No Provision under IBC for set of/adjustment/counter claim: NCLAT [Read Order]

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, held that there is no provision under the Insolvency bankruptcy Code (IBC), 2016 for the set of/adjustment/counter claim. The Tribunal observed that the debt claimed by the appellants was undisputed and acknowledged in the financial statements for which a petition under section 7 of the IBC could be maintained.

Mr. Kailash Motilal Kakrania and Mrs. Manju Kailash Kakrania (appellants) were shareholders of of Apurva Oil and Industries Pvt. Ltd (corporate debtor). A petition under section 7 of the IBC was filed by them claiming amount to the tune of Rs. 1,22,42,927 on September 4, 2021. The principal amount of Rs. 1,01,50,009 along with interest of Rs. 20,92,918 calculated at interest rate of 9% per annum was claimed in the petition based on the balance sheet of the corporate debtor. This petition was dismissed by the NCLT on the ground that it did not meet the threshold limit provided under section 4 of the IBC. The amount of Rs. 10,85,850 was also counter claimed by the corporate debtor which reduced further the claimed amount below threshold limit.

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The appellants submitted that counter claim of the corporate debtor was incorporated in the form of unilateral entries made just to reduce the admitted debt below the threshold limit and avoid insolvency proceedings. It was further contended that the counterclaim was not initially mentioned in the response filed on December 19, 2021 by the corporate debtor. It was introduced later in an affidavit filed on April 11, 2022.

Per contra, the respondent submitted that the amount was not entitled for an interest after the financial years 1998-99 and 1999-2000. It was further contended that the appellant had ceased to be a director of the company from August 16, 2014.

The claims of the appellants were acknowledged in the balance sheet of the corporate debtor including for the financial year 2021-2022 therefore they were within limitation. The tribunal found that counter claim of the corporate debtor was not genuine as it had been recorded as eight entries with consecutive voucher numbers on the same date that is July 10, 2021.

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It was held that the Corporate Debtor in his written submissions has nowhere stated that any demand of the said amount was ever made on Mr. Kailash Motilal Kakrania.There is no entry in the balance sheet, prior to the date of filing of petition under Section 7, regarding the said amount. Even in the books of account of the Corporate Debtor, the amounts are not adjusted against the financial debt, and are shown separately in the balance sheet as on 31.03.2022

The NCLAT referred to the decision of the NCLAT Khushbu Dey Chem Pvt. Ltd. V. Chemical Suppliers India Pvt. Ltd. (2024) in which it was held that there is no provision under the Code for set of/adjustment/counter claim.

The tribunal observed that the debt claimed by the appellants was undisputed and acknowledged in the financial statements for which a petition under section 7 of the IBC could be maintained.

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The bench comprising Mr. Justice Rakesh Kumar Jain (Judicial Member) and Shri Ajai Das Mehrotra (Technical Member) held that the debt of the appellants was duly acknowledged in the financial statements and the debt was not barred by limitation. While allowing the appeal, the bench held that counter claim of the corporate debtor was introduced just to avoid insolvency proceedings under section 7.

To Read the full text of the Order CLICK HERE

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