NCLT Ahemdabad Rejects Jindal SMI's Insolvency Plea Against Astron Packaging As Principal Dues Paid

The Ahmedabad bench of the National Company Law Tribunal (NCLT) has rejected an insolvency petition filed by Jindal SMI Coated Products Limited against Astron Packaging Limited, finding that Astron had paid ₹3.23 crore against principal dues of ₹2.97 crore.

The court further observed that the amount remaining after treating the payment towards principal was below the statutory threshold under the Insolvency and Bankruptcy Code (IBC).

The bench comprising Judicial Member Chitra Hankare and Technical Member Dr V.G. Venkata Chalapathy observed, “Interest dues amount outstanding cannot be brought before the IBC by putting the cart before the horse unilaterally especially when there is a dispute or agreed terms.”

The court noted that there was no contract on record specifying whether payments were to be adjusted first towards interest or principal. The parties should instead have reconciled their accounts.

Jindal, an operational creditor engaged in manufacturing pressure-sensitive label stocks, supplied packaging material to Astron under various purchase orders, according to its submissions. Its invoices provided for payment within 30 days, with interest at 24% per annum for delayed payments. The credit period was later extended to 90 days at Astron's request.

Jindal submitted that Astron acknowledged outstanding dues of about ₹3.26 crore in an email dated November 22, 2022 and assured payment. Astron subsequently paid ₹28.77 lakh in December 2022 and ₹2.94 crore in January 2023. Jindal claimed that ₹1.16 crore towards principal remained payable, along with ₹23.17 lakh in interest.

Jindal issued a statutory demand notice on December 22, 2022, seeking about ₹4.10 crore towards principal and interest. Astron maintained that the entire principal had been paid between October 2022 and March 2023 and that the payments had been accepted without objection. It also contended that the parties had a mutual understanding that interest would not be charged on delayed payments.

Astron further argued that Jindal had wrongly appropriated the payments towards interest instead of principal, thereby creating an artificial default. It challenged the demand notice on the ground that it had been issued by an advocate without proper authorisation. Astron also pointed to the absence of purchase orders, delivery challans, lorry receipts and other documents evidencing the supplies.

Jindal denied that there was any pre-existing dispute. It argued that Astron had acknowledged its liability and made payments without disputing the supplies or invoices.

The court noted that Jindal had issued two debit notes towards accrued interest totalling ₹1.12 crore. Astron, meanwhile, had paid ₹3.23 crore against principal dues of ₹2.97 crore. The January 2023 payment of ₹2.94 crore was made in accordance with Astron's November 22, 2022 email, the court noted.

The court found that Jindal had unilaterally adjusted the payment towards interest. In the absence of a contractual term specifying whether interest or principal was to be adjusted first, the appropriate course was to reconcile the accounts, it observed.

The court further observed that if Astron's payment was treated towards the principal and interest was to be collected separately, the amount remaining would be below the statutory threshold. It also took note of Astron's ledger statement and the chartered accountant's certificate and proof showing that the principal had been paid through the bank account. Jindal, however, had not placed its ledger statement on record.

The insolvency petition was accordingly rejected and disposed of.