Take notes as you read a judgment using our Virtual Legal Assistant and get email alerts whenever a new judgment matches your query (Query Alert Service). Try out our Premium Member services -- Free for one month.\n\nNational Company Law Appellate Tribunal\nSteel India vs Theme Developers Pvt Ltd on 11 February, 2020\n    NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI\n\n           Company Appeal (AT) (Insolvency) No. 1014 of 2019\n\n[Arising out of Impugned Order dated 23rd July 2019 passed by the\nHon'ble National Company Law Tribunal, Mumbai Bench, Mumbai in\nC.P. (IB) No. 843/MB/2019 filed under Section 9 of the Insolvency and\nBankruptcy Code, 2016]\n\nIN THE MATTER OF:\nM/s Steel India\nPartnership registered under the Partnership Act, 1932\nD/7, 40L Kunthunath Apt.\nNahur Road, Mulund (W)\nMumbai - 400080                                             ...Appellant\n\nVersus\n\nTheme Developers Pvt. Ltd.\n3AB Rajabahadur Mansion\n20 Ambalal Doshi Marg\nFort, Mumbai - 400023                                       ...Respondent\n\nPresent:\n\nFor Appellant:  Mr Harsh Gokhale, Advocate\nFor Respondent: Ms Surekha Raman, Advocate\n\n\n                             J U D G M E N T\n\n[Per; V. P. Singh, Member (T)]\n\n    This appeal emanates from the order passed by the Adjudicating\n\nAuthority on the application filed U/S 9 of the Insolvency and Bankruptcy\n\nCode 2016 (for short „I & B Code‟) by the Appellant /applicant M/s Steel\n\nIndia to initiate Corporate Insolvency Resolution Process (CIRP) against the\n\ncorporate debtor M/s Theme Developers Pvt. Ltd. The appellant contends\n\nthat the „Corporate Debtor‟ committed default in making payment to the\n\nextent of Rs.22,64,054/-, which is inclusive of interest calculated @ 2% on\n\n\nCompany Appeal (AT) (Insolvency) No. 1014 of 2019                Page 1 of 8\n the delayed payments against goods sold and delivered by the „Operational\n\nCreditor‟ to the „Corporate Debtor‟. The Applicant states that it supplied the\n\nsteel bars to the „Corporate Debtor‟ for their construction activity, at their\n\nproject sites and against these supplies various invoices have been raised.\n\nDetails of invoices are given below:\n\n\n       "S. No.        Buyer              Invoice No.    Amount         Date\n\n         1.      Theme              S1/086/2015-16     4,16,805.00   30.07.2015\n                 Developers\n                 Private Ltd.\n\n         2.      Theme              S1/100/2015-16     2,94,487.00   30.07.2015\n                 Developers\n                 Private Ltd.\n\n         3.      Theme              S1/101/2015-16     3,16,060.00   30.07.2015\n                 Developers\n                 Private Ltd.\n\n         4.      Theme              S1/102/2015-16     2,19,805.00   30.07.2015"\n                 Developers\n                 Private Ltd.\n\n\n     It is further stated by the „Operational Creditor‟ that as per the terms\n\nand conditions between the parties; it was aggrieved that in case the\n\npayment is delayed beyond 60 (sixty) days, 2% interest per month will be\n\ncharged.\n\n\n     The Appellant/Operational Creditor further contends that amount due\n\ntowards the „Corporate Debtor‟ is of interest amounting to Rs.22,64,054/-.,\n\nfor delayed payment against the goods sold and delivered. The details of\n\ncomputation of outstanding amount, relating to the payment of interest for\n\ndelayed payment is Rs.22,64,054/-, which is due and payable, against the\n\n„Corporate Debtor‟.\n\n\nCompany Appeal (AT) (Insolvency) No. 1014 of 2019                    Page 2 of 8\n       The Adjudicating Authority rejected the petition, on the ground that\n\noutstanding amount is relating to the payment of interest-only, on account\n\nof the delayed payment, to the extent of Rs.22,64,054/-,i.e. for the period\n\nfrom 2015 to 2018.\n\n     The Adjudicating Authority rejected the petition, also on the ground\n\nthat the „Corporate Debtor‟ has raised the dispute on 10th January 2019,\n\nafter receiving the first demand notice, stating that they are not liable to pay\n\nthe amount, as claimed by the „Operational Creditor‟. The demand notice\n\nhas been issued on 15th January 2019. The petition was rejected, on the\n\nground of pre-existing dispute, covered under Section 5 sub Clause 6(a) of\n\nthe I & B Code 2016.