Gopal Trading Company Vs. Ravindra Kumar Goyal (RP) and Ors. - The Adjudicating Authority had rightly concluded that the intent behind filing the Section 9 application was not genuine in view of the fact that the Appellant who had initiated the Section 9 application, for inexplicable reasons, absented themselves from further participation in the CIRP proceedings including abstention from the filing of claims.

 NCLAT (2026.03.17) in Gopal Trading Company Vs. Ravindra Kumar Goyal (RP) and Ors. [(2026) ibclaw.in 326 NCLAT, Company Appeal (AT) (Insolvency) No. 222 of 2026] held that;

• The plain reading of Section 65 also leaves no doubts in our minds that there is no need of any formal application for its invocation and the Adjudicating Authority is well within its rights to take suo-moto cognizance of any such development at any stage of the proceedings.

• The Adjudicating Authority had rightly concluded that the intent behind filing the Section 9 application was not genuine in view of the fact that the Appellant who had initiated the Section 9 application, for inexplicable reasons, absented themselves from further participation in the CIRP proceedings including abstention from the filing of claims.

• Be that as it may, we tend to agree with the Adjudicating Authority that when the family links are kept in mind along with the fact that the Appellant was also an ex-director of the Corporate Debtor coupled with non-pursuit of their claims arising out of debt owed by the Corporate Debtor clearly establishes that the purpose was not resolution of insolvency but to prevent recovery proceedings by CGST and GST Department.

Excerpts of the Order;

The present appeal filed under Section 61 of Insolvency and Bankruptcy Code 2016 (“IBC” in short) by the Appellant arises out of the Order dated 15.12.2025 (hereinafter referred to as “Impugned Order”) passed by the Adjudicating Authority (National Company Law Tribunal, Ahmedabad Bench-I) I.A. Nos. 1316(AHM)/2024 and 643(AHM)/2025 in C.P. (IB) No. 251/(AHM)/2022. By the impugned order, the Adjudicating Authority has allowed I.A. Nos. 1316(AHM)/2024 and 643(AHM)/2025. Aggrieved by the impugned order, the present appeal has been preferred by the Appellant-Operational Creditor.

# 2. Coming to the brief facts of the case, Gopal Trading Company-Operational Creditor/Appellant had filed a Section 9 application under IBC which led to admission of the Corporate Debtor-Matrushri Fibres Private Limited into CIRP on 25.09.2023. The Interim Resolution Professional after verification and collation of claims constituted the Committee of Creditors (“CoC” in short). The IRP was later confirmed as Resolution Professional (“RP” in short). The CoC consisted only of two Operational Creditors viz. Assistant Commissioner of GST and Assistant Commissioner of State Tax holding 95.01% and 4.99% vote-share respectively. During the conduct of CIRP proceedings, the IRP had issued several communications to the suspended management of the Corporate Debtor seeking statutory financial records which did not elicit any response from the suspended management. The RP had also issued communications to the Appellant for deposit of CIRP costs which the Appellant did not initially deposit on grounds of financial constraints. This had led the RP to initiate contempt proceedings against the Appellant following which Rs. 2 lakh was deposited towards CIRP cost on 29.08.2024. On finding that the CIRP was not making much meaningful progress due to non-cooperation from the suspended management in making available necessary information/ documents/records of the Corporate Debtor, the Respondent No.1-RP preferred IA No. 1316 of 2024 against the members of CoC seeking directions for inter-alia the closure/termination of the CIRP; for direction to the CoC members to pay the RP fees and expenses incurred besides discharge of the RP from the CIRP of the Corporate Debtor. The Appellant was however not impleaded as party in IA No. 1316 of 2024. While the IA No. 1316 of 2024 was being heard, the RP-Respondent No.1 also filed an IA No. 643 of 2025, in which the Appellant was arrayed as a party, seeking directions of the Adjudicating Authority to declare that the Section 9 petition was initiated by the Appellant-Operational Creditor fraudulently with malicious intent and for purpose other than resolution of the Corporate Debtor and for levy penalty in terms of Section 65 on the Appellant. The Adjudicating Authority after hearing both IA No. 1316 of 2024 and IA No. 643 of 2025 disposed them of with a common impugned order terminating the CIRP of the Corporate Debtor alongwith direction to the Appellant to pay a penalty of Rs. 10 lakhs for fraudulent initiation of CIRP; pay CIRP related costs of Rs.6 lakhs which was in addition to the Rs. 2 lakhs which had already been paid earlier. Aggrieved by this impugned order, the present appeal has been preferred by the Appellant.

