have reached stage where it would be irreversible, making it impossible to set the clock back ....
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....4,43,14,429/-. The petition is converted into the application under Section 9 of IBC, 2016 on 04.03.2022 as per amended Section 4 of IBC, 2016. Learned Counsel for the applicant is required to satisfy the Bench with respect to maintainability considering threshold limit as per the amended section 4 of the IBC, 2016. In the meantime, notice be issued to the corporate debtor. List on 30.05.2022." 12. The above order clearly indicate that petition has been filed under Section 9 of the I&B Code and has been converted into Section 9 petition of the I&B Code. The Adjudicating Authority specifically directed the Applicant to satisfy the bench as per the amended Section 4 of the IBC whether threshold is fulfilled or not. Section 434 deals with transfer of certain pending proceeding. Section 434(c) deals with proceeding of winding up also. A proviso was added in the above Section by Act 26 of 2018 w.e.f. 06.06.2018. When we look into the order passed by the Gujarat High Court transferring the petition on 25.11.2021, the Gujarat High Court noticed the submission of the Corporate Debtor, who submitted that Company Petition is required to be transferred to the NCLT. The said submis....
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.... 14.4. Therefore, what follows as a matter of law is that even post admission of a winding-up petition, and after the appointment of a Company Liquidator to take over the assets of a company sought to be wound up, discretion is vested in the Company Court to transfer such petition to NCLT. The question that arises before us in this case is how is such discretion to be exercised?" 14. The order of Winding Up in the above case was upheld by the Hon'ble Supreme Court. In para 25 and 26 following was held: "25. Given the aforesaid scheme of winding up under Chapter XX of the Companies Act, 2013, it is clear that several stages are contemplated, with the Tribunal retaining the power to control the proceedings in a winding-up petition even after it is admitted. Thus, in a winding-up proceeding where the petition has not been served in terms of Rule 26 of the Companies (Court) Rules, 1959 at a pre-admission stage, given the beneficial result of the application of the Code, such winding-up proceeding is compulsorily transferable to NCLT to be resolved under the Code. Even post issue of notice and pre-admission, the same result would ensue. However, post admission of a w....
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....-up proceedings to NCLT was taken by the Companies (Transfer of Pending Proceedings) Rules, 2016 ("the Transfer Rules, 2016"), which compulsorily transferred all winding-up proceedings pending before the High Courts to NCLT at a stage prior to the service of the petition in terms of Rule 26 of the Companies (Court) Rules, 1959. By an amendment made on 17-8-2018, the 5th proviso to Section 434(1)(c) was added which states as follows: "434. Transfer of certain pending proceedings.-(1) On such date as may be notified by the Central Government in this behalf- (a)-(b) * * * (c) all proceedings under the Companies Act, 1956 (1 of 1956), including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies, pending immediately before such date before any District Court or High Court, shall stand transferred to the Tribunal and the Tribunal may proceed to deal with such proceedings from the stage before their transfer: * * * Provided further that any party or parties to any proceedings relating to the winding up of companies pending before any court immediately before the commencement of the Insol....
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....posed insolvency professional to the Tribunal upto 15th day of July, 2017, failing which the petition shall stand abated: Provided further that any party or parties to the petitions shall, after the 15th day of July, 2017, be eligible to file fresh applications under sections 7, & or 2 of the Code, as the case may be, in accordance with the provisions of the Code: Provided also that where a petition relating to winding up of a company is not transferred to the Tribunal under this rule and remains in the High Court and where there is another petition under clause (e) of section 433 of the Act for winding up against the same company pending as on 15th December, 2016, such other petition shall not be transferred to the Tribunal, even if the petition has not been served on the respondent.]" 19. As noted above, after transfer of the Winding Up Petition, the Operational Creditor filed application in Form 5 to comply the procedural requirement and petition was converted in Section 9 petition which is recorded in the order of the Adjudicating Authority, as noted above, by order dated 06.04.2022. The Adjudicating Authority directed the Operational Creditor to satisfy th....
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....f the economy of the country. It is, thus, not possible to accede to the argument on behalf of the appellant that given Section 446 of the Companies Act, 1956/Section 279 of the Companies Act, 2013, once a winding-up petition is admitted, the winding-up petition should trump any subsequent attempt at revival of the company through a Section 7 or Section 9 petition filed under the IBC. While it is true that Sections 391 to 393 of the Companies Act, 1956 may, in a given factual circumstance, be availed of to pull the company out of the red, Section 230(1) of the Companies Act, 2013 is instructive and provides as follows: "230. Power to compromise or make arrangements with creditors and members.-(1) Where a compromise or arrangement is proposed- (a) between a company and its creditors or any class of them; or (b) between a company and its members or any class of them, the Tribunal may, on the application of the company or of any creditor or member of the company, or in the case of a company which is being wound up, of the liquidator, appointed under this Act or under the Insolvency and Bankruptcy Code, 2016, as the case may be, order a meeting of the credito....
