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Synopsis

The National Company Law Tribunal Mumbai has recently observed that a petition under Section 9 of the Insolvency and Bankruptcy Code 2016 cannot be filed solely for the purpose of recovering the interest component.

“Without going into the claim that there existed dispute in relation to supply of third lot also, we are of considered view that a petition u/s 9 of the Code cannot lie merely for recovery of interest component, if the contention of the Corporate Debtor is accepted, and which appears to be more evident basis the facts produced before us,” the bench observed.

In the case before the tribunal, TCL Cable Ltd, an operational creditor, filed a petition under Section 9 of the Insolvency and Bankruptcy Code 2016 seeking the initiation of a Corporate Insolvency Resolution Process (CIRP) against Shapoorji Pallonji & Company Private Limited.

The dispute involved unpaid dues owed by Shapoorji Pallonji & Company Private Limited to TCL Cable Ltd, totalling Rs. 13.73 crores. TCL Cable Ltd supplied a batch of cables to the corporate debtor, but the corporate debtor failed to make payments for the first two batches.

Due to non-payment, TCL Cable Ltd did not supply the third batch of cables. The operational creditor had sent multiple notices and emails to the corporate debtor, informing them about the imposition of an 18% interest charge for non-payment of the first two batches.

During the proceedings, the corporate debtor made payments to settle the outstanding principal amount for which the Corporate Insolvency Resolution Process (CIRP) was initiated against them. What remained in dispute was the interest on the delayed payment, which the operational creditor was claiming.

The tribunal observed that although the invoice sent to the corporate debtor mentioned the levy of interest, there was no such stipulation in the purchase order accepted and acknowledged by the operational creditor prior to the supply of goods.

Additionally, the tribunal rejected the operational creditor's argument that it had appropriated the payments made by the corporate debtor towards the interest due on each invoice along with the principal amount. This was because no evidence was presented to support this claim.

As a result, the tribunal dismissed the application seeking CIRP against the corporate debtor, stating that it could not be filed solely for the recovery of the interest amount.

Case title: TCL Cables Private Limited vs Shapoorji Pallonji & Company Private