# 3. Submission was made by the Ld. Counsel for the Appellant that the Appellant was a small-time business entity which had already suffered business/financial losses and hence the cumulative burden of Rs. 18 lakhs toward penalty, RP’s fees and CIRP expenses imposed by the Adjudicating Authority vide the impugned order had caused grave and irreparable injury to the Appellant. Assailing the impugned order, submission was pressed that when the Adjudicating Authority had itself admitted the CIRP after due adjudication of the existence of the operational debt and default way back in 25.09.2023 and this CIRP admission order had already acquired finality, the impugned order by reversing its earlier order by holding the CIRP initiation to be fraudulent/malicious suffered from inconsistency and incongruity both in terms of fact and law. Stagnation of CIRP was the central reason on which the CIRP admission order was reversed by the impugned order. However, this stalemate was not caused by any act of omission or commission on the part of the Appellant but was entirely caused by persistent non-cooperation from the suspended management. Yet inspite of the purported non-cooperation from the suspended management, the RP did not take any coercive or corrective steps under Section 19(2) of the IBC to ensure cooperation of the suspended management. Hence, the RP being responsible for the slow and negligible progress of CIRP, it could not have held the Appellant responsible for contributing to the stagnation of CIRP and made liable to suffer penalty under Section 65 of IBC. Pressing further that the Appellant was not impleaded as a party in IA No. 1316 of 2025 which had been filed by the RP for closure/termination of the CIRP, the matter having been heard ex-parte against them, the Appellant was unfairly subjected to substantial and disproportionate financial liability by imposition of CIRP related costs and levy of penalty on the Appellant.

# 4. We have duly considered the arguments advanced by the Learned Counsel for the Appellant and perused the records carefully.

# 5. To commence with our analysis on the tenability of the contentions raised by the Appellant, we would like to begin by first outlining the prayers contained in I.A No. 1316 of 2024 and IA No. 643 of 2025. The prayers are as reproduced below:

I.A. No.1316 of 2024

“a. Pass appropriate orders to close/terminate the CIRP initiated against the Corporate Debtor and pass other and further consequential orders including in relation to discharge of the Applicant as Resolution Professional;

b. Pass appropriate orders directing the COC members of the Corporate Debtor to pay the RP fees and reimburse the CIRP expenses incurred by the Resolution Professional as mentioned at Annexure LL;

c. Pass any other order(s) that this Hon’ble Tribunal may deem fit.”

I.A. No.643 of 2025

“a. Pass appropriate order declaring that CP(IB) No. 251 of 2022 has been initiated by the Respondent fraudulently and/or with malicious intent for purpose other than for the resolution of insolvency of the Corporate Debtor and further this Adjudicating Authority be pleased to pass appropriate order levying penalty as per Section 65 of the IB Code on the Respondent;

b. Pass any other order(s) that this Hon’ble Tribunal may deem fit.”

# 6. Next, we advert our attention to the prayers urged by the Appellant as contained in the present appeal petition which is before us for our consideration which is as reproduced below:

“a. Be pleased to allow this Appeal.

b. Be pleased to quash and set-aside the Impugned Final Order and Judgment dated 15.12.2025 passed by the Ld. National Company Law Tribunal, Ahmedabad Bench, Court-I in I.A. No. 643/ 65/ NCLT(AHM)2025 IN CP(IB) No. 251/9(AHM)2022.

c. Be pleased to quash and set aside the imposition of penalty of Rs 10,00,000 and the direction fastening Resolution Professional fees and CIRP costs amounting to Rs 6,00,000 upon the Appellant, as directed under the Impugned Order;

d. Be pleased to pass such other or further or orders as may be necessary and expedient in the facts of this case.”

