Interest component in Financial/Operational Debt/Clubbing of Interest for default threshold amt.

Use of the word “confirming” in Section 9(3)(d) of IBC indicates that the record of default (RoD) from the Information Utility (IU) is merely evidentiary in nature | RoD from IU is a supporting piece of evidence and not a strict requirement for initiating insolvency proceedings under Section 9 – Mr. R.K. Lala Vs. Ramky Infrastructure Ltd. – NCLT Hyderabad Bench

/ 4 minutes of reading

Hon’ble NCLT Hyderabad Bench held that the use of the word “confirming” in Section 9(3)(d) indicates that the record of default from the IU is merely evidentiary in nature. It serves to confirm the non-payment of the operational debt. The record of default from the IU is a supporting piece of evidence and not a strict requirement for initiating insolvency proceedings under Section 9 of the IBC. The Operational Creditor can rely on other forms of evidence to establish the existence of an unpaid operational debt, and the Adjudicating Authority is to consider the overall facts and circumstances of the case.

Use of the word “confirming” in Section 9(3)(d) of IBC indicates that the record of default (RoD) from the Information Utility (IU) is merely evidentiary in nature | RoD from IU is a supporting piece of evidence and not a strict requirement for initiating insolvency proceedings under Section 9 – Mr. R.K. Lala Vs. Ramky Infrastructure Ltd. – NCLT Hyderabad Bench Read Post »

An interest clause in an invoice, without specifying the period within which the amount is to be paid and without any corresponding clause in the agreement or Purchase Order, cannot be included in calculating the threshold for admission of a Section 9 application under IBC – Pramod Kumar Jain Vs. Mangesh Vitthal Kekre, IRP of Aryan Ispat & Power Pvt. Ltd. and Anr. – NCLAT New Delhi

/ 17 minutes of reading

Hon’ble NCLAT observed that condition prescribed in the invoice is that in case of delay in payment, interest will be charged at the rate of 12 @ as per the agreed terms. This clause in the invoice is totally vague because it does not specify the period within which the amount was to be paid. Secondly, it is mentioned in this clause that interest will be charged as per the agreed terms whereas no agreed terms have seen the light of the day to enable the Operational Creditor to claim interest as a part of debt.

An interest clause in an invoice, without specifying the period within which the amount is to be paid and without any corresponding clause in the agreement or Purchase Order, cannot be included in calculating the threshold for admission of a Section 9 application under IBC – Pramod Kumar Jain Vs. Mangesh Vitthal Kekre, IRP of Aryan Ispat & Power Pvt. Ltd. and Anr. – NCLAT New Delhi Read Post »

When a fraudulent CIRP proceeding is initiated, Adjudicating Authority has jurisdiction under the IBC to consider allegations of fraudulent and malicious initiation of CIRP proceedings under Section 65 of IBC and to recall the CIRP admission order/ terminate CIRP (even if a Resolution Plan approval application has been filed before the NCLT) – Acute Daily Media Pvt. Ltd. and Ors. Vs. Rockman Advertising and Marketing (India) Ltd. and Ors. – NCLAT New Delhi

/ 50 minutes of reading

The Hon’ble NCLAT held that:

(i) There is no statutory embargo on the Adjudicating Authority to exercise its discretion carefully and judiciously in a Section 65 application to prevent and protect the Corporate Debtor from being dragged into CIRP.
(ii) When no interest income had been reflected in the balance sheet, yet computing the interest amount in the Section 7 application to cross the threshold hurdle lends credence to the narrative of precipitation of fraud.
(iii) As non- compliance under the Companies Act cannot negate a petition filed under Section 7 as long as there is a valid debt and default in payment of the said debt.
(iv) Debt and default cannot always be seen in isolation. AA is also required to take care that the provisions of Section 7 of IBC are not misused or abused in any manner either by the financial creditor or the promoters of the Corporate Debtor to take undue advantage at the cost of insolvency resolution.