\n\n      The Learned Counsel for the Respondent, corporate debtor submits\n\nthat the „Operational Creditor‟ has filed the Application under Section 9 of\n\nthe I & B Code, before the Adjudicating Authority, alleging its dues towards\n\ninterest on loan alone, which is not maintainable, given the decision of this\n\nAppellate Tribunal in the cases of SBF Pharma V Gujarat Pharma caps Pvt.\n\nLtd, Company Appeal (AT) (Insolvency) No. 883 of 2019           and Company\n\nAppeal (AT) (Insolvency) No. 1227 of 2019 in S.S. Polymers Versus Kanodia\n\nTechnoplast Limited.\n\n\n     The Respondent/Corporate Debtor contends that interest alone on loan\n\ndoes not qualify the term „Operational Debt‟, as defined under the „I & B\n\nCode‟ 2016. The Respondent further submits that the Appellant has\n\nsuppressed the fact that before issuance of demand notice dated 13th\n\nJanuary 2019, it had issued the purported demand notice DT. 28th\n\n\n\nCompany Appeal (AT) (Insolvency) No. 1014 of 2019                    Page 3 of 8\n December 2018 under the „I & B Code‟ 2016, in Form-3 claiming a sum of\n\nRs.36,00,006/-, which includes the principal amount Rs.13,35,952/- and\n\ninterest to the tune of Rs.22,64,054/-. In response to the first demand\n\nnotice dated 28th December 2019 the „Corporate Debtor‟ made the payment\n\nof the principal amount of Rs.13,35,952/- via RTGS on 28th January 2019\n\nand raised the dispute regarding the outstanding interest amount, i.e.\n\nRs.22,64,054/- towards interest dues. The Respondent further submits that\n\nbefore the issuance of demand notice under Section 8 of the I & B Code, the\n\n„Corporate Debtor‟ has raised the dispute about the outstanding interest, i.e.\n\nRs.22,64,054/-, which is purported to be claimed as interest on account of\n\ndelayed payment @ 2% per month.\n\n\n     We have heard the arguments of the Learned Counsel for the parties\n\nand perused the record.\n\n\n     Admittedly, the outstanding amount against the „Corporate Debtor‟ is\n\ntowards interest amount of Rs.22,64,054/-, for delayed payment against the\n\ngoods sold and delivered. It is evident from the particulars of claims annexed\n\nwith the Appeal as Annexure A2 (Page 16).\n\n       This Appellate Tribunal in the case of Company Appeal (AT)\n\n(Insolvency) No. 1227 of 2019 in S.S. Polymers Versus Kanodia Technoplast\n\nLimited held that:\n\n\n     "5.      Admittedly before the admission of an application under Section 9\n     of the I&B Code, the „Corporate Debtor‟ paid the total debt. The\n     application was pursued for realisation of the interest amount,\n     which, according to us is against the principal of the I&B Code,\n\n\n\nCompany Appeal (AT) (Insolvency) No. 1014 of 2019                   Page 4 of 8\n      as it should be treated to be an application pursued by the\n     Applicant with malicious intent (to realise only Interest) for any\n     purpose other than for the Resolution of Insolvency, or Liquidation of the\n     „Corporate Debtor‟ and which is barred in view of Section 65 of the I&B\n     Code."\n                                                                   (Quoted verbatim)\n\n     Similarly, in case of Company Appeal (AT) (Insolvency) No. 883 of 2019\n\nin SBF Pharma Versus Gujarat Liqui Pharmacaps Pvt. Ltd., this Appellate\n\nTribunal rejected the Petition for the realization of only interest amount, on\n\nthe ground that the Petition is filed for other than for the Resolution of\n\nInsolvency or liquidation. This Appellate Tribunal observed that:\n\n\n     "7.      In    the    present     case,    we   find   that    the   Respondent-\n     'Corporate Debtor' is not insolvent and viable and feasible to pay\n     the claim amount. Only for recovery of the interest, the Appellant\n     is pursuing the Insolvency Resolution Process which, according to\n     us, is malicious intent for any purpose other than for the\n     resolution of insolvency, or liquidation."