NCLAT New Delhi Rules, Interest On Unilateral Invoices For Delayed Payment Doesn't Constitute Operational Debt In Absence Of Contractual Clause
Pranav B Prem
The Principal Bench of the National Company Law Appellate Tribunal (NCLAT) at New Delhi has ruled that interest claimed solely on the basis of unilateral invoices—without a corresponding contractual clause—cannot constitute “operational debt” under the Insolvency and Bankruptcy Code, 2016 (IBC). Dismissing an appeal filed by M/s SNJ Synthetics Limited against M/s PepsiCo India Holdings Pvt. Ltd., the Tribunal reaffirmed that the Corporate Insolvency Resolution Process (CIRP) cannot be triggered solely on the basis of a contested and unsupported claim for interest.
The bench comprising Justice Ashok Bhushan (Chairperson), Barun Mitra (Member – Technical), and Arun Baroka (Member – Technical) upheld the decision of the National Company Law Tribunal (Chandigarh Bench-I), which had dismissed the Section 9 application initiated by the appellant.
Background of the Case
The appellant, M/s SNJ Synthetics Ltd., an MSME engaged in manufacturing PET preforms and thermoplastics, had a long-standing business relationship with the respondent, M/s PepsiCo India Holdings Pvt. Ltd., governed by a Supply Agreement dated 09.10.2018. Between 2018 and 2021, the appellant continued to supply goods and raised invoices accordingly.
Alleging unpaid dues, the appellant served a demand notice under Section 8 of the IBC and subsequently filed a Section 9 application seeking initiation of CIRP, claiming ₹91.63 lakh as the principal amount and ₹1.05 crore as interest at 24% per annum due to delayed payment.
During proceedings, the parties reconciled accounts and the principal amount was revised to ₹77.37 lakh. The respondent paid the revised principal amount without prejudice, but the appellant continued to press for the interest claim. The NCLT dismissed the Section 9 petition, holding that CIRP cannot be initiated solely on the ground of unpaid interest when the principal amount has already been paid.
Appellant’s Contentions
Senior Advocate Anupam Lal Das, representing the appellant, argued that both the principal and interest form part of operational debt and must be considered together to determine whether the ₹1 crore threshold under Section 4 of IBC was met. It was submitted that the invoices bearing the interest clause were routinely issued, and the respondent never objected to the interest terms. Thus, according to the appellant, these terms were binding and enforceable.
The appellant relied on Prashat Agarwal v. Vikas Parasrampuria [CA(AT)(Ins.) No. 690 of 2022] and Anuj Sharma v. Rustagi Projects Pvt. Ltd [CA(AT)(Ins) No. 550 of 2023], where the Tribunal had recognized interest stipulated in invoices as part of operational debt. Reference was also made to the Bombay High Court’s judgment in Jatin Koticha v. VFC Industries Pvt. Ltd [2007 SCC Online Bom 1092], asserting that unsigned invoices accepted through conduct amount to enforceable contracts.
It was further submitted that the appellant, being an MSME, was entitled to interest on delayed payments under Sections 15 and 16 of the MSME Act, 2006, and also under the Interest Act, 1978.
Respondent’s Submissions
Senior Advocates Krishnendu Dutta and Abhijeet Sinha, representing the respondent, contended that the Supply Agreement of 09.10.2018 did not contain any clause regarding interest on delayed payments. They argued that unilateral invoices bearing an interest clause could not override a formal bi-partite agreement, particularly in the absence of mutual consent or acknowledgment by the respondent.
It was emphasized that IBC is not a recovery mechanism and that once the principal amount was paid, continuation of the Section 9 petition solely for interest—which was never contractually agreed upon—amounted to misuse of the insolvency framework.
NCLAT’s Analysis and Ruling
The Tribunal meticulously examined the Supply Agreement, particularly Clause 9 and Schedule D, which governed payment terms. It found no clause prescribing interest on delayed payments. It held that in the absence of any express or implied agreement regarding interest, unilateral inclusion of interest terms in invoices could not override the contract.
Citing its earlier ruling in Krishna Enterprises v. Gammon India Ltd [CA(AT)(Ins) No. 144 of 2018], the Tribunal reiterated that where the contract does not provide for interest, the debt under IBC is limited to the principal amount. The NCLAT also observed that the appellant had failed to explain why the interest amount remained constant even after the principal amount was reduced upon reconciliation. This cast doubt on the genuineness of the interest claim, especially as it was apparent that the threshold limit was being pursued solely to invoke CIRP.
Referring to S.S. Polymers v. Kanodia Technoplast Ltd [CA(AT)(Ins) No. 1227 of 2019], the Tribunal reaffirmed that interest based solely on one-sided invoices cannot be the foundation for initiating insolvency proceedings. It stated: “Unilaterally generated invoices signed by only one party cannot overrun or recast the terms of bi-partite agreements and create binding obligations on the other party to pay interest.”
The bench also rejected the appellant’s reliance on the MSME Act and the Interest Act, stating that such claims were outside the jurisdiction of NCLT/NCLAT and must be pursued before a competent forum.
Verdict
The NCLAT concluded that the appellant’s claim for interest was neither contractually justified nor substantiated by conduct or practice. It held that once the principal amount was paid and only a disputed interest claim remained, the Section 9 application was not maintainable under the IBC. Accordingly, the appeal was dismissed, and the impugned order of the NCLT was upheld, with the Tribunal cautioning against misuse of insolvency provisions for debt recovery.
Appearance
For Appellant: Mr. Anupam Lal Das, Sr. Advocate with Mr. Nithin Chowdary Pavuluri, Mr. Anirudh Singh and Mr. Subham Saurabh, Advocates.
For Respondent: Mr. Krishnendu Dutta & Mr. Abhijeet Sinha, Sr. Advocates with Ms. Avni Sharma and Ms. Simarpreet Kaur N., Advocates.
Cause Title: M/s SNJ Synthetics Limited V. M/s Pepsi Co India Holdings Private Limited
Case No: Company Appeal (AT) (Ins) No. 386/2025
Coram: Justice Ashok Bhushan [Chairperson] , Mr. Arun Baroka [Member (Technical)], Mr. Barun Mitra [Member (Technical)]
[Read/Download order]
