MANU/NL/0049/2022

IN THE NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI

Company Appeal (AT) (Insolvency) No. 540 of 2020
Decided On: 17.01.2022
Appellants: Amsons Communication Pvt. Ltd.
Vs.
Respondent: ATS Estates Pvt. Ltd.
Hon'ble Judges/Coram:
Ashok Bhushan, J. (Chairperson), Jarat Kumar Jain, J. (Member (J)) and Dr. Alok
Srivastava, Member (T)
Counsels:
For Appellant/Petitioner/Plaintiff: Riju Raj Singh Jamwal, Advocate
For Respondents/Defendant: Manoranjan Sharma, Advocate
JUDGMENT
Ashok Bhushan, J. (Chairperson)
1 . This Appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016
(hereinafter referred to as 'Code') has been filed against the order dated 15.01.2020 of
the National Company Law Tribunal, New Delhi Bench - II, by which an Application
under Section 9 filed by the Appellant claiming 'operational debt' was rejected. The
Appellant aggrieved by the rejection of his Application under Section 9 has come up in
this Appeal.
2 . Brief facts of the case and sequence of events needs to be noted for deciding this
Appeal are:
(i) The Appellant, advertising Company was engaged by the Respondent
Company - Corporate Debtor for the advertisement related work. The payments
were made from time to time regarding the work undertaken by the Appellant.
(ii) The Appellant on 27th July, 2018 sent a Demand Notice under Section 8 of
the Code demanding payment in respect of unpaid operational debt due from
the Respondent demanding an amount of Rs. 89,28,494/- including interest.
The Respondent Company replied vide its email dated 27th August 2018
refuting the claim of the Appellant and stated that no amount is due and
payable by the Respondent Company.
(iii) On 13.12.2018, the Appellant filed an Application under Section 9 of the
Code where Rs. 18,09,586/- was claimed as principal amount and Rs.
71,18,908/- was claimed as interest @ 3% monthly, totaling Rs. 89,28,494/-.
(iv) The Respondent on 15.12.2018 made payment of Rs. 18,07,373 through
NEFT to the Appellant.
(v) The Adjudicating Authority vide order dated 16.01.2019 issued notice to the
Respondent Company in Section 9 Application.

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 (vi) The Respondent Company filed reply dated 15th February, 2019 to Section
9 Application disputing any liability to pay. In the reply, it was specifically
pleaded that there has never been any agreement to pay interest and the
principal amount as claimed by the Appellant has already been paid. It was
further pleaded that amount of interest claimed is fraudulent and imaginary. It
was further pleaded that audited balance sheet of the Appellant itself does not
show any amount has been due from trade creditors for a period beyond six
months during the financial years 2016-17 and 2017-18. In the reply it has
been specifically stated that there is no operational debt due and payable and
Section 9 Application deserves to be rejected.
(vii) The Adjudicating Authority by the impugned order dated 15.01.2020 held
that claim for interest is unconscionable, irrational, unjustified and does not
qualify as an operational claim. It was further held that claim for interest on the
delayed payment is a disputed fact and as such can only be adjudicated by the
court of competent jurisdiction.
3 . Shri Riju Raj Singh Jamwal, learned Counsel for the Appellant in support of the
Appeal contends that Adjudicating Authority committed error in holding that the claim of
interest cannot be included in the 'operational debt'. It is submitted that in the invoices
which were issued by the Appellant, there were clear stipulation that if payment is not
paid within five days from the bill date, interest @ 5% per month will be charged. The
interest on delayed payment is to be constituted as a 'debt' defined under Section 3(11)
read with Section 5(8) and 5(21) of the Code. The learned Counsel for the Appellant
has relied on judgment of the Hon'ble Supreme Court reported in MANU/SC/8499/2008
: (2009) 3 SCC 527 - Vijay Industries vs. National Technologies Ltd. in support of his
submission. It is stated that it was only after initiation of Corporate Resolution Process
that Corporate Debtor deposited amount of Rs. 18,07,373/- as principal amount. It is
for the first time in the reply filed by Respondent to the Company Petition that the claim
of interest is disputed. The impugned order failed to consider the facts and law, which
deserves to be set aside.
4. The learned Counsel for the Respondent refuting the submissions of the Counsel for
the Appellant contends that the claim of interest by the Appellant was disputed by the
Respondent from the very beginning. The principal debt having already been paid, there
was no debt due on which insolvency proceedings could have been proceeded any
further and no error has been committed by the Adjudicating Authority in rejecting the
Application. It is submitted that there was no agreement for payment of any interest and
different rate of interest is being claimed by the Appellant, which is apparent from
materials filed by the Appellant itself.
5. We have considered the submissions of the learned Counsel for the parties and have
perused the record.
6 . There is no dispute that before issuance of notice in the Company Petition filed by
the Appellant, the principal amount as claimed by the Appellant of Rs. 18,07,373/- was
paid on 15th December, 2018. The claim of interest was refuted in the reply filed before
the Adjudicating Authority by the Respondent. It was specifically a case of the
Respondent that there was no agreement between the parties to make any payment of
interest and the claim of interest by the Appellant is mala-fide and without any basis.
7 . It will be useful to refer to the pleadings of Respondent in reply filed to Section 9
Application to find out the nature of dispute raised by the Respondent in its reply.