# 7. When we look at the prayers above, it is adequately clear that the Appellant has sought that the order of the Adjudicating Authority passed in IA No. 643 of 2025 be set aside. This order of the Adjudicating Authority which has been impugned held that the CIRP proceeding had been initiated fraudulently and/or with malicious intent for purpose other than insolvency resolution by the Appellant besides imposition of penalty of Rs 10 lakhs and fastening of fees of RP and CIRP costs amounting Rs 6 lakhs on the Appellant. The prayers in the present appeal, however, makes no reference to IA No. 1316 of 2024.

# 8. It is the case of the Appellant that the Adjudicating Authority had exceeded their jurisdiction in holding the initiation of CIRP to be fraudulent and malicious at a time when the same Adjudicating Authority had itself admitted the CIRP vide its order dated 25.09.2023 after recording existence of debt and default. In such circumstances, it was not correct on the part of the Adjudicating Authority to hold that the CIRP proceeding was fraudulently initiated. The Respondent No.1-RP had conducted the CIRP proceedings over a long period of two years during which several CoC meetings were also held. Thus, after CIRP had effectively run its course for two years, the invocation of Section 65 by the RP thereafter and holding the CIRP initiation to be fraudulent was arbitrary and untenable. It was also contended that Section 65 of IBC requires strict construction and IA No. 643 of 2025 could not have been admitted merely on the grounds of non-filing of claim by the Appellant-Operational Creditor. Further contention had been raised that when the Appellant had chosen to stay out of CoC proceedings and had also paid advance CIRP cost, they were being dragged into unnecessary litigation by the Respondent No.1 by filing IA No. 643 of 2025 under Section 65 of IBC. It was also their vehement contention that the Adjudicating Authority could not have directed the Appellant to discharge the CIRP costs as it is the CoC which is obligated to bear the fees of RP and CIRP expenses. The impugned order while imposing the penalty also failed to record reasons to justify imposition of such heavy penalty without disclosing the basis for quantifying the penal amount.

# 9. When we look at the material on record, we find that Respondent No.1-RP had filed IA No. 643 of 2025 in which a prayer had been clearly made that the CIRP initiation order having been fraudulently and maliciously initiated other than for purposes of resolution of insolvency of the Corporate Debtor, the Adjudicating Authority may order closure of the CIRP and levy penalty on the Appellant in terms of Section 65. At the very threshold, we would like to observe that insofar as IA No. 643 of 2025 is concerned, it is an undisputed fact that the Appellant had been impleaded as a party therein and therefore afforded an opportunity to appear before the Adjudicating Authority. The Appellant having also filed their reply in IA No. 643 of 2025 cannot claim any prejudice on grounds of breach of principles of natural justice.

# 10. Now we come to the main bone of contention as to whether the CIRP was initiated by the Appellant in a fraudulent/malicious manner which attracted Section 65 of the IBC. When we glance at the contours of Section 65 of the IBC, we find that this statutory provision embodies a clear legislative fiat that insolvency resolution process shall not be invoked fraudulently or with malicious intent for any purpose other than resolution of insolvency. This statutory provision therefore empowers the Adjudicating Authority to interdict the abuse of CIRP process at any stage, if the Adjudicating Authority is satisfied from the surrounding facts and circumstances on record, of fraud and/or malicious intent on the part of any party seeking admission of CIRP of the Corporate Debtor. Quite apart from the fact that Section 65 application can be entertained at any time or at any stage of the CIRP proceeding, the plain reading of Section 65 also leaves no doubts in our minds that there is no need of any formal application for its invocation and the Adjudicating Authority is well within its rights to take suo-moto cognizance of any such development at any stage of the proceedings.

# 11. When we look at the facts of the present case, it is an indisputable fact that the RP had filed the IA No. 643 of 2025 for declaring the CIRP as one tainted by fraudulent and malicious invocation. It is an undisputed fact that the statutory period of 180 days had already expired and the CIRP had entered into a phase of stagnation with no signs of registering further progress. It is the case of the Appellant that when the RP had continued on with the conduct of CIRP for a protracted period of 2 years, the RP could not have abruptly turned volte face thereafter to claim that the CIRP admission was fraudulent in nature.

