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Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • Mr. G.K. Jain, Chartered Accountant.
  • Mr. Aniruddh Singh, Ms. Awantika Mansher and Mr. Ankit Dwivedi, Advocates.
Judges
  • S.J. Mukhopadhaya
  • Chairperson
  • Bansi Lal Bhat, Judicial Member
Acts
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • Mr. G.K. Jain, Chartered Accountant.
  • Mr. Aniruddh Singh, Ms. Awantika Mansher and Mr. Ankit Dwivedi, Advocates.
Judges
  • S.J. Mukhopadhaya
  • Chairperson
  • Bansi Lal Bhat, Judicial Member
Acts
See more information ...
Smart Summary

Factual and Procedural Background

On 27.07.2018, the Appellants, who are Operational Creditors, filed applications under Section 9 of the Insolvency and Bankruptcy Code, 2016 (I&B Code) seeking initiation of the Corporate Insolvency Resolution Process against M/s Gammon India Ltd. (Corporate Debtor). Upon appearance, it was brought to the notice of the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench) that the principal amount of the debt, which was the only amount due, had already been paid to the Appellants. The Adjudicating Authority, having noted this fact, dismissed the applications preferred by the Appellants through impugned orders.

Legal Issues Presented

  1. Whether the 14-day period prescribed under Section 9 of the I&B Code for disposal of the application is mandatory.
  2. Whether the definition of "debt" under the I&B Code includes interest in the absence of an agreement to pay interest.
  3. Whether an application under Section 9 for initiation of Corporate Insolvency Resolution Process is maintainable when the principal amount of debt has been paid and only interest is claimed.

Arguments of the Parties

Appellant's Arguments

  • The Adjudicating Authority delayed disposal of the matter beyond the 14-day period mandated by Section 9 of the I&B Code.
  • Under Section 3(6) of the I&B Code, a "claim" includes a right to payment whether fixed, disputed, undisputed, legal, or equitable.
  • Debt as defined in Section 3(11) includes financial and operational debt, and the debt should include interest.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Company Appeal (AT) (Insolvency) Nos. 144, 145, 146, 147 & 148 of 2018 Held that the 14-day period prescribed under Section 9 of the I&B Code is not mandatory. The court relied on this precedent to reject the Appellant's contention that the delay in disposal violated the mandatory timeline.

Court's Reasoning and Analysis

The court analyzed the definitions of "claim" under Section 3(6) and "debt" under Section 3(11) of the I&B Code, emphasizing that while "debt" includes financial and operational liabilities, it does not automatically include interest unless there is an agreement to that effect. The court found that since the principal amount had been paid and no interest was payable as per the agreement, the applications under Section 9 based solely on claims for interest were not maintainable. The court further clarified that if the Appellants wished to claim interest for delayed payment, their remedy lies before a competent civil court, not through the insolvency process. The court also rejected the argument regarding the mandatory nature of the 14-day disposal period, referencing its prior rulings.

Holding and Implications

The appeals were dismissed for lack of merit.

The direct consequence of this decision is that initiation of Corporate Insolvency Resolution Process under Section 9 of the I&B Code cannot be based solely on claims for interest where the principal debt has been paid and no contractual obligation to pay interest exists. The Appellants retain the option to pursue interest claims before a civil court. No new precedent was established beyond reaffirming the non-mandatory nature of the 14-day disposal period under Section 9.

Show full summary ...
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    Krishna Enterprises v. Gammon India Ltd.

    27.07.2018: Appellant(s) (Operational Creditors) filed applications under Section 9 of the Insolvency and Bankruptcy Code, 2016 (for short I&B Code) for initiation of Corporate Insolvency Resolution Process against M/s Gammon India Ltd. (Corporate Debtor). On appearance it was brought to the notice of the Adjudicating Authority (National Company Law Tribunal) Mumbai Bench that principle amount of debt which was the only amount due has been paid to the Appellant(s). The Adjudicating Authority having noticed the same, by impugned orders dismissed the applications preferred by appeal(s).

    2. Learned counsel for the Appellant submits that the Adjudicating Authority kept the matter pending since long and has not dispose of the matter within 14 days as stipulated under Section 9 of I&B Code. However, such submission cannot be accepted as 14 days period prescribed is not mandatory as has already been held by this Appellate Tribunal. Company Appeal (AT) (Insolvency) No. 144, 145, 146, 147 & 148 of 2018

    3. According to learned counsel for the Appellant in terms of Section 3(6) of I&B Code claim means a right of payment, whether such right is reduced to judgment, fixed disputed, undisputed, legal, equitable, etc. Reliance has been placed on definition of debt as defined in Section 3(11) as per which debt means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt.

    4. It is submitted that the debt includes the interest, but such submission cannot be accepted in deciding all claims. If in terms of any agreement interest is payable to the Operational or Financial Creditor then debt will include interest, otherwise, the principle amount is to be treated as the debt which is the liability in respect of the claim which can be made from the Corporate Debtor.

    5. In the present appeals, as we find that the principle amount has already been paid and as per agreement no interest was payable, the applications under Section 9 on the basis of claims for entitlement of interest, were not maintainable. If for delayed payment Appellant(s) claim any interest, it will be open to them to move before a court of competent jurisdiction, but initiation of Corporate Insolvency Resolution Process is not the answer.

    6. We find no merit in these appeals. These are accordingly dismissed. No cost. [Justice S. J. Mukhopadhaya] Chairperson [Justice Bansi Lal Bhat] Member (Judicial) am/sk Company Appeal (AT) (Insolvency) No. 144, 145, 146, 147 & 148 of 2018

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    Comments

    Krishna Enterprises v. Gammon India Ltd.
    (Jul 27, 2018)