Excerpts of the order;
# 9. In view of the above the only limited question for determining would be whether the claim of interest falls within the term 'debt which the respondent is liable to pay, failing which the petitioner is entitled to an order of admission in terms of section 9 of the Code and for recommending the appointment of the Insolvency Resolution Professional. It may be pointed out that the petitioner has not named the RP to be appointed in case of admission, but has made a request for referring the matter to the Insolvency and Bankruptcy Board of India, for such an appointment in terms of section 16(3) of the Code
# 10. I have heard learned counsels of parties and given my thoughtful consideration to the controversy involved in the case. It is not disputed by the learned counsel for petitioner that the respondent has issued cheques in respect of entire principal sum due.
# 11. The learned counsel mainly relied upon the judgement of Hon'ble Supreme Court in Vijay Industries Vs. NATL Technologies Limited (2009) 3 Supreme Court Cases 527, in support of his contention. The question before the Hon'ble Supreme Court was whether interest payable on the sum due would be a debt so as to attract the provisions of sections 433 and 434 of the Companies Act, 1956. The Hon'ble Supreme Court held as under: -
"34. Section 433 of the Companies Act does not state that the debt must be precisely a definite sumn. It has not been disputed' before us that failure to pay the agreed interest or the statutory interest would come within the purview of the word "debt". It is one thing to say that the amount of debt is not definite or ascertainable because of the bona fide dispute raised thereabout or there exists a dispute as regards quantity or quality of supply or such other defences which are available to the purchaser; but it is another thing to say that although the dues as regards the principal amount resulting from the quantity or quality of supply of the goods stands admitted but a question is raised as to whether any agreement had been entered into for payment of interest or whether the rate of interest would be applicable or not in the latter case, in our opinion, the application for winding up cannot be dismissed'."
# 12. The facts of the case before the Hon'ble Supreme Court were that the invoices of the credit bills attached with each of the supply contained a clause relating to payment of interest in the following terms - "amount must be paid within 7 days or you are liable to pay 2% Interest per month." It was not in dispute that on the foot of each credit bill, the officer of the respondent company has put his signatures as a token of acceptance.
# 13 It was further found that the respondent company had adjusted the amount paid first towards the interest at a stipulated rate and the balance against the principal amount. The Hon'ble Supreme Court, on the facts of the case, further held as under: -
"43. The findings of the High Court, with respect, are not correct for more than one reason; firstly, because the Division Bench did not hold that the invoices were not proved by cogent evidence; secondly, question of leading evidence would arise only after the company petition is admitted and, thirdly, issuance of invoices and signature of the respondent thereon is not disputed"
44. The judgment of the Division Bench also contains a legal flaw insofar as it failed to take into consideration that the appellant had in fact issued three notices being dated 6-1-2003, 8-9-2003 and legal notice dated 23-12-2003 specifically mentioning that the payments had been adjusted towards interest first and balance, if any, shall be adjusted towards the principal Thus, a prima facie case was made out."
# 14. The Hon'ble Supreme Court set aside the judgment of High Court. Further, instead of remitting the case back to the High Court, disposed of the matter in exercise of its jurisdiction under Article 142 of the Constitution of India, directing the respondent company to pay simple interest on the admitted sum @ 12% p.a. on the balance amount instead of 24% p.a. within 8 weeks from the date the amount became due till it was paid, failing which the consequences provided under the Law were to ensue
# 15. I am, however, of the view that the issue here is to be determined, in view of the provisions of the 'Code' which has come into force w.e.f. 01.12.2016. Learned counsel for parties have not disputed that the term "debt" or operational creditor were not defined in the 1956 Act. This term is now defined in section 3(11) of the Code' as meaning a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt'. We are presently concerned with the definition of the term "operational debt" as defined in section 5(21) of the Code'. Section 5 (20) defines "operational creditor" as meaning 'a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred'. Section 5 (21) of the Code' says that "operational debt'' means 'a claim in respect of the provisions of goods and services including employment or a debt in respect of the repayment of the dues arising under any law for the time being in force and payable to the Central Government or State Government or any local authority.
# 16. There is a marked difference between the definition of the term 'financial debt and the operational debt'. Under section 5 (8) the term financial debt means a debt along with interest, if any, which is disbursed against the consideration for the time value of money and that is an inclusive definition. In the definition of the term 'operational debt under section 5 (21) the word 'interest has not been mentioned.
# 17. Anyhow, to resolve the issue, it would be relevant to refer to the documents on record and the agreement, if any, between the parties. In the present case, admittedly, the amount being paid by the applicant / petitioner from time to time was being regularly adjusted towards the principal only and the interest has accumulated for the amount claimed by the petitioner Even the invoices filed along with the winding up petition, do not contain any clause of payment of interest. It is only now with the present application that the operational creditor has attached 'Tax Invoices' [Annexure A-4 (colly)] containing the clause of payment of 24% p.a. towards the interest in case the payment is not made within 3 days. These Tax Invoices were not part of the petition before the Hon'ble High Court. It is not the version of the petitioner that the Credit Invoices or Tax Invoices bear the signatures of the representative of the respondent Company. The term of 'interest' is thus only a unilateral act of the petitioner / applicant.
# 18. It would be pertinent to refer to the reply of respondent dated 23.03.2015 (Annexure P-8), attached with the Company Petition filed in the High Court. In this reply, the respondent has explained the reasons for the delayed payment. ………. The petitioner has not placed on record the purchase orders issued by the respondent with the applicant company, in order to controvert the above stand of the respondent.
# 19. The learned counsel for petitioner, however, vehemently contended that the interest can be determined by the Tribunal at the reasonable rate, as the petitioner is entitled to interest in accordance with section 61 of the Sales of Goods Act and section 3 of the Interest Act. I am of the considered view that it is never the intention of the legislature under the 'Code' that the Tribunal should determine the rate of interest and grant time to the company to pay the amount as per the directions. It is clearly intended that an application filed under section 9 of the Act is either to be admitted or rejected within a period of 14 days of the receipt of the application. There is no scope of passing an interim order like the one suggested by the learned counsel for the applicant / petitioner.
In view of the aforesaid discussion, I hold that the entire amount of debt' as per the intention of the legislature under the Code having been paid by way of cheques, the instant petition is rejected. However, in case the cheques issued by the respondent are dishonoured, the petitioner would be at liberty to file a fresh petition, if so advised or take other appropriate steps in accordance with the Law. Certified copy of the order be sent to both the parties by speed post.
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