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 Paragraph 5 of the reply is as follows:
"5. That the afore-captioned application has been filed by the Applicant
claiming two categories of amounts - principal and interest. It is submitted that
entire principal amount has already been paid by the Respondent to the
Applicant and there is no amount which is due and payable from the
Respondent to the Applicant by way of interest as there has never been any
agreement between the parties as to payment of interest. Rather, an analysis of
the details submitted by the Applicant in the petition evidence that it has been
in receipt of far more amounts from the Respondent than the outstanding figure
agitated by it in the instant petition."
8 . With regard to claim of interest by the Appellant, it was further pleaded that the
audited balance sheet of the Applicant itself does not show any amount as being due
from trade creditors for a period beyond six months during the financial years 2016-17
and 2017-18. Paragraph 34 of the reply in this context is as below:
"34. That it is further submitted that the audited balance sheet of the applicant
itself does not show any amount as being due from trade creditors for a period
beyond 6 months during the financial years 2016-17 and 2017-18. A copy of
the audited balance sheet of the Applicant as available at the website of the
Ministry of Corporate Affairs containing the audited figures as at 31.03.2017
and 31.03.2018 is enclosed as Annexure AR-5. It is submitted that there is no
question of such a heavy amount being not accounted for, shown and recorded
in the audited financial statements of the Applicant Company. The only
conclusion that can be drawn from this is that the Applicant itself has nowhere
shown the debt on account of interest as being due and that the entire petition
is a sham with no legs to stand on. Admittedly, no amounts in the nature of
trade payables which were outstanding for a period of six months or more have
been shown and recorded in the audited financial statements of the Applicant
and by no stretch of imagination, the alleged outstanding principal amount of
approximately Rs. 18 lacs can attract interest of more than Rs. 70 lacs for a
period less than six months."
9 . The Respondent in its reply to the notice issued under Section 9 has refuted the
claim of the Appellant and also denied any liability towards any interest. Thus, the claim
regarding interest was clearly disputed.
10. We may refer to judgment of the Hon'ble Supreme Court in MANU/SC/1196/2017 :
(2018) 1 SCC 353 - Mobilox Innovations Private Limited vs. Kirusa Software Private
Limited where in paragraph 51 of the judgment it was held that Adjudicating Authority
has to see as to whether there is a plausible contention which requires further
investigation and that the "dispute" is not a patently feeble legal argument or an
assertion of fact unsupported by evidence. In paragraph 51 following was laid down:
"51. It is clear, therefore, that once the operational creditor has filed an
application, which is otherwise complete, the adjudicating authority must reject
the application under Section 9(5)(2)(d) if notice of dispute has been received
by the operational creditor or there is a record of dispute in the information
utility. It is clear that such notice must bring to the notice of the operational
creditor the "existence" of a dispute or the fact that a suit or arbitration
proceeding relating to a dispute is pending between the parties. Therefore, all
that the adjudicating authority is to see at this stage is whether there is a

