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M/s Steel India Versus Theme Developers Pvt. Ltd. - (NATIONAL COMPANY LAW APPELLATE TRIBUNAL) (11 Feb 2020)

Interest alone cannot be construed as operational debt



Present appeal emanates from the order passed by the Adjudicating Authority on the application filed under Section 9 of the Insolvency and Bankruptcy Code 2016 (I & B Code) by the Appellant /applicant Steel India to initiate Corporate Insolvency Resolution Process (CIRP) against the corporate debtor Theme Developers Pvt. Ltd. The Appellant contends that, the Corporate Debtor committed default in making payment to the extent of Rs.22,64,054, which is inclusive of interest calculated @ 2% on the delayed payments against goods sold and delivered by Operational Creditor to the Corporate Debtor.

The Applicant states that it supplied the steel bars to the Corporate Debtor for their construction activity, at their project sites and against these supplies, various invoices have been raised. It is further stated by the Operational Creditor that as per the terms and conditions between the parties; it was agreed that in case the payment is delayed beyond 60 days, 2% interest per month will be charged.

The Appellant/Operational Creditor further contends that amount due towards the Corporate Debtor is of interest amounting to Rs.22,64,054., for delayed payment against the goods sold and delivered. The details of computation of outstanding amount, relating to the payment of interest for delayed payment is Rs.22,64,054, which is due and payable, against the Corporate Debtor. The Adjudicating Authority rejected the petition, on the ground that outstanding amount is relating to the payment of interest-only, on account of the delayed payment, to the extent of Rs.22,64,054,i.e. for the period from 2015 to 2018.

Admittedly, the outstanding amount against the Corporate Debtor is towards interest amount of Rs.22,64,054, for delayed payment against the goods sold and delivered. It is pertinent to mention that, Operational Creditor issued first demand notice on 28th December 2018. Based on this first demand notice, the Corporate Debtor made the payment of the principal amount, and only an interest amount of Rs.22,64,054 remained outstanding towards interest, for which the Corporate Debtor raised the dispute. After that, the Operational Creditor issued the demand notice on 15th January 2019 Application for initiation of corporate insolvency resolution process under Section 9 of the I & B Code was filed before the Adjudicating Authority.

Before the issuance of the second demand notice, the dispute relating to the payment of interest was existing. Therefore, the Adjudicating Authority rejected the Application by the Impugned Order. It is also pertinent to allege that, the outstanding amount is towards interest on the delayed payments, for which there was a pre-existing dispute, before issuance of demand notice. The alleged claim amount, towards interest on loan alone, cannot be termed as an Operational Debt. Present Tribunal is not inclined to interfere with the order passed by the Learned Adjudicating Authority. The Appeal is dismissed.


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