The National Company Law Appellate Tribunal (NCLAT) on Wednesday rejected an appeal by SNJ Synthetics Limited, which sought to initiate insolvency proceedings against PepsiCo India Holdings Private Limited.
The NCLAT ruled that SNJ's insolvency plea under Section 9 of the Insolvency and Bankruptcy Code, 2016, was not maintainable as the principal debt had already been repaid, and only a contested interest claim was pending.
SNJ Synthetics, an MSME supplying materials to PepsiCo, filed an insolvency plea claiming ₹1.96 crore in operational debt, including ₹91.63 lakh as principal and ₹1.05 crore as interest for delayed payments. After reconciliation, PepsiCo paid the revised principal of ₹77.37 lakh in February 2023. SNJ accepted the payment but pursued the interest claim. The NCLT dismissed the plea, stating only a disputed interest remained. SNJ challenged this before NCLAT, arguing the interest formed part of the operational debt.
The three-member Bench of Justice Ashok Bhushan (Chairperson), and Technical Members Barun Mitra and Arun Baroka observed, “the Adjudicating Authority has not committed any infirmity in not allowing the CIRP of the Corporate Debtor to be initiated solely on the basis of the claim of the contested and unsubstantiated interest component. The provisions of IBC cannot be turned into a debt-recovery proceedings and to commend any such course of action would tantamount to pushing the Corporate Debtor to face the perils of corporate death instead of being rejuvenated and revived.
The tribunal also stated, “We also notice that the Appellant has relied on the provisions of other laws like MSME Act or Interest Act to justify their claim of interest payment. Without making any observation on the merits of their contention, we would only like to add that neither the Adjudicating Authority nor this Appellate Tribunal is the appropriate forum for making any such determination on the liability of the Respondent-Corporate Debtor to pay interest under the MSME Act or Interest Act.”
The NCLAT dismissed SNJ Synthetics' appeal, noting SNJ didn’t revise its ₹1.05 crore interest claim after the principal was reduced, supporting PepsiCo’s argument that the claim was inflated to meet the ₹1 crore insolvency threshold. It also found no written provision for interest in the Supply Agreement or countersigned invoices. While SNJ cited the MSME Act and Interest Act, 1978, the NCLAT held it wasn’t the right forum to decide such statutory interest claims.
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