IBC Application Under Section 9 Not Maintainable for Unagreed Interest Claims Based Solely on Invoice Clause

NCLAT held that an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, is not maintainable when the claim pertains solely to interest based on an invoice clause, in the absence of any express agreement or acknowledgement by the corporate debtor.

The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench comprising Justice Rakesh Kumar Jain (Judicial Member) and Technical Members Mr. Naresh Salecha and Mr. Indevar Pandey, while reviewing an appeal and connected interlocutory applications, held that an application under Section 9 of the IBC is not maintainable solely for the recovery of interest where there is no express agreement or acknowledged liability to pay such interest. The Tribunal clarified that a unilateral boilerplate interest clause in invoices, unsupported by any contractual agreement or corroborative correspondence, does not constitute an enforceable operational debt.

The National Company Law Appellate Tribunal (NCLAT) allowed an appeal filed by an ex-director of the Corporate Debtor, challenging the order dated 22.03.2024 passed by the National Company Law Tribunal (NCLT), New Delhi. The NCLT had admitted a Section 9 application under the Insolvency and Bankruptcy Code, 2016, filed by an Operational Creditor for an alleged operational debt of ₹6.13 crore, including ₹4.97 crore as principal and ₹1.16 crore as interest. The Corporate Debtor had paid the entire principal amount during the pendency of proceedings and informed the Operational Creditor through an email dated 31.01.2024, requesting withdrawal of the petition.

Despite this, the NCLT admitted the application on the ground that the interest component remained unpaid, relying on an interest clause in the invoices and judicial precedents that permitted apportionment of payments first towards interest in the absence of specific directions. The ex-director/appellant argued that there was no express agreement regarding the payment of interest, the clause in the invoices was a boilerplate term unilaterally inserted by the creditor, and that no documents such as purchase orders, emails, or prior acknowledgements substantiated the claim for interest. The Tribunal had also failed to consider that no due date for payment was specified in the invoice, rendering the interest demand vague and unenforceable.

The NCLAT noted that the ledger account of the Corporate Debtor reflected nil outstanding principal dues and that the Operational Creditor had accepted the principal amount without protest. It held that reliance by the NCLT on Supreme Court decisions regarding apportionment of payments towards interest was misplaced in the absence of any contractual or statutory liability to pay interest. The NCLAT referred to its own precedents, Comet Performance Chemicals Private Limited v. Aarvee Denims and Exports Limited, REEDLAW 2025 NCLAT Del 01539 and Rohit Motawat v. Madhu Sharma, Proprietor Hind Chem Corporation and Another, REEDLAW 2023 NCLAT Del 02705, which emphasised that invoices containing unilateral interest clauses not forming part of a formal agreement could not be enforced under Section 9 of the IBC.

It distinguished the judgment in Prashat Agarwal v. Vikash Parasrampuria and Another, REEDLAW 2022 NCLAT Del 07546 on facts, noting that in that case, the interest clause specified a clear due date and had not been disputed by the Corporate Debtor, whereas in the present case, the clause was vague and unsupported by any evidence of agreement between the parties.

Consequently, the NCLAT set aside the admission order passed by the NCLT, holding that in the absence of any agreement to pay interest, the application under Section 9 of the IBC was not maintainable solely for recovery of interest. The appeal was allowed, the impugned order was quashed, and all pending interlocutory applications were closed with no order as to costs.

Mr. Sunil Fernandes, Sr. Advocate, Mr. Rakesh Kumar, Ms. Preeti Kashyap, Ms. Diksha Dadu

and Mr. Ankit Sharma, Advocates, represented the Appellant.

Mr. Sumesh Dhawan, Mr. Praveen M. Surange, Ms. Vatsala Kak, and Mr. Shaurya Shyam, Advocates, appeared for the Respondent No. 2.

Mr. Kushal Bansal and Mr. Anish Ahlawat, Advocates, appeared for the Respondent No. 1.

Mr. Pranav Sachdeva and Mr. Jatin Bhardwaj, Advocates, represented the Intervenor.

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