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PRASHAT AGARWAL, MEMBER OF SUSPENDED BOARD OF BOMBAY RAYON FASHIONS LIMITED VS VIKASH PARASRAMPURIA, COMPANY APPEAL (AT) (INS) NO. 690 OF 2022

 PRASHAT AGARWAL, MEMBER OF SUSPENDED BOARD OF BOMBAY RAYON FASHIONS LIMITED VS VIKASH PARASRAMPURIA, COMPANY APPEAL (AT) (INS) NO. 690 OF 2022

 

FACTS

  • Vikash Parasrampuria- Sole Proprietor of ‘Chiranjilal Yarns Trading’ the Operational Creditor (OC) has supplied goods to Bombay Rayons Fashions Ltd (Corporate Debtor CD).
  • The OC has raised invoices between March, 2017 and January 2020, the CD has paid three invoices with substantial delay; for one invoice part payment made and remaining five invoices, CD has failed to make any payment. Based on this position, the Adjudicating Authority admitted the Section 9 application and approved initiation of CIRP along with appointment of IRP.

 

ISSUE

  • Whether the application for CIRP under Section 9 of IBC would be maintainable if the principal operational debt was below the minimum threshold limit of Rs. 1 crore as per Section 4 of the IBC?

 

APPELLANT’S SUBMISSION

  • Section 4 of IBC mandates that for an application to be maintainable under Section 9 of IBC, the minimum amount of Operational Debt must be Rs. 1 crore. According, to Learned Counsel in the present case the principal amount of debt is only Rs. 97,87,220/- which is below the prescribed threshold limit.
  • As per notification No. S.O 1205(E) dated 24.3.2020 issued by the Ministry of Corporate Affairs, Government of India, threshold limit of Rs. 1 Crore will be applicable for any application filed under Section 7 or 9 of IBC.

 

HELD

  • Relied on: 
    • ‘CBRE South Asia Pvt. Ltd. vs. United Concepts and Solutions Pvt. Ltd
    • Jumbo Paper Products vs. Hansraj Agrofresh Pvt. Ltd
    • ‘Reliance Cellulose Products Limited v. Oil andNatural Gas Corporation Limited’ (2018) 9 SCC 266
    • Oriental Structural Engineers Pvt. Ltd. vs. State of Kerala’ (2021) 6 SCC 150
    • ‘Steel India vs. Theme Developers Pvt. Ltd.
  • Ratio of two cited judgements of Hon’ble Supreme Court of India by Learned counsel and noted that case of ‘Reliance Cellulose Products Limited v. Oil and Natural Gas Corporation Limited’ was with respect to Section 29 of Arbitration Act, 1940 and case of ‘Oriental Structural Engineers Private Limited vs. State of Kerala’ was with respect to Section 31(7), 34 & 37 of Arbitration and Conciliation Act, 1996. Although, Hon’ble Supreme Court of India touched upon interest issue but the references were not with respect to treatment of interest on delayed payment as debt especially to calculate threshold limit to decide about maintainability of Application, which is the case broughtbefore this Appellant Tribunal.
  • We have perused 9 invoices issued by OC raised against CD and noticed that it has clearly been mentioned under terms and condition “interest will be charged @ 18% plus GST P.A after due date of the bill” unlike in cited judgment of NCLAT ‘Steel India vs. Theme Developers Pvt. Ltd.’ (Supra) where there was no mention of interest in delayed payment. Hence, the cited case by Learned Counsel is not exactly and directly relevant
  • ‘CBRE South Asia Private Limited v. United Concept and Solutions Private Limited’ cited by Counsel for Appellant is from NCLT, Delhi, hence, no comment given. Incidentally, we have noted that divergent views have been taken by various NCLT with respect to treatment of interest on delayed payment to treat such component of interest as operational debt.
  • Adjudicating Authority has also referred one Judgment of this Tribunal i.e Pavan Enterprises v. Gammon India while allowing interest on delayed payment to be part of total debt for calculation of minimum threshold limit for Section 4 of IBC
  • Since, interest on delayed payment was clearly stipulated in invoice and therefore, this will entitle for “right to payment” (Section 3(6) IBC) and therefore will form part of “debt” (Section 3(11) IBC)
  • The total amount for maintainability of claim will include both principal debt amount as well as interest on delayed payment which was clearly stipulated in the invoice itself.
  • It is noted that the total principal debt amount of Rs. 97,87,220/- along with interest the total debt makes total outstanding as Rs. 1,60,87,838/- . Thus, the total debt outstanding of OC is above Rs. 1 crore as per requirement of Section 4 IBC read with notification No. S.O 1205 (E) dated 24.3.2020 and Application is therefore maintainable in present case.