Section 9 IBC Application Must Exceed Financial Threshold Excluding Interest to Be Maintainable
- REEDLAW
- Oct 14
- 3 min read
REEDLAW Legal News Network reports: In a crucial ruling, the National Company Law Appellate Tribunal (NCLAT), New Delhi Bench, clarified that an application under Section 9 of the Insolvency and Bankruptcy Code is maintainable only if the principal operational debt—excluding interest—exceeds the statutory financial threshold. The Tribunal emphasised that interest cannot be included unless expressly supported by a signed agreement with the Corporate Debtor, thereby reinforcing that petitions falling below the prescribed limit are liable to be dismissed, regardless of the limitation period.
The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench, comprising Justice Rakesh Kumar Jain (Judicial Member) and Mr. Naresh Salecha and Mr. Indevar Pandey (Technical Members), while adjudicating a Company Appeal and connected Interlocutory Application, held that an application under Section 9 of the Insolvency and Bankruptcy Code must surpass the prescribed financial threshold, excluding interest. The Tribunal further ruled that any interest claimed without a duly signed agreement with the Corporate Debtor is not recoverable, and therefore, a petition that does not meet the financial threshold cannot be maintained, even if filed within the limitation period.
The Appellant, an Operational Creditor, filed an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) for recovery of Rs. 1,41,57,817/-, including interest, which was dismissed by the Adjudicating Authority primarily on the grounds of limitation and the claim being below the prescribed threshold amount of Rs. 1 crore excluding interest. The Appellant had supplied polyester staple fibre to the Corporate Debtor (CD) through invoices issued during January and February 2018 and filed the Section 9 application electronically and physically in October 2021. After the Corporate Insolvency Resolution Process (CIRP) commenced against the CD, the Interim Resolution Professional (IRP) admitted the Appellant's claim, which was reflected in the Insolvency and Bankruptcy Board of India (IBBI) portal. However, the CIRP order was subsequently withdrawn following a settlement.
The Appellant contended that the acknowledgement of the claim by the IRP in February 2022 triggered a fresh limitation period pursuant to the Supreme Court’s order suspending limitation during the COVID-19 pandemic, making the application within time. Regarding the threshold, the Adjudicating Authority considered only the admitted principal amount of Rs.74,97,097/- and excluded interest, holding the claim below the Rs. 1 crore minimum for filing under Section 9. The Appellant argued that, inclusive of interest at the contractual rate of 12% per annum, the claim crossed the threshold. However, the Appellant failed to prove that the invoices demanding interest were signed by the Corporate Debtor, a prerequisite as per precedents, which hold unsanctioned invoices for interest as unilateral and unenforceable.
The Tribunal noted authoritative precedents reinforcing that interest claims based on unsigned invoices are not recoverable. It observed inconsistencies and the absence of documentary proof supporting the interest claim and affirmed that only the principal amount stood admitted, leaving the total below the threshold. Further, the Tribunal refrained from deciding the limitation issue given the failure to cross the monetary threshold. Post-dismissal of the initial petition, the Appellant filed another claim during a subsequent CIRP initiated in May 2024, being admitted only to the principal amount. Consequently, the appeal was dismissed as devoid of merit, with no order as to costs.
This judgment highlights the critical importance of complying with both the limitation period
and the prescribed financial threshold for Section 9 applications, and reinforces that interest
claims must be supported by duly signed agreements or documents; failure in either aspect
renders the application non-maintainable under the Insolvency and Bankruptcy Code, 2016.
Mr. Sumit Shukla and Mr. Sanjeev Panda, Advocates, represented the Appellant.
Already ex parte for the Respondent.
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