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TMI Blog2025 (5) TMI 658X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Authority has dismissed the Section 9 application filed by the M/s SNJ Synthetics Ltd.-Operational Creditor seeking admission of M/s PepsiCo India Holdings Pvt. Ltd.-Corporate Debtor into the rigours of Corporate Insolvency Resolution Process ("CIRP" in short). Aggrieved by the impugned order, the present appeal has been preferred by the Appellant. 2. Coming to the relevant factual background and sequence of events in the matter, put briefly, the Appellant-M/s SNJ Synthetics Limited, an MSME Operational Creditor, engaged in manufacturing PET preforms and thermoplastics maintained a long-standing business relationship with the Respondent-M/s PepsiCo India Holdings Private Ltd. being the Corporate Debtor. This relationship was formalised through a Supply Agreement dated 09.10.2018 and the transactions arising from this agreement were maintained through periodically reconciled mutual and open accounts. The Appellant continued fulfilling its obligations under the Supply Agreement and raised invoices from 2018 to 2021. Since the dues remained unpaid, the operational debt purportedly accumulated to Rs.1,96,80,953/- as on 28.02.2021. On 13.03.2021, the Appellant served a demand notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he statutory rights of the Appellant. Reliance was placed on the judgement of this Tribunal in Prashat Agarwal v. Vikas Parasrampuria in CA(AT)(Ins.) No. 690 of 2022 and Anuj Sharma v. Rustagi Projects Pvt. Ltd. in CA(AT)(Ins) No. 550 of 2023 wherein it was held that interest stipulated in invoices formed part of operational debt and must be aggregated with the principal amount in computing the threshold limits under Section 4 of IBC. 5. It was submitted that the interest component of 24% p.a. on delayed payment was part of the operational debt as interest was clearly stipulated in the invoices issued by the Appellant. Since these invoices were issued pursuant to the Supply Agreement of 09.10.2018, the interest component mentioned therein constituted an integral part of the contractual relationship between the two parties. Since these invoices bearing interest terms were issued regularly by the Appellant and was acted upon by the Respondent without any protest, this constituted a valid contract under Regulation 7(2)(b)(ii) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ("CIRP Regulations" in short). Reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erted that the appeal is a clear misuse of the statutory provisions of IBC to recover a disputed and unsubstantiated interest claim. Interest cannot be claimed merely on the basis of a stipulation to that effect in a bill or invoice, unless it is proven that such a provision is based on a contract or agreement on the part of the purchaser to pay interest. The invoices relied upon by the Appellant are unilateral documents which were not signed or acknowledged by the Respondent. No communication has been placed on record wherein the Respondent had agreed to pay interest. Hence the claim of interest is entirely untenable and contrary to the commercial understanding between the parties. 8. Assertion was made that IBC is a remedy of last resort intended for resolution of genuine insolvency and not for recovery proceedings. Thus, if an Operational Creditor pursues the Section 9 application only for the realisation of interest amount, as in the instant case, this violates the spirit, ethos and principles of IBC and should be treated as an application pursued with malafide intent. Submission was pressed that it is settled law that once the principal amount is paid and only a contested int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties had established their business dealing basis a Supply Agreement. The relevant clause viz. clause 9 which deals with 'Payment Terms' and Schedule-D which deals with 'Contract Prices and Payment Terms' do not provide for payment of interest. At the cost of repetition, for reasons of clarity, we would like to extract these clauses though the same has been reproduced at para 14.3 of the impugned order which reads as follows: "9. PAYMENT TERMS 9.1 Seller shall issue Tax Invoice properly capturing all the relevant information and details as required under the GST law and rules/formats framed there under. The respective parties would be liable to pay GST, as applicable to the Government under the GST laws. 9.2 Notwithstanding anything contained in the agreement, both parties agree that in the event PIH is not able to avail Input Tax Credit due to reasons attributable to the Seller. PIH may hold the payment or debit an amount to the extent of input tax credit disallowed to PIH until the PIH actually avails Input Tax Credit. 9.3 Payment terms will be net no. of days as specified in price note in SCHEDULE 'D' i.e. 30 days from the later of the invoice received date or the da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot overrun or recast the terms of bi-partite agreements and create binding obligations on the other party to pay interest. 13. In this regard attention has been adverted by the Respondent to the judgement of this Tribunal in Krishna Enterprises vs. Gammon India Limited in CA (AT) (Ins) No. 144 of 2018 wherein it has been held therein that if no interest was payable, in terms of the contractual agreement, then only the principal amount would constitute the claim, basis which Section 9 application can be filed. We find the ratio of the above judgment to be squarely applicable to the facts of the present case and for easy reference reproduce the relevant portion of the said judgment as below: "4. It is submitted that the 'debt' includes the interest, but such submission cannot be accepted in deciding all claims. If in terms of any agreement interest is payable to the Operational or Financial Creditor then debt will include interest, otherwise, the principle amount is to be treated as the debt which is the liability in respect of the claim which can be made from the Corporate Debtor. 5. In the present appeals, as we find that the principle amount has already been paid and as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest component of Rs 1.05 Cr was being insisted upon to artificially to cross the threshold limit of Rs 1 Cr. 16. In the given circumstances when the principal amount claimed by the Appellant has already been paid, we agree with the Adjudicating Authority that there was no legally enforceable unpaid operational debt as required under Section 9(5) of IBC to trigger CIRP. We are also guided by the decision rendered by this Tribunal in case of S.S.Polymers Vs Kanodia Technoplast Limited in CA(AT)(Ins.) No. 1227 of 2019 in which a similar issue had arisen and this Tribunal had held that claim of interest basis one-sided invoices cannot be the foundation for a Section 9 application. The relevant extracts of the judgment is as reproduced below: "3. The Adjudicating Authority has noticed that a sum of Rs.25,00,000/- out of Rs.32,71,800/- was paid to the Appellant by 31st December, 2018 through RTGS(s). The remaining amount of Rs.7,71,800/- was also paid by 'Corporate Debtor' to the Applicant by 17th January, 2019 through NEFT(s). The said amounts were paid before the admission of the application under Section 9 of the I&B Code. Even after receiving the total amount due, the Appellant p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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