NCLAT Upholds Rejection Of CIRP Plea Against S Square Cargo, Excludes Invoice-Based Interest From Debt

The National Company Law Appellate Tribunal (NCLAT) at Delhi has recently upheld the dismissal of a Section 9 CIRP application filed by Shivani Enterprises against S Square Cargo Movers Pvt. Ltd. It held that the interest component reflected in the invoices was not mutually agreed between the parties and could not be included in the operational debt.

A bench of Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra held:

"When the payment of interest is not found to have been mutually agreed to between the parties, the levy of interest by the Appellant and the denial to pay any such interest by the Corporate Debtor in itself becomes a ground of dispute. Hence, we do not find any error on the part of the Adjudicating Authority to hold that the dispute raised by the Corporate Debtor over enforceability of interest amount claimed by the Appellant was a ground of dispute between the two parties. Whether this interest component could have been factored in by the Appellant in computing the outstanding liability of the Corporate Debtor is clearly a question which can only be adjudicated by a court of competent jurisdiction and not in the summary proceedings conducted by the Adjudicating Authority."

The appeal arose from the January 16, 2026 order of the NCLT's Cuttack bench, which had rejected the insolvency plea on the ground that the operational debt fell below the statutory threshold.

Shivani Enterprises had supplied goods to the corporate debtor and raised invoices aggregating Rs.1.52 crore. Against this, the corporate debtor made part payments of Rs 48.58 lakh, leaving a principal outstanding of Rs 70.54 lakh. The operational creditor relied on an interest clause in the invoices to compute a total claim of Rs.1.06 crore.

A demand notice under Section 8 of the Insolvency and Bankruptcy Code was issued on March 3, 2025. In response, the corporate debtor did not dispute the principal dues but took specific objection to the interest being claimed. Although the NCLT later proceeded ex parte, it chose to exclude the interest component and dismissed the petition, noting that the remaining amount fell short of the ₹1 crore threshold.

Before the appellate tribunal, Shivani Enterprises maintained that the invoices themselves formed binding contracts. It argued that since the debtor had not objected to the interest clause at the relevant time, the term ought to be treated as accepted.

The NCLAT was not persuaded. It recorded that there was no formal agreement between the parties governing payment terms. The appellant, the tribunal noted, had itself acknowledged this position. It also pointed out that there was no history of the corporate debtor ever paying interest on delayed payments, which further weakened the claim.

The tribunal held:

"Hence, we are not in a position to accept the contention of the Appellant that the interest liability in the present factual matrix be added to the principal amount outstanding for computing the total operational debt which is outstanding qua the Corporate Debtor. Since it is an admitted fact that the total principal outstanding is Rs 70,54,167/- and any application under Section 9 must comply with Section 4 of IBC which mandates a minimum default amount of Rs 1 Cr., the present Section 9 application clearly falls below the statutory threshold and hence cannot be maintained."

The tribunal found no reason to interfere with the NCLT's order and dismissed the appeal.