NCLT Delhi Rejects Insolvency Plea Over Claims Based On Unilateral Invoice Payment Terms

The Delhi bench of the National Company Law Tribunal (NCLT) has rejected Kannodia Technoplast Ltd.'s insolvency petition against Kay Pee Khaini Pvt. Ltd. It held that payment terms unilaterally mentioned in invoices cannot establish default when there is no bilateral contract between the parties.

The order was passed by a bench comprising Judicial Member Ashok Kumar Bhardwaj and Technical Member Banwari Lal Meena.

“In the absence of there being bilateral contract stipulating the terms of payment, on the basis of invoices issued by the creditor unilaterally, neither any default can be alleged nor the CD can claim any interest,” the bench observed.

Kannodia Technoplast manufactures integrated flexographic packaging material. Kay Pee Khaini manufactures tobacco products. Kay Pee Khaini approached it for packaging material and pouches for printed plastic laminate products. Supplies were made during financial years 2022-23, 2023-24 and 2024-25.

The creditor claimed ₹1.59 crore as principal and ₹46.91 lakh interest. The total claim was ₹2.06 crore.

Kay Pee Khaini disputed the petition. It maintained that payments were made on account rather than against individual invoices. It challenged September 30, 2024 as default, noting ₹8 lakh was paid on December 2, 2024.

The company contended that there was no agreement requiring payment within 30 days of an invoice. It said the parties made consolidated payments after receiving and verifying goods. It disputed the interest claim for lack of a bilateral agreement.

The court found that Kay Pee Khaini issued no purchase order and that no supply contract existed.

Since there was no bilateral contract fixing payment terms, the bench held that invoice terms could not establish default.

“When the time limit for payment was not stipulated in any bilateral contract for supply, the unilateral mention of rate of interest and time limit for payment in invoices can be no basis to allege default,” the bench observed.

The court found an inconsistency in Kannodia Technoplast's case. It cited September 30, 2024, as the default while also relying on a 30-day period from each invoice.

The bench found substance in Kay Pee Khaini's contention that payments were made on account rather than against invoices. It found that the payment pattern indicated a running balance.

The court found that the requirement under Section 9(5)(b) of the IBC was not satisfied. The application was rejected, leaving the creditor free to pursue other legal remedies.