Interest Mentioned In Invoice Cannot Be Counted For IBC Threshold Without Binding Agreement: NCLT Kochi

The National Company Law Tribunal (NCLT) at Kochi has dismissed an insolvency petition after holding that an operational creditor cannot rely solely on an interest clause printed on invoices to inflate the claim amount and cross the statutory Rs. 1 crore threshold under the Insolvency and Bankruptcy Code, in the absence of any binding agreement for payment of interest.

Judicial Member Vinay Goel rejected a Section 9 plea filed by Savino Ceramic Private Limited against Fontana Impex Private Limited, observing that the claimed default of Rs. 1,52,29,080.50 included Rs. 71,64,651 towards interest, which had no contractual foundation.

“There is no agreement, contractual stipulation, or other binding arrangement placed on record that entitles the Petitioner to levy or recover such interest. The claim of interest, therefore, appears to be a unilateral and self-serving addition, made solely to artificially inflate the quantum of alleged default so as to invoke the insolvency jurisdiction of this Adjudicating Authority.”

Excluding the interest amount, the principal allegedly due stood at Rs. 80,64,429.50, which is below the Rs. 1 crore threshold prescribed under Section 4 of the Code.

The tribunal further held that the invoices forming the basis of the claim were raised between October 2, 2020 and February 22, 2021, a period covered by Section 10A of the Code, which bars initiation of insolvency proceedings for defaults arising during the Covid-19 suspension period.

“If the amounts falling under Section 10A are excluded, the petition itself is not maintainable,” it observed.

Savino Ceramic said the parties had been doing business since 2015 and claimed that Rs 1,52,29,080.50 remained unpaid as of March 31, 2025. It relied on a 24 per cent interest clause printed on its invoices and referred to email correspondence to assert that the dues were acknowledged.

Fontana opposed the petition, arguing that there was no agreement to pay interest and that, without adding the interest component, the alleged default was below the statutory threshold. It further contended that the invoices related to the period covered by Section 10A.

Dismissing the petition, the tribunal clarified that its findings were confined to maintainability under the Code and would not affect the creditor's remedies in accordance with law. It imposed a cost of Rs 1 lakh to be deposited with the National Defence Fund.

For Petitioner: Advocate Monaal Davawala

For Respondent: Advocate Sunny Gangar