NCLT: Interest Not Included In Invoices Or Court Decree Cannot Be Added To Meet Threshold Limit

NCLT: Interest Not Included In Invoices Or Court Decree Cannot Be Added To Meet Threshold Limit

The National Company Law Tribunal (NCLT) New Delhi Bench, comprising Bachu Venkat Balaram Das (Judicial Member) and Atul Chaturvedi (Technical Member), has determined that interest claims do not qualify as operational debt under Section 5(21) of the Insolvency and Bankruptcy Code (IBC), 2016.

The Tribunal held that interest awarded by a civil court cannot be combined with the principal amount to meet the ₹1 crores threshold required for initiating the Corporate Insolvency Resolution Process (CIRP).

M/s. Honey Yarn, the applicant/operational creditor, sought to initiate CIRP against M/s. Welldone Exim Private Limited, the respondent/corporate debtor, under Section 9 of the IBC. The application was based on the corporate debtor’s alleged default in paying ₹1,31,48,053, including interest at 9% per annum for delays in payment.

The operational creditor had supplied goods on credit to the corporate debtor, receiving partial payments over time. After accounting for these payments, ₹68,25,725 (the principal amount) remained unpaid. Following multiple payment requests, the operational creditor filed a civil suit in Ludhiana, which resulted in a decree for ₹74,40,040 plus interest. Despite this, the corporate debtor did not make the payment, prompting the operational creditor to issue a demand notice under Section 8 of the IBC. With no response, the matter was brought before the NCLT.

The NCLT noted that the respondent argued the invoices did not include an interest component, thus disputing the inclusion of interest from the civil court decree. The Tribunal reviewed the invoices and found no interest entitlement specified. Citing the NCLAT’s decision in Pavan Enterprises v. Gammon India Ltd, the NCLT concluded that interest could not be considered part of the debt unless explicitly stated in an agreement between the parties.

As a result, the Tribunal ruled that the interest awarded by the civil court could not be combined with the principal amount to meet the ₹1 crores threshold. Since the principal amount of ₹68,25,725 was below the threshold, the NCLT dismissed the application under Section 9 of the IBC.