\n                                                                   (Quoted verbatim)\n\n     The respondent further contends that, the claim of interest alone on\n\nloan, does not clarify as an „Operational Debt‟ under the „I & B Code‟. It is\n\nsettled that the charging of interest, ought to be an actionable claim,\n\nenforceable under law, provided it was properly agreed upon between the\n\nparties. In this case, Learned Counsel for the Appellant submits that the\n\nemail dated 05th September 2015, relates to the quotation only. The scanned\n\ncopy of the email is as under:\n\n\nCompany Appeal (AT) (Insolvency) No. 1014 of 2019                           Page 5 of 8\n      The Appellant contends that as per agreed terms @ 2% interest was\n\npayable if the payment is delayed for more than 60 days. In this case,\n\nundisputedly, payment was delayed.                  Therefore the „Corporate Debtor‟ is\n\nliable to pay interest amount as per agreed terms and conditions.\n\n\n\n     The „Operational Creditor‟ has placed reliance on the email dated 05th\n\nSeptember 2015, which shows that „Operational Creditor‟ quoted the rate to\n\nthe „Corporate Debtor‟ wherein, it was mentioned that if payment was\n\ndelayed for more than 60 days, then interest@ 2%                    per month will be\n\ncharged. The „Operational Creditor‟/Appellant has not filed any document to\n\nshow that the „corporate debtor ever agreed to pay the interest on delayed\n\npayment. Based on an email dated 05th September 2015, it is apparent that\n\nthe „Operational Creditor‟ quoted the rate, which contains the clause of\n\ncharging interest on delayed payment if payment is not made within 60\n\ndays. But the copy of supply order is not filed by the operational creditor to\n\nprove that interest @2% per month is chargeable if payment is not made\n\n\nCompany Appeal (AT) (Insolvency) No. 1014 of 2019                            Page 6 of 8\n within 60 days. It was mentioned that on delayed payment interest @ 2%\n\nper month will be charged. But no document is placed before us to show\n\nthat the said term of charging 2% interest on delayed payment was accepted\n\nby the „Corporate Debtor‟. The Copies of the invoices, which are annexed\n\nwith the Appeal does not contain the said term that interest is to be paid @\n\n2% per month, if the payment is delayed for more than 60 days.\n\n\n\n     It is pertinent to mention that „Operational Creditor‟ issued first\n\ndemand notice on 28th December 2018. Based on this first demand notice.\n\nThe „Corporate Debtor‟ made the payment of the principal amount, and only\n\nan interest amount of Rs.22,64,054/- remained outstanding towards\n\ninterest, for which the „Corporate Debtor‟ raised the dispute. After that, the\n\n„Operational Creditor‟ issued the demand notice on 15th January 2019\n\nApplication for initiation of corporate insolvency resolution process under\n\nSection 9 of the I & B Code was filed before the Adjudicating Authority.\n\nBefore the issuance of the second demand notice, the dispute relating to the\n\npayment of interest was existing. Therefore, the Adjudicating Authority\n\nrejected the Application by the Impugned Order.\n\n\n\n     It is also pertinent to allege that the outstanding amount is towards\n\ninterest on the delayed payments, for which there was a pre-existing\n\ndispute, before issuance of demand notice. The alleged claim amount,\n\ntowards interest on loan alone, cannot be termed as an „Operational Debt‟.\n\nFor the reasons aforesaid, we are not inclined to interfere with the order\n\npassed by the Learned Adjudicating Authority.\n\n\nCompany Appeal (AT) (Insolvency) No. 1014 of 2019                  Page 7 of 8\n      The Appeal is dismissed. No order as to costs.\n\n\n                                                      [Justice Venugopal M.]\n                                                           Member (Judicial)\n\n\n\n                                                           [Kanthi Narahari]\n                                                          Member (Technical)\n\n\n\n                                                              [V. P. Singh]\n                                                         Member (Technical)\nNEW DELHI\n11th FEBRUARY, 2020\n\npks/md\n\n\n\n\nCompany Appeal (AT) (Insolvency) No. 1014 of 2019               Page 8 of 8