Threshold for Section 9 IBC Application to Be Determined on Date of Filing, Not Admission: NCLAT
- REEDLAW
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NCLAT held that the threshold for a Section 9 application under the Insolvency and Bankruptcy Code, 2016, must be determined on the date of filing of the application and not at the stage of its admission.
On 13.05.2025, the National Company Law Appellate Tribunal (NCLAT), New Delhi Bench, comprising Justice Rakesh Kumar Jain (Judicial Member) and Mr. Naresh Salecha (Technical Member), reviewed an appeal along with connected Interlocutory Applications and held that the threshold limit of ₹1 crore under Section 4 of the Insolvency and Bankruptcy Code, 2016, must be assessed as on the date of filing of the application under Section 9. The Tribunal further clarified that any subsequent reduction in the claim amount due to part payment by the corporate debtor does not affect the maintainability of the application.
The National Company Law Appellate Tribunal (NCLAT) in Comp. App. (AT) (Ins) No. 938 of 2024 allowed an appeal filed against the order of the Adjudicating Authority dated 06.03.2024, which had dismissed a Section 9 IBC application on the ground that the operational debt had fallen below the ₹1 crore threshold due to a part payment made during the pendency of the proceedings. The Appellant, an operational creditor, had initiated insolvency proceedings against the Respondent on account of non-payment for iron ore supplied, with the total claimed dues amounting to ₹1,16,25,583, including interest. A demand notice under Section 8 of the Code was issued on 04.04.2022, and a Section 9 application followed on 20.05.2022.
Although the application was initially admitted on 31.10.2022 and CIRP was initiated, the NCLAT had earlier remanded the matter by order dated 19.10.2023 due to denial of opportunity to the Respondent. During the remand proceedings, the Respondent deposited ₹20 lakhs in the Appellant’s account, which the Appellant asserted was without consent and an attempt to artificially bring the debt below the statutory threshold. The Tribunal, however, dismissed the application, holding that post-filing reduction of debt below ₹1 crore rendered the application non-maintainable.
On appeal, the NCLAT examined whether the threshold under Section 4 of the Code should be considered at the time of filing the application or at the time of admission. The Appellate Tribunal relied on Supreme Court judgments, including Rajamundry Electric Supply Corporation Ltd. v. A. Nageshwara Rao; Manish Kumar v. Union of India and Another, REEDLAW 2021 SC 01515, and its own prior decision in Hyline Mediconz Pvt. Ltd. v. Anandaloke Medical Centre Private Limited, REEDLAW 2022 NCLAT Del 09626, and held that the ₹1 crore threshold under Section 4 must be assessed as on the date of filing the application, not at the stage of admission. The Tribunal emphasised that subsequent part payments cannot affect the maintainability of an application validly filed when the default exceeded the threshold.
The NCLAT found the Adjudicating Authority’s order to be legally unsustainable and set it aside. CP (IB) No. 31/CB/2022 was restored and remanded for reconsideration on merits. The parties were directed to appear before the NCLT on 28.05.2025. The Tribunal clarified that it had not expressed any view on the merits of the operational debt itself and disposed of all pending interlocutory applications.
Mr. Akshay Goel, Mr. Kanishk Khetan and Mr. Harsh Jadon, Advocates, represented the Appellant.
Mr. Shreyas Vaghe, Advocate, appeared for the Respondent.
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