Application u/s 7 of IBC can be Admitted if Interest on Principal Amount Crosses Threshold Limit: NCLAT [Read Order]

The New Delhi bench of the National Company Law Appellate Tribunal ( NCLAT ) held that if interest on the principal amount disbursed to the corporate debtor crosses the threshold limit as provided under section 4 of the Insolvency Bankruptcy Code ( IBC ), 2016, application under section 7 of the code can be admitted.

Mrs. Rita Kedia, filed the appeal. He is the Suspended Director of M/s Evyavan Merchantile Private Limited (Corporate Debtor) and the challenge was against an order passed by the NCLT, Mumbai by which an application under section 7 against the corporate debtor was admitted.

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The Financial Creditor is a Non-Banking Financial Company and is engaged in the activities of financing and investment in shares/securities. In its ordinary course of business, the Financial Creditor is also engaged in providing loan funding in lieu of interest.

The Financial Creditor disbursed a sum of Rs. 7,00,00,000/- (7 crores) to Corporate debtor on different dates. The Corporate Debtor never disputed its liability in respect of the said loan and had in fact repaid an amount of Rs. 1.90 crore during the period 23.08.2016 to 04.07.2018. The said repayment was towards the principal amount.

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The Corporate Debtor had not paid any amount towards interest though it has deducted TDS which is also reflected in Form 26AS of Income Tax Department as Tax deducted at source on behalf of the Financial Creditor.The total amount of debt and interest payable by the Corporate Debtor as on 31.03.2022 amounts to Rs. 7,81,73,014/-.

The appellant submitted that no loan agreement or contract was executed between the parties and there was no agreed date for repayment of amount received from the Financial Creditor and that there was no demand on behalf of the petitioner in respect of the alleged loan amount. The demand letter issued by the Financial Creditor on 27.01.2019 is only regarding payment of interest.

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Per contra, the respondents submitted that sum of Rs. 7 crores was advanced and disbursed to the Corporate Debtor between 18.08.2016 to 31.03.2017. The Corporate Debtor had deposited TDS which reflects that the transaction was in fact on loan transaction.

The bench found that the total interest due is more than Rs. 1 crore and was demanded by the Financial Creditor through letter dated 22.01.2019 which was not paid by the Corporate Debtor. Thus, the debt of above Rs. 1 crore was due, was demanded and was payable which was not paid by the Corporate Debtor.

The tribunal while rejecting the contention with respect to limitation noted that the application under Section 7 of the IBC, 2016 was filed on 30.05.2022. The three year period, since the acknowledgement, expired on 31.03.2022.

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The bench viewed that “as per the direction of the Hon'ble Supreme Court in Suo Moto Writ Petition No. 3 of 2020 decided on 10.01.2022, the period from 15.03.2020 till 28.02.2022 is to be excluded for counting of limitation under any law. Excluding the said period, the present petition under Section 7 was filed within the limitation period by the Financial Creditor.”

The bench of Justice Yogesh Khanna (Judicial Member) and Mr. Ajai Das Mehrotra (Technical Member) has affirmed NCLT’s action of admitting the Corporate Debtor in CIRP on an application under Section 7 of IBC, 2016 filed by the Financial Creditor and dismissed the appeal.

To Read the full text of the Order CLICK HERE

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