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Clubbing of charges with principal amount to cross minimum threshold limit

Cause Title : North West Carrying Company, LLP vs Metro Cash and Carry India Pvt. Ltd, CP (IB) No.133/BB/2022, National Company Law Tribunal Bengaluru Bench

Date of Judgment/Order : 25/5/2023

Corum : Hon’ble Justice (Retd.) T. Krishnavalli, Member (Judicial) & Hon’ble Shri. Manoj Kumar Dubey, Member (Technical)

Citied: 

  1. Prashat Agarwal v. Vikash Parasrampuria, Company Appeal (AT)(Ins) No. 690 of 2022 dated 15.07.2022
  2. Asset Reconstruction Company (India) Limited vs Tulip Star Hotels Limited & Ors, 2022 SCC Online SC 944 

Background

The petition under section 9 of the Insolvency and Bankruptcy Code, 2016, r/w. Rule 6 of the I&B (Application to Adjudicating Authority) Rules 2016, was filed by M/s North West Carrying Company, LLP. - ‘Operational Creditor/Petitioner’ to initiate Corporate Insolvency Resolution Process against M/s. Metro Cash and Carry India Pvt. Ltd  on the ground that the Corporate Debtor has committed a default for a total outstanding amount of Rs. 1,63,71,799/-.

The Respondent argued that the principal amount is only Rs. 12,46,204/- and other amounts as claimed by the petitioner i.e interest, legal charges, balance cost of amortization, notice period rent neither forms part of any contractual arrangement nor can even be considered as an operational debt. The petitioner purposefully clubbed these amounts with the principal amount to arrive at the minimum threshold of Rs.1 crore for complying with the provisions of Section 4 of IBC, which cannot be done.

Judgment

The NCLT observed that in Prashat Agarwal (supra) it has been held that the total amount for maintainability of claim will include both principal debt amount as well as interest on delayed payment in case the same was stipulated in the invoice. In other decisions it has been decided that only if interest was to be levied in accordance with some agreement between the two parties, can it be considered for inclusion for the purpose of Section 9 of the Code.

Therefore the NCLT held that in order to club other charges with the principal amount express stipulation has to be incorporated specifically in the agreement, the purchase order or the invoice and in the absence of the same, neither interest nor any other charges can be clubbed with the principal amount which has not happened in this matter. Therefore, the petitioner’s contention in this regard is devoid of merit.

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