The National Company Law Tribunal, Bengaluru branch, comprising of Justice (Retd) T. Krishnavalli (Judicial Member) and Shri Manoj Kumar Dubey (Technical Member), while adjudicating a petition under Section 9 of Insolvency and Bankruptcy Code, 2016 (“IBC”) in Ramesh Kumar Garg vs M/s Buildmet Pvt Ltd. passed an order on 2nd March 2023, ruled that a Section 9 petition would not be maintainable if the principal amount has been repaid by the corporate debtor during the pendency of the petition even if the interest component remains unpaid.
Petition was filed by the proprietor of D.R. Garg Enterprises, the operational creditor. The Petitioner had supplied Timber, Plywood, Flush Door, and Hardware accessories to M/s Buildment Private Limited, Corporate Debtor in the present case, against purchase orders. As per the purchase order, upon non-payment by the debtor to the creditor for a period of 100 days, the Corporate Debtor would be liable to pay interest at the rate of 1.5% per month to the corporate creditor.
The Corporate Creditor issued the last invoice on 08.01.2020 and continuously followed up with the Corporate Debtor for repayment vide emails and reminders till 05.04.2021. In furtherance of the same, the Corporate Creditor issued a Demand Notice dated 05.04.2021 for an outstanding amount of INR 1.38 crores. However, the Corporate Debtor did not serve any reply to the aforementioned demand notice.
The Corporate Debtor also failed to file a reply before the aforementioned authority during the pendency of the petition. However, the National Company Law Tribunal observed that INR 1,04,43,057/- had been repaid by the Corporate Debtor during the pendency itself. Thus, the entire principal amount was repaid by the Corporate Debtor and only the interest component of INR 34,37,592/- was left repaid.
The Adjudicating Authority observed since the Principal Amount has entirely been paid during the pendency of the petition and since the issue is only regarding the outstanding interest, the petition under Section 9 of IBC does not stand maintainable.
The Authority further relied on “Rohit Motawat v. Madhu Sharma” wherein it was held that in a Section 9 application where only the interest component had to be recovered, the same shall not be maintainable since “the spirit of the legislation of the Code is for ‘resolution of debt’ and not for recovery”. Conclusively, the Petition was dismissed by the Authority.
CP (IB) No.109/BB/2021
Comp. App.(AT) (Ins) No. 1152 of 2022.