When a fraudulent CIRP proceeding is initiated, Adjudicating Authority has jurisdiction under the IBC to consider allegations of fraudulent and malicious initiation of CIRP proceedings under Section 65 of IBC and to recall the CIRP admission order/ terminate CIRP (even if a Resolution Plan approval application has been filed before the NCLT) – Acute Daily Media Pvt. Ltd. and Ors. Vs. Rockman Advertising and Marketing (India) Ltd. and Ors. – NCLAT New Delhi Read Post »

Section 5 (21) of the IBC restricts claims to those arising from goods or services, and interest is recoverable only when expressly agreed upon by the parties, in the absence of agreement for interest, the interest component cannot be considered part of the operational debt – Comet Performance Chemicals Pvt. Ltd. Vs. Aarvee Denims and Exports Ltd. – NCLAT New Delhi

/ 14 minutes of reading

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Section 5 (21) of the IBC restricts claims to those arising from goods or services, and interest is recoverable only when expressly agreed upon by the parties, in the absence of agreement for interest, the interest component cannot be considered part of the operational debt – Comet Performance Chemicals Pvt. Ltd. Vs. Aarvee Denims and Exports Ltd. – NCLAT New Delhi Read Post »

In absence of any written agreement between the parties containing a clause of payment Interest, interest part cannot be included in the principal amount – Evergreen Construction (Durgapur) Pvt. Ltd. Vs. GPT Casting Ltd. – NCLT Kolkata Bench

/ 1 minute of reading

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In absence of any written agreement between the parties containing a clause of payment Interest, interest part cannot be included in the principal amount – Evergreen Construction (Durgapur) Pvt. Ltd. Vs. GPT Casting Ltd. – NCLT Kolkata Bench Read Post »

Invoices containing the term of interest cannot be operated against the Corporate Debtor unless there is an agreement for interest or any other document showing that the Corporate Debtor has accepted the obligation for interest – Rishabh Infra Vs. Sadbhav Engineering Ltd. – NCLAT New Delhi

/ 5 minutes of reading

Hon’ble NCLAT held that the entire Principal Amount having been paid, the Adjudicating Authority did not commit any error in rejecting the Section 9 Application filed by the Operational Creditor. Invoices which have been sent by the Operational Creditor containing the term of interest cannot be operated against the Corporate Debtor unless there is an agreement for interest or any other document showing that the Corporate Debtor has accepted the obligation for interest.

Invoices containing the term of interest cannot be operated against the Corporate Debtor unless there is an agreement for interest or any other document showing that the Corporate Debtor has accepted the obligation for interest – Rishabh Infra Vs. Sadbhav Engineering Ltd. – NCLAT New Delhi Read Post »

Interest cannot be raised unilaterally in the Insolvency petition under Section 9 of IBC, without prior intimation to the Corporate Debtor – Janus GBAC Ltd. Vs. Beloorbayir Biotech Ltd. – NCLT Bengaluru Bench

/ 5 minutes of reading

Hon’ble NCLT Bengaluru Bench held that for any creditor to claim the interest in the default amount the same should be reflected in either the agreement or the invoices raised against the Corporate Debtor. The interest cannot be raised unilaterally in the Insolvency petition, without prior intimation to the Corporate Debtor.

Interest cannot be raised unilaterally in the Insolvency petition under Section 9 of IBC, without prior intimation to the Corporate Debtor – Janus GBAC Ltd. Vs. Beloorbayir Biotech Ltd. – NCLT Bengaluru Bench Read Post »

Can CIRP be initiated against a Stock Broker Company, which is a Financial Service Provider under Section 3(16)(e), if, at the time of initiation of CIRP, the Stock Broker is not engaged in providing financial services due to SEBI restrictions prohibiting it from accepting new clients for its stockbroking activities? – Kapston Facilities Management Ltd. Vs. Karvy Stock Broking Ltd. – NCLT Hyderabad Bench

/ 6 minutes of reading

In this case, Operational Creditor submitted that the Corporate Debtor was not dealing in the business of providing financial services at the time of initiation of the present petition in view of ad-interim ex-parte order issued by SEBI, which prohibited the CD from accepting new clients for its stockbroking activities.

The Hon’ble NCLT held that this contention of the Applicant is meritless because SEBI’s restrictions were limited to prohibiting the CD from taking on new clients for stockbroking activities. As per the Certificate of Registration issued by SEBI, it is explicitly stated that the Certificate remains valid unless it is suspended or cancelled in accordance with the regulations.

Can CIRP be initiated against a Stock Broker Company, which is a Financial Service Provider under Section 3(16)(e), if, at the time of initiation of CIRP, the Stock Broker is not engaged in providing financial services due to SEBI restrictions prohibiting it from accepting new clients for its stockbroking activities? – Kapston Facilities Management Ltd. Vs. Karvy Stock Broking Ltd. – NCLT Hyderabad Bench Read Post »

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