Application dismissed due to failure to meet the statutory pecuniary threshold under the Insolvency and Bankruptcy Code.
In a significant ruling, the National Company Law Tribunal (NCLT), New Delhi Bench, has dismissed the insolvency application filed by Vishnu Traders against Shivam Coal Carriers Pvt. Ltd. The application, which sought the initiation of a Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016, was dismissed on the grounds of not meeting the requisite pecuniary threshold.
Vishnu Traders, an operational creditor in this case, had filed the application claiming a total operational debt of approximately Rs. 13.77 million, which included a principal amount of Rs. 8 million and interest of Rs. 5.77 million. The interest was calculated at an 18% per annum rate, allegedly as per industry norms and agreed terms.
However, the tribunal, comprising Member (Judicial) Shri Mahendra Khandelwal and Member (Technical) Ms. Anu Jagmohan Singh, found that there was no mutual agreement between Vishnu Traders and Shivam Coal Carriers regarding the payment of interest. The tribunal noted that the mere inclusion of interest in invoices does not bind the corporate debtor unless there is clear mutual consent or an agreement to this effect.
The tribunal relied on precedents, including judgments from the National Company Law Appellate Tribunal (NCLAT), which emphasize that interest claims must be substantiated by mutual consent and cannot be unilaterally imposed through invoices.
As the interest claim lacked substantiation, the tribunal considered only the principal amount of Rs. 8 million for evaluating the statutory threshold. This amount fell short of the Rs. 1 crore threshold required under Section 4 of the Insolvency and Bankruptcy Code, leading to the dismissal of the application.
The tribunal's decision underscores the importance of clear agreements regarding interest payments in business transactions. It highlights the necessity for creditors to ensure that their claims meet the statutory requirements before initiating insolvency proceedings.
The dismissal of this application serves as a critical reminder for operational creditors to substantiate their claims adequately, particularly concerning interest, to meet the pecuniary thresholds established by the Insolvency and Bankruptcy Code.
Bottom Line:
Insolvency and Bankruptcy Code - Section 9 application by Operational Creditor - Pecuniary threshold under Section 4 not met due to absence of substantiation for interest claimed - Application dismissed.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 - Sections 9, 4; Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - Rule 6(1).
Vishnu Traders v. Shivam Coal Carriers Pvt. Ltd., (NCLT)(New Delhi) : Law Finder Doc Id # 2829085