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 plausible contention which requires further investigation and that the "dispute"
is not a patently feeble legal argument or an assertion of fact unsupported by
evidence. It is important to separate the grain from the chaff and to reject a
spurious defence which is mere bluster. However, in doing so, the Court does
not need to be satisfied that the defence is likely to succeed. The Court does
not at this stage examine the merits of the dispute except to the extent
indicated above. So long as a dispute truly exists in fact and is not spurious,
hypothetical or illusory, the adjudicating authority has to reject the
application."
The above judgment of the Hon'ble Supreme Court has been followed subsequently and
same principles have been reiterated time and again.
1 1 . We may refer to another judgment of the Hon'ble Supreme Court in
MANU/SC/1192/2018 : (2019) 12 SCC 697 - Transmission Corporation of Andhra
Pradesh Limited vs. Equipment Conductors and Cables Limited where Apex Court again
referring to judgment in Mobilox Innovations (supra) made following observation in
paragraph 19:
"19. In a recent judgment of this Court in Mobilox Innovations (P) Ltd. v. Kirusa
Software (P) Ltd. [Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd.,
MANU/SC/1196/2017 : (2018) 1 SCC 353 : (2018) 1 SCC (Civ) 311], this Court
has categorically laid down that IBC is not intended to be substitute to a
recovery forum. It is also laid down that whenever there is existence of real
dispute, the IBC provisions cannot be invoked...."
12. We may also refer to judgment of Hon'ble Supreme Court in MANU/SC/0079/2019 :
(2019) 4 SCC 17 - Swiss Ribbons Private Limited and Anr. vs. Union of India and Ors.
where Apex Court has held that primary focus of the insolvency legislation is to ensure
revival and continuation of the Corporate Debtor and the Code is not a mere recovery
legislation for creditors. In paragraph 28, following has been laid down:
"28. It can thus be seen that the primary focus of the legislation is to ensure
revival and continuation of the corporate debtor by protecting the corporate
debtor from its own management and from a corporate death by liquidation.
The Code is thus a beneficial legislation which puts the corporate debtor back
on its feet, not being a mere recovery legislation for creditors''
1 3 . The learned Counsel for the Appellant has relied on judgment of the Hon'ble
Supreme Court in Vijay Industries vs. NATL Technologies Ltd. MANU/SC/8499/2008 :
(2009) 3 SCC 527 wherein it was held that interest is also part of 'operational debt'. He
submits that Hon'ble Supreme Court while interpreting Section 433 (e) and (f) and
Section 434(1) (a) and Section 439 of the Companies Act, 1956 has laid down that
failure to pay the agreed/statutory interest is covered under the word "debt". There can
be no dispute to the proposition of law as laid down by the Apex Court in the above
case. When an amount of interest is agreed or statutory, the same shall be clearly part
of the debt. However, the judgment of Vijay Industries (supra) is clearly distinguishable
from the facts of the present case, since in the above case the claim of interest was not
disputed, which facts is reflected in paragraphs 30 and 31 of the judgment, which are to
the following effect:
"30. The fact that despite receipt of a legal notice dated 23-12-2003, no
payment has been made to liquidate the debt on the part of the Company is not
in dispute. Admittedly, the appellant had been supplying castor oil to the

