NCLAT rejected the claim for interest based on unsigned invoices without the respondent's consent, affirming that the IBC serves as a resolution mechanism and not a tool for debt recovery.
The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench led by Justice Rakesh Kumar Jain (Judicial Member) and Technical Members Mr. Naresh Salecha and Mr. Indevar Pandey reviewed an appeal and observed that the interest could not be claimed under Section 9 of the IBC based solely on unsigned invoices without the debtor’s express consent, especially when the governing purchase order is silent on interest, as the IBC framework is intended for resolution, not debt recovery.
The appeal before the NCLAT arose from the NCLT Ahmedabad Bench’s order dated 18.10.2023, which dismissed an application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC) by the appellant, an operational creditor. The appellant had issued a demand notice under Section 8 on 28.11.2018, to which the respondent replied on 11.12.2018. The appellant sought admission of the Section 9 application, claiming Rs. 55,23,253 along with 18% interest. However, the NCLT initially dismissed the application on 20.07.2022, finding a lack of sufficient grounds, prompting the appellant to appeal before the NCLAT.
On 21.12.2022, the NCLAT reversed the NCLT’s decision, observing that no genuine pre-existing dispute existed and directing the NCLT to admit the Section 9 application. During subsequent proceedings on 03.01.2023, the respondent offered to pay the principal amount but refused to pay interest. The appellant rejected the offer, resulting in further litigation between the parties. After extensive hearings and multiple applications from both sides, the NCLT dismissed the Section 9 petition on 18.10.2023, reasoning that the appellant’s intent was not insolvency resolution but debt recovery. The NCLT emphasized that IBC is not a tool for recovery but a framework aimed at resolution, relying on relevant precedents to support its finding of malicious intent.
In the subsequent appeal, the NCLAT upheld the NCLT’s order, rejecting the appellant’s claim for interest. The tribunal noted that the invoices relied upon by the appellant were unsigned and lacked the respondent’s express consent to pay interest. The respondent argued that the governing purchase order was silent on any obligation to pay interest for delayed payments, which the NCLAT accepted. The tribunal referred to the decision in Rohit Motawat v. Madhu Sharma and other relevant judgments, such as S.S. Polymers v. Kanodia Technoplast Limited and Permali Wallace Pvt. Ltd. v. Narbada Forest Industries Pvt. Ltd., which held that interest could not be claimed solely on the basis of invoices unless agreed upon by the debtor.
The NCLAT also addressed the appellant’s reliance on cases where interest was included to meet the threshold for initiating a Corporate Insolvency Resolution Process (CIRP). It found these precedents inapplicable, as the facts of the present case were different, and the appellant failed to establish an enforceable claim for interest. In the absence of any contractual basis for charging interest, the tribunal held that the appellant’s demand was unsustainable. Concluding that there was no error in the NCLT’s findings, the NCLAT dismissed the appeal as devoid of merit, with no order as to costs.
Mr. Shivek Trehan and Mr. Ishaan Kumar, Advocates represented the Appellant.
Mr. Navin Pahwa, Sr. Advocate with Mr. Karan Valecha, Advocate appeared for the Respondent.
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