Section 9 Petition Dismissed: No Interest Without Agreement – Claim Below Threshold After Exclusion of 10A Period

NCLAT held that a Section 9 petition under the IBC was not maintainable as the interest component, lacking any prior agreement, could not be included in the operational debt, and upon excluding defaults falling within the Section 10A period, the claim fell below the statutory threshold.

The National Company Law Appellate Tribunal (NCLAT), Principal Bench comprising Justice Ashok Bhushan (Chairperson) and Technical Members Mr. Barun Mitra and Mr. Arun Baroka, reviewed an appeal and held that an operational creditor cannot include unilaterally imposed interest in the calculation of operational debt under Section 9 of the IBC unless there is an express agreement between the parties. The Tribunal further held that any claims falling within the Section 10A period must be excluded; consequently, if the remaining admitted debt falls below the ₹1 crore threshold, the application under Section 9 is not maintainable.

The National Company Law Appellate Tribunal (NCLAT) dismissed an appeal filed under Section 61 of the Insolvency and Bankruptcy Code, 2016, against the order dated 02.07.2024 passed by the Adjudicating Authority (NCLT, Ahmedabad Bench) in CP (IB) No. 275(AHM)/2023. The Adjudicating Authority had dismissed the Section 9 petition filed by Comet Performance Chemicals Private Limited (Operational Creditor) against Aarvee Denims and Exports Limited (Corporate Debtor) on the grounds that the debt amount was below the threshold limit under Section 4 of the IBC and that the interest component included in the claim was disputed.

The Appellant had supplied chemicals to the Corporate Debtor over several years and claimed an outstanding amount of ₹1.36 crores, including principal and interest @24% per annum for delayed payments. While the invoices included the interest clause, the Respondent contended that such terms were never mutually agreed upon and that the Purchase Orders did not stipulate any interest liability. The Adjudicating Authority held that in the absence of a prior agreement on interest, the interest portion could not be considered part of the operational debt under Section 5(21) of the IBC. Therefore, only the principal amount of ₹60.44 lakhs was admissible, which fell below the ₹1 crore threshold.

The Appellate Tribunal upheld the NCLT's view, citing its earlier ruling in Rishabh Infra v. Sadbhav Engineering Ltd., where it was held that interest clauses not forming part of the formal agreement are unenforceable. Furthermore, the Tribunal agreed with the Respondent’s submission that certain invoices raised between November 2019 and February 2020, totalling ₹36.46 lakhs, fell within the COVID-19 protection period under Section 10A of the IBC and were thus not eligible for default claims. After excluding these invoices, the remaining claim was further reduced below the minimum limit.

The Tribunal also noted that a commercial suit for the same claim had already been filed by the Appellant prior to the issuance of the demand notice, establishing a pre-existing dispute. Since the pendency of such a suit falls within the ambit of Section 8(2)(a) of the IBC and reflects ongoing disputes, it constituted another valid reason to reject the Section 9 application.

In conclusion, the NCLAT held that the petition under Section 9 was not maintainable due to the claim being below the statutory threshold, the interest being unilaterally imposed without a contractual basis, part of the debt falling within the Section 10A bar, and the existence of a pre-existing dispute demonstrated by the pending civil suit. The Appeal was dismissed without costs.

Mr. Arjun Sheth, Mr. Aalay Shah, Ms. Kriti Kothari and Ms. Henna George, Advocates, represented the Appellant.

Mr. Palash S. Singhai and Mr. Harshal Sareen, Advocates, appeared for the Respondent.

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