Pranav B Prem

The National Company Law Tribunal (NCLT), Amravati Bench, comprising Kishore Vemulapalli (Judicial Member) and Umesh Kumar Shukla (Technical Member), has held that the Adjudicating Authority under the Insolvency and Bankruptcy Code (IBC) is not the appropriate forum to determine a corporate debtor’s liability to pay interest under the Micro, Small and Medium Enterprises Development (MSME) Act, 2006 or the Interest Act. The Bench further observed that insolvency proceedings cannot be used as a tool for debt recovery, particularly when the claim is based solely on disputed or unsubstantiated interest components.

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Background

The order came in an application filed under Section 9 of the IBC, 2016, by Green Morning Horticulture Pvt. Ltd. (Operational Creditor) seeking initiation of Corporate Insolvency Resolution Process (CIRP) against Lakshmi Infrastructure and Developers India Pvt. Ltd. (Corporate Debtor). The operational creditor claimed that as of 15 December 2024, a total of ₹1,20,14,708.18 remained outstanding towards the principal amount. The applicant also sought payment of interest on delayed payments under the MSME Act, 2006, along with compensation and damages for alleged losses suffered.

The dispute arose out of two work orders awarded by the corporate debtor to the operational creditor for tree translocation and maintenance services relating to a National Highways Authority of India (NHAI) project — the six-laning of the NH-44 stretch from Gundlapochampally to Bowenpally in Telangana under the Bharatmala Pariyojana. As per the contractual terms, the corporate debtor was required to make payment within 15 days of the certification of monthly bills. However, the operational creditor alleged that despite repeated reminders and part payments, significant dues remained unpaid. A statutory demand notice under Section 8 of the IBC was issued on 24 August 2024, which was received by the corporate debtor on 30 August 2024, but no payment or reply followed. Consequently, the operational creditor filed the Section 9 application before the NCLT Amravati.

Tribunal’s Observations

Upon examining the record, the Tribunal found that the operational creditor had failed to furnish certified measurement quantities of the executed work as required by the terms of the work orders. Instead, the creditor relied on an experience certificate issued by the corporate debtor, which merely mentioned the gross value of completed work (₹1,24,12,982) without providing any certification of quantities. The Tribunal, therefore, held that the invoices raised could not be considered valid under the contractual terms, as they lacked necessary certification.

Addressing the claim for interest under the MSME Act, the Bench referred to the NCLAT ruling in SNJ Synthetics Ltd. v. PepsiCo India Holdings Pvt. Ltd. [(2025) ibclaw.in 342 NCLAT], wherein it was categorically held that the Adjudicating Authority under the IBC is not competent to determine liability for interest under the MSME Act or the Interest Act. Quoting the NCLAT, the Bench reiterated: “Neither the Adjudicating Authority nor this Appellate Tribunal is the appropriate forum for making any such determination on the liability of the Corporate Debtor to pay interest under the MSME Act or Interest Act. The provisions of the IBC cannot be turned into debt recovery proceedings.”

The NCLT further observed that ₹30 lakh had been paid by the corporate debtor after the filing of the petition, thereby reducing the outstanding operational debt. As a result, the remaining claim amount fell below the minimum threshold limit of ₹1 crore prescribed under Section 4 of the IBC for initiating insolvency proceedings. The Bench emphasized that the object of the IBC is to resolve insolvency, not to recover money, and that insolvency cannot be invoked as a substitute for enforcing payment of interest or damages. “The object of the IBC is not to recover money but to resolve insolvency; hence, an application cannot be filed with the sole purpose of recovering the money,” the Bench noted.

Decision

In light of the above findings, the Tribunal held that the Section 9 application was not maintainable as:

1. The invoices did not comply with the contractual certification requirements,

2. The claim for interest under the MSME Act could not be adjudicated by the Adjudicating Authority, and

3. The outstanding debt fell below the ₹1 crore threshold due to post-petition payments.

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Accordingly, the NCLT dismissed the application and disposed of the proceedings, reiterating that insolvency cannot be used as a substitute for debt recovery or interest disputes.

Cause Title: Green Morning Horticulture Pvt. Ltd. Versus Lakshmi Infrastructure and Developers India Pvt. Ltd.

Case No: CP (IB)/23/9/AMR/2025

Coram: Kishore Vemulapalli (Judicial Member), Umesh Kumar Shukla (Technical Member)