# 12. We have already noticed in the preceding paragraph that in terms of the statutory construct of Section 65 of IBC, there is no ring-fencing in terms of timing as to when the Adjudicating Authority can initiate Section 65 proceedings. This coupled with the over-arching principle that the Adjudicating Authority is obligated to take necessary safeguard to ensure that the IBC framework is not abused or leveraged in any manner to perpetrate fraud, leaves no room for the Appellant to raise the bogey that the Adjudicating Authority could not have initiated the Section 65 proceedings after a period of two years. Merely because CIRP had been admitted and CIRP proceedings was thereafter continued by the RP, that clearly did not preclude the filing of a Section 65 application and the Adjudicating Authority is also not barred in any manner from adjudicating upon such Section 65 application.

# 13. Another defence taken by the Appellant is that they had at no stage acted in the manner which obstructed or delayed the CIRP process and that they had complied to all directions issued during CIRP including deposit of CIRP cost. It was contended that merely because the CIRP did not reach its logical culmination, this cannot constitute a valid ground for invocation of Section 65 of IBC. Moreover, the Appellant cannot be put to blame if the RP for his own shortcomings could not effectively proceed with the conduct of CIRP proceedings. It is the case of the Appellant that it was the RP who was responsible for the stagnation of the CIRP process since he failed to invoke the statutory remedy available to him under Section 19(2) of the IBC to take corrective steps against the suspended management of the Corporate Debtor for not cooperating with the RP in furnishing relevant information necessary for pursuing the CIRP proceedings.

# 14. The issue before the Adjudicating Authority was not what caused the delay in the CIRP proceedings but whether the CIRP proceedings had been fraudulently and/or maliciously initiated and was fit to be terminated in view of the same. The Section 9 application having been initiated by the present Appellant, the Adjudicating Authority has rightly focussed on the facts and circumstances on record to view the conduct of the Appellant.

# 15. We find that the Adjudicating Authority in the impugned order took notice of the fact that the Appellant had filed the Section 9 application on the basis of an outstanding operational debt of Rs 3.80 Cr. and that after the Section 9 application was admitted and moratorium had commenced, the Appellant surprisingly slipped into a hibernation mode and did not file any claim in pursuance of public announcement made by the RP. The reasons for not filing their claim have also not been disclosed before the RP by the Appellant. This glaring omission to file claims on part of the present Appellant had rightly arrested the attention of the Adjudicating Authority in finding the conduct of the Appellant to be unusual. This conclusion of the Adjudicating Authority was well justified as the standard and usual response of any operational or financial creditor is to file their claims as and when a Corporate Debtor is admitted into insolvency particularly so when it is their own Section 9 application which led to CIRP of the Corporate Debtor. The Adjudicating Authority had rightly concluded that the intent behind filing the Section 9 application was not genuine in view of the fact that the Appellant who had initiated the Section 9 application, for inexplicable reasons, absented themselves from further participation in the CIRP proceedings including abstention from the filing of claims. In this backdrop, the Adjudicating Authority did not commit any infirmity in proceeding to examine whether this omission on the part of the Appellant to file their claims was deliberate and whether this conduct was a pointer to the fact that the purpose of filing the Section 9 application was motivated by reasons other than corporate insolvency.

# 16. At this stage, it is also pertinent to note that the only claims filed in the CIRP process was from two entities viz. Assistant Commissioner of GST and Assistant Commissioner of State Tax, which were authorized to collect statutory taxes. The recovery of taxes by these two entities was no longer possible because of moratorium having come into play following the admission of CIRP. The outstanding tax liability also stands validated by the fact that the Tax Departments in their claims had submitted substantial amounts as statutory dues outstanding against the Corporate Debtor for past years. The Adjudicating Authority has therefore rightly noticed that the initiation of CIRP followed by moratorium barrier coming into existence under Section 14 coincided with pending recovery actions by the Tax Departments. Thus, what seems to underpin the reason for triggering CIRP proceedings was clearly to circumvent the tax liability. It is clearly evident from the timing of CIRP admission that the moratorium provision was being put to use by the Appellant to shield themselves from their tax liabilities and not as a genuine resolution tool.