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 respondent. The fact that the respondent did not pay the price of the said
supplies, on presentation of the invoices, is also not in dispute. It also stands
admitted that the parties negotiated as regards the manner in which the
payments could be made. In a meeting held on 25-11-2003, promises were
made to square up the old outstanding dues and bring it into the system for the
purpose of rotation. The agreement spoke of payment of compensation to the
appellant for the delay in payment on account of earlier supplies after clearing
the entire old dues. There cannot be any doubt whatsoever that when, in
principle, the respondent had agreed to compensate the appellant for the delay
in payment, the same must be by way of interest payable on the principal
amount or otherwise.
31. The respondent never denied the demand of interest as such, but in its
reply dated 30-12-2003 merely stated that a sum of Rs. 16,80,468 (sic Rs.
15,80,460) was due."
14. In the present case, when the Corporate Debtor in its reply to Section 9 Application
has clearly and categorically denied it liability to pay any interest, there was no case of
payment of any agreed interest.
15. We may also refer to a judgment of this Tribunal where this Tribunal has refused to
proceed with the insolvency proceedings after noticing that Application was being
pursued only for realization of interest amount. In S.S. Polymers vs. Kanodia
Technoplast Limited, Company Appeal (AT) (Insolvency) No. 1227 of 2019 in paragraph
5 following was laid down:
"5. Admittedly, before the admission of an application under Section 9 of the
I&B Code, the 'Corporate Debtor' paid the total debt. The application was
pursued for realisation of the interest amount, which, according to us is against
the principle of the I&B Code, as it should be treated to be an application
pursued by the Applicant with malicious intent (to realise only Interest) for any
purpose other than for the Resolution of Insolvency, or Liquidation of the
'Corporate Debtor' and which is barred in view of Section 65 of the I&B Code."
16. We may also notice one more fact, which has been highlighted by Respondent in its
reply filed in this Appeal. In Section 9 Application, which was filed by the Appellant in
Part-IV of the Application stating that rate of interest claimed by the Appellant is @ 3%
monthly, whereas in Invoices, which have been filed and has also been brought on
record where one of the contention is as follows:
"If payment is not paid within 5 days from bill date, interest @ 5% interest per
month will be charged."
17. In certain calculation sheets filed before the Adjudicating Authority, the Appellant
has calculated interest for some period @2.5% per month. There is no clarity even on
the part of the Appellant as to what rate of interest is liable to be paid by the
Respondent. The Appellant was only advertising agency and as per Invoices, the claim
of interest @ 5% monthly comes to interest @ 60% per annum and @ 3% it comes to
36% per annum. The Adjudicating Authority after taking into consideration of all facts
and circumstances has rightly in paragraph 9 has turned the claim of interest as
unconscionable, irrational and unjustified. In paragraph 9 of the judgment of the
Adjudicating Authority following has been observed:
"9. In view of the above facts, this Bench is satisfied that as the principal

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 amount has already been paid by the Corporate Debtor, the claim of the
petitioner for Rs. 71,18,908.04 as interest is unconscionable, irrational,
unjustified and in the opinion of this Bench does not qualify as a operational
claim, default of which would entitle the petitioner to seek resolution of the
Corporate Debtor. The claim for interest on delayed payment is a disputed fact
by the Corporate Debtor and as such can only be adjudicated by a court of
competent jurisdiction. Initiation of Corporate Insolvency Resolution Process is
certainly not an answer in this facts and circumstances of the case. Recovery of
interest alone can be initiated before a civil court for its due adjudication."
18. The Adjudicating Authority has also recorded finding that claim for interest on the
delayed payment is a disputed fact by the Corporate Debtor and it can only be
adjudicated by a court of competent jurisdiction. The claim of interest being disputed,
no error has been committed by the Adjudicating Authority in rejecting the Application
under Section 9 of the Code. The provisions of Code cannot be allowed as a recovery
mechanism or to recover the claim of interest by Operational Creditor. The Application
under Section 9 cannot be converted into proceedings for recovery of interest by
Operational Creditor on delayed payment, that is not the object of IBC. The object of
the IBC is to resolve the insolvency of the Corporate Debtor and to bring back the
Corporate Debtor on its feet. The present is not a case where there is any insolvency
resolution of Corporate Debtor. We are thus of the view that Adjudicating Authority has
rightly rejected the Application of the Appellant filed under Section 9 of the Code, which
warrants no interference in this Appeal. There is no merit in the Appeal, the Appeal is
dismissed. No order as to costs.
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