Interest Claims Require Contractual Basis, Not Just Invoice Terms: NCLT Kolkata

Interest Claims Require Contractual Basis, Not Just Invoice Terms: NCLT Kolkata

The NCLT Kolkata Division Bench, comprising Bidisha Banerjee (Judicial Member) and D. Arvind (Technical Member), has ruled that interest cannot be added to the debt amount in the absence of a contractual agreement or clause within the purchase order. The Tribunal further clarified that the deduction of TDS on interest payable does not serve as an acknowledgment of liability.

Sudarshan Paper & Board Private Limited, the Operational Creditor, filed a petition under Section 9 of the Insolvency and Bankruptcy Code (IBC), seeking the initiation of the Corporate Insolvency Resolution Process (CIRP) against Verges Properties LLP, the Corporate Debtor. The Operational Creditor alleged that the Corporate Debtor defaulted on payment for goods supplied, with the principal amount due being ₹91,49,171. They also claimed interest at 18% per annum, totaling ₹10,25,237, leading to a combined demand of ₹1,01,74,408.

The NCLT observed that there was no contractual agreement or clause in the purchase order specifying interest payments, and therefore, interest could not be included with the principal debt. The Tribunal referenced prior rulings, such as Jyothi Limited v. Boving Fouress Limited and Steel India v. Theme Developers Pvt. Ltd., which held that interest could not be awarded merely based on an invoice provision.

Furthermore, the Tribunal noted that the deduction of TDS on interest does not constitute an acknowledgment of debt, citing judgments from cases like P.M. Cold Storage Pvt. Ltd. v. Goouksheer Farn Fresh Pvt. Ltd. and R S Infra v. R P Infraventure Pvt. Ltd.

Additionally, the Tribunal highlighted that the claim of ₹91,49,171 fell below the threshold limit of ₹1 crore required to initiate CIRP under the IBC.

As a result of these findings, the petition was dismissed by the NCLT Kolkata Division Bench.