# 17. This brings us to the ostensible reasons adduced by the Appellant for not filing claims. This was attributed by them to their ignorance of the scheme of IBC and CIRP procedures due to lack of education. We find that this plea has been duly considered by Adjudicating Authority in the impugned order. The Adjudicating Authority has correctly observed that if the Appellant could have pursued the Section 9 application with all vigour at their command and taken it forward to its logical culmination, it clearly denotes that the Appellant was fully aware of the IBC framework and its ramifications. Further, the Appellant by their own admission has also stated that they had issued a legal notice to the Corporate Debtor on 11.01.2022 as placed at page 399 of the Appeal Paper Book wherein they had called upon the Corporate Debtor to make payment of Rs 3.90 Cr. of outstanding operational debt. The issue of legal notice and lodging of police complaints by the Appellant also shows that the Appellant was meticulously preparing for the legal battle they had chosen to enter into. Given this background, the plea taken by the Appellant that they did not file the claims because of lack of legal awareness is an after-thought which lacks credibility. In this backdrop, the Adjudicating Authority cannot be said to have taken an arbitrary stand in not accepting this hollow plea of the Appellant to explain the non-filing of claims. Such opacity of reasons for invoking Section 9 and yet not filing claims justifies the finding returned by the Adjudicating Authority that the CIRP was initiated for fraudulent reasons which tantamount to a clear abuse of the insolvency framework.

# 18. The Adjudicating Authority has further noticed that the Appellant was related to the director of the Corporate Debtor and that this familial relationship was extremely close a relationship as they were real brothers. It has also been noticed by the Adjudicating Authority that the Appellant was also a director of the Corporate Debtor for some period of time. These facts have not been controverted by the Appellant except that it was pointed out that the Appellant was a director of the Corporate Debtor only for a very brief period. Be that as it may, we tend to agree with the Adjudicating Authority that when the family links are kept in mind alongwith the fact that the Appellant was also an ex-director of the Corporate Debtor coupled with non-pursuit of their claims arising out of debt owed by the Corporate Debtor clearly establishes that the purpose was not resolution of insolvency but to prevent recovery proceedings by CGST and GST Department.

# 19. Since Section 65 is designed to deter misuse and protect the integrity of the insolvency framework, the Adjudicating Authority was not off the mark in examining the overall conduct of the Appellant in the surrounding circumstances and in satisfying itself that the threshold elements of malicious intent was met in the facts of the present case. The Adjudicating Authority had not committed any error in imposing penal/compensatory amounts on the Appellant as Section 65 clearly provides for penal costs as a punitive measure in case of abuse of the process of law and to protect the integrity of the insolvency framework.

# 20. This brings us to the question of whether the Adjudicating Authority was correct in holding that the Appellant should bear the fees of the RP and the CIRP expenses. On the face of it, we quite agree with the Appellant that in terms of CIRP Regulations, such costs are ordinarily met from the assets of the Corporate Debtor or through CoC. Be that as it may, we are inclined to agree with the Adjudicating Authority that the present is however not a case where CIRP proceedings were taken up in normal circumstances. In the present case, the CoC consisted of only two tax entities who had filed their claims on the basis of their tax liabilities recoverable from the Corporate Debtor. The Tax Departments which were the only constituents of the CoC had not initiated the CIRP proceedings. The CIRP process also gradually slid into the path of turning non- viable with the CoC stopping to function altogether after a while. Hence for reasons of equity, the CoC in the present case could not be made to bear the financial implications of the CIRP proceedings for reasons of equity. The RP was thus left with no option but to carry on with his statutory obligations by funding the CIRP process from own resources. Given the absence of assets and a non-functional CoC coupled with prima-facie abuse of the CIRP proceedings by the Appellant for reasons other than seeking insolvency resolution of the Corporate Debtor having been established, the Adjudicating Authority in the present factual matrix, cannot be said to have faulted in exercising its residuary jurisdiction to hold that fees/expenses of RP shall be borne by the Appellant being the original Operational Creditor.

