Pre-existing dispute cannot bar admission of application u/s. 7 of IBC

Canara Bank Vs S. S. Aluminium Private Limited (NCLT Cuttack)

NCLT Cuttack held that a pre-existing dispute cannot be a bar for admission of an application under Section 7 of the Insolvency and Bankruptcy Code, 2016. Accordingly, CIRP application against S.S. Aluminium Private Limited admitted as debt and default established.

Facts- The present application was filed on 10.04.2024 by Canara Bank (Petitioner/Financial Creditor) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (the Code) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for initiation of Corporate Insolvency Resolution process (‘CIRP’) against S.S. Aluminium Private Limited (‘Respondent/ Corporate Debtor’) for default amount of 15,88,33,394.26/-.

Conclusion- A review of Section 5(8) of IBC, 2016, shows that a financial debt includes borrowed money plus any interest, reflecting the consideration for the time value of money. It covers funds borrowed with interest payments. In this case, the Financial Creditor approved loans to the respondent through various loan agreements, and interest was charged on the sanctioned amount. This interest was detailed in the loan account statements submitted by the Financial Creditor with their application, but the respondent did not dispute the loan account statement during the argument of the present matter. Thus, the FIR was registered by the respondent against the concerned official of the Financial Creditor cannot be a ground to reject the application under Section 7 of IBC, 2016, unlike in a Section 9 application, a pre-existing dispute cannot be a bar for admission of an application under Section 7 of the IBC, 2016.