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.... I. After transfer of the Winding Up Petition by the High Court to the NCLT after admission of the Winding Up Petition, NCLT has not to mechanically admit the petition and has to examine the application in accordance with provisions of the I&B Code and to pass a judicial order after considering as to whether the application need to be admitted under Section 9 or not. II. After transfer of the Winding Up Petition which has been converted into the Section 9 application, the Operational Creditor has to satisfy all parameters for admission of Section 9 application including threshold. Question No. III and IV 25. Both the questions being related are being taken together. The submission which has been pressed by learned counsel for the Respondent is that threshold for T.P. No. 02 of 2022 after it is converted into Section 9 application shall be Rs. 1 Lakh since at the time it was filed i.e. Winding Up Petition, the threshold under Companies Act was fulfilled and the Adjudicating Authority while passing the order under Section 9 has to examine the threshold as of Rs. 1 Lakh only. Alternatively, learned counsel for the Respondent has contended that the invoices containe....
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....t calculation by the Operation Creditor is 24% interest compounded quarterly, which is not even referred in invoices and even if 24% simple interest is added to Principal Amount, the threshold of Rs. 1 Crore is not met. We need to notice the invoice which is relied by the Respondent. In the invoice Note 1 provides as follows: "1. We charge interest at 24% if payment is not received within 30 days from the date of this bill." 29. It is relevant to notice that the Corporate Debtor never admitted acceptance of 24% interest. In the reply which was filed to the Winding Up Petition by the Corporate Debtor before the Gujarat High Court, the claim of the interest was denied. On the issue as to whether in a debt Operational Creditor can claim interest came for consideration before this Tribunal in large number of cases. Invoices claimed by the Respondent are only unilateral statement by the Operational Creditor which is clear from Note 1 which says; "We charge interest at 24%". There is no agreement between the parties or any act on part of the Corporate Debtor that at any point of time it has paid interest so as to even implied acceptance of interest. Learned counsel for the Ap....
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.... basis of an Insolvency Application. Deducting this amount from the total alleged outstanding of Rs. 1,36,30,679/-(rupees one crore, thirty-six lakhs, thirty thousand, six hundred and seventy-nine only) reduces the admissible claim to Rs. 99,84,479/- (rupees ninety-nine lakhs, eighty-four thousand, four hundred and seventy-nine only) which remains below the statutory threshold of rupees one crore. It is to be noted that this gets further reduced on deduction of the claims of interest." 31. Another judgment relied by learned counsel for the Appellant is in "Shitanshu Bipin Vora vs. Shree Hari Yarns Private Limited, Company Appeal (AT) (Ins.) No.2204 of 2024", on question of adding interest in the claim. After considering all relevant judgments, in Para 47 following was held: "47. Similarly, the Appellate Tribunal in the case of SS Polymers vs Kanodia Technoplast Limited, had held that relying on the invoices to raise claims for payment of interest is against the principle of the Code. Relevant extracts from this judgment are reproduced herein below: "4. The Learned Counsel for the Appellant relied on invoices to suggest that in the invoices, the claim was raised....
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....f interest @ 24% per annum nor there being any other material to prove that Corporate Debtor paid the interest or accepted interest of 24%, the claim of interest cannot be included in the debt and debt being only Rs. 7,62,500/- did not fulfil the threshold. Question No. V 35. Learned counsel for the Corporate Debtor has submitted that there was pre-existing dispute which was flagged by the Corporate Debtor as early as 24.05.2004, hence, the Adjudicating Authority was required to reject the application on account of pre-existing dispute. 36. We have noticed that the invoices were issued by the Operational Creditor to the Corporate Debtor and account confirmation letter dated 03.03.2004 was issued by the Operational Creditor to the Corporate Debtor which account confirmation was filed along with the Winding Up petition and is part of the record which is filed as Annexure - A4 to this appeal. The above account confirmation letter which was duly signed by the Corporate Debtor mentioned outstanding debt of Rs. 7,62,500/- as on 28.02.2004. We also need to notice letter dated 24.05.2004, which was sent by the Corporate Debtor, which is filed as Annexure - A5, which reads as follo....
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....ntention on behalf of the respondent Company that by communication dated 24.5.2004 the dispute with regard to debts was raised however no particulars are given with regard to such dispute. Apart from that, in the communication a dated 24.5.2004 the confirmation of accounts dated 3.3.2004 has not been disputed. The respondent company was served with a statutory notice, however there is no reply to the same raising any dispute. So far as Company Petition No. 241 of 2004 is concerned, even there is no dispute raised like the one raised on 24.5.2004 in Company Petition No. 240 of 2004. There is no reply to the statutory notice nor any amount has been paid within 21 days of statutory notice. It, prima facie, appears that considering the provisions of Section 434(1)(a) of the Companies Act, non-payment of the dues within 21 days is deemed to be a neglect on the part of the company to make payment. It appears that the disputes raised by the respondent Company in the affidavit-in-reply are not bonafide and no particulars are given with regard to any dispute with regard to rates, as the same were mentioned in the invoices itself. Thus, it prima facie appears that the respondent company has ....