K. Lakshmi Narayana, Proprietor of Lalithaambica Enterprises Vs. Hindustan Unilever Ltd. (HUL) – NCLAT New Delhi
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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
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.
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
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Whether after payment of principal amount through settlement during the pendency of the petition, the Petition under Section 9 of IBC, is maintainable for the balance interest amount? – SNJ Synthetics Ltd. Vs. PepsiCo India Holdings Pvt. Ltd. – NCLT Chandigarh Bench
The Hon’ble NCLT Chandigarh Bench held that the principal amount has been paid during the pendency of the Petition, therefore requirement of Section 9(5)(i)(b) is not complied with. In the present case, the principal amount stands paid, therefore the CIRP cannot be initiated solely on the basis of the claim of interest component.
The attempt to recover interest for delayed payment under Section 60(5) of IBC, 2016 in absence of any delayed interest clause in invoice or agreement, is like a recovery proceeding on the Corporate Debtor, which is barred in terms of Section 33(5) of IBC, 2016 – Parkash Cotton Pressing Factory Vs. Allahabad Bank and Anr. – NCLT Chandigarh Bench
The Hon’ble Adjudicating Authority observes that in the absence of any clause on interest for delayed payment clause in any agreement or invoice, the Applicant is barred to claim this amount by virtue of Section 33(5) of IBC. In terms of Section 33(5) of IBC, no legal proceedings can be initiated against Corporate Debtor, therefore the same is covered under the term “other legal proceeding” used under the section 33(5) of IBC. Hence, the attempt to recover this amount under Section 60(5) of IBC, 2016 in absence of any delayed interest clause in invoice or agreement on equity terms, is like a recovery proceeding on the Corporate Debtor, which is barred in terms of Section 33(5) of IBC, 2016.
Artisan Spirits Pvt. Ltd. Vs. Indospirit Distribution Ltd. – NCLT New Delhi Bench
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Artisan Spirits Pvt. Ltd. Vs. Indospirit Distribution Ltd. – NCLT New Delhi Bench Read Post »
Capstech Network Pvt. Ltd. Vs. Tollman International Pvt. Ltd. – NCLT New Delhi Bench
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Capstech Network Pvt. Ltd. Vs. Tollman International Pvt. Ltd. – NCLT New Delhi Bench 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
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Interest cannot be admitted in claim filing on the basis of the MSMED Act, 2006, if no interest clause in the Agreement on the delayed payment | NCLT is not appropriate Forum to consider the issue pertaining to the interest under Section 16 of the MSMED Act – Vedic Projects Pvt. Ltd. Vs. Shri Sutanu Sinha RP for Simplex Projects Ltd. – NCLAT New Delhi
Hon’ble NCLAT:
(i) There being no clause in the Agreement to include the interest on the delayed payment, the Hon’ble Appellate Tribunal does not find any error in the order of the Adjudicating Authority, refusing to accept the claim of the Appellant towards interest on the operational debt, which was claimed by the Appellant.
(ii) With regard to claim under the MSME, the Adjudicating Authority has observed that NCLT is not appropriate Forum to consider the issue pertaining to the interest, claimed by the Appellant under Section 16 of the MSMED Act.
(iii) Upheld the decision of NCLT.
If interest is not agreed upon by the parties, it cannot form a part of Operational Debt within the meaning of Section 5(21) of IBC, even if Operational Creditor is registered as an MSME | Interest under Section 16 of MSME Act can be claimed before the MSME Facilitation Council (MSEFC) and the correct forum for such claims shall be the MSEFC and not NCLT – KBC Infrastructures Pvt. Ltd. Vs. Shapoorji Pallonji and Company Pvt. Ltd. – NCLT Mumbai Bench
Hon’ble NCLT Mumbai Bench held that:
(i) The statutory scheme under Sections 8 and 9 of the Code does not indicate that in case reply to Demand Notice is not given within the specified time, the Corporate Debtor is precluded from bringing relevant materials before the Adjudicating Authority in reply to Section 9 Application so as to establish that there are pre-existing disputes which may lead to rejection of Section 9 Application.
(ii) If interest is not agreed upon between the parties, it cannot form a part of ‘operational debt’ within the meaning of Section 5(21) of the Code and that no such interest can be claimed in an application under Section 9 of the Code. Interest under Section 16 of MSME Act can be claimed before the MSME Facilitation Council (MSEFC) in terms of Section 18 of the MSME Act. Thus, the correct forum for such claims shall be the MSEFC and not this Tribunal.
(iii) It is well-established that the Code cannot be used as a recovery mechanism or as a substitute for debt enforcement procedures. In this connection, it is now recognised that NCLT is not a debt collection forum and that it is not the object of the Code that CIRP should be initiated to penalise solvent companies for non-payment of disputed dues claimed by an Operational Creditor.