# 21. In result, we find no merit in the appeal and find no cogent reasons to interfere with the impugned order in any manner. The Appeal is dismissed.

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Phenix Building Solutions Pvt. Ltd. Vs. Mascot Suryapur LLP - Such conduct amounts to an abuse of the process of law and misuse of the provisions of the Code, as the interest claim is unsupported by any binding contractual term, rendering the aggregation mala fide as the artificial aggregation of un-agreed interest to circumvent the threshold constitutes abuse of process

NCLT Ahd. (2025.10.27) in Phenix Building Solutions Pvt. Ltd. Vs. Mascot Suryapur LLP [(2025) ibclaw.in 2363 NCLT, CP (IB) No. 73/9/AHM/2024] held that; 

• The Respondent issued an unqualified Completion Certificate dated 15.03.2023, acknowledging that all works related to the supply and erection were satisfactorily completed. This certificate stands undisputed at the time of filing the petition.

•  However, this Tribunal observes that the alleged pre-existing disputes mainly pertain to erection work carried out by MB Engineering Ltd., which is a distinct contract with separate scope from the supply contract that is the subject matter of this petition.

• The Completion Certificate was issued unconditionally for the supply contract, which estops the Respondent from raising such contentions as pre-existing disputes in regard to the supply contract. Further, there is nothing on record to demonstrate that payments were withheld by the Respondent due to any dispute connected to the supply of material.

• The Hon’ble NCLAT in Jai Narain Fabtech Pvt. Ltd. v. Cheema Spintex Ltd., (2025) ibciaw.in 238 NCLAT, decided on 04.04.2025 held that interest not accepted by the Respondent through signed agreements cannot be included in the operational debt for threshold purposes under Section 4 of the Insolvency and Bankruptcy Code, 2016.

• The Letter of Intent dated 30.06.2021 and Purchase Order dated 06.01.2022 do not constitute a concluded binding contract incorporating the interest clause, as no separate Contract Agreement was executed. Thus, no concluded contract under Section 10 of the Indian Contract Act, 1872, incorporates the interest clause, rendering it unilateral and excludable

• Here, absent a binding interest stipulation, only the principal qualifies as interpreted in Jai Narain Fabtech Put. Ltd. v. Cheema Spintex Ltd. (supra), excluding unilateral claims.

• It is observed that the Applicant has artificially aggregated the principal and interest amounts solely to meet the threshold limit prescribed under Section 4 of the Insolvency and Bankruptcy Code, 2016, and has sought to invoke the insolvency resolution process as a tool for recovery of dues rather than for bona fide resolution of insolvency.

• As discussed above, the claim of interest is unsupported and unilateral action and we consider that the sole purpose of computing the interest was to add it to the unpaid principal amount so as to cross the threshold of Rs one crore.

• Such conduct amounts to an abuse of the process of law and misuse of the provisions of the Code, as the interest claim is unsupported by any binding contractual term, rendering the aggregation mala fide as the artificial aggregation of un-agreed interest to circumvent the threshold constitutes abuse of process (S.S. Engineers v. Hindustan Petroleum Corporation Ltd. & Ors., (2022) ibclaw.in 92 SC, supra), with clear intent for recovery over resolution.

• Accordingly, a penalty of Rs. 5,00,000/- is hereby imposed upon the Operational Creditor under Section 65 of the Insolvency and Bankruptcy Code, 2016, being a reasonable proportion of the artificial inflation of the unpaid amount.

Blogger’s Comments;

NCLAT (27.07.2022) in Zoom Communications Pvt. Ltd. Vs. M/s. Par Excellence Real Estate Pvt. Ltd. [Company Appeal (AT) (Insolvency) No. 619 of 2022] held that;

• Hence, before taking any action under Section 65(1) IBC 2016, we think it proper to issue a show cause notice, under Rule 59 of the National Company Law Tribunal Rules 2016,

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NCLT Rules

Rule-59: Procedure for imposition of penalty under the Act 

(1): Notwithstanding anything to the contrary contained in any rules or regulations framed under the Act, no order or direction imposing a penalty under the Act shall be made unless the person or the company or a party to the proceeding, during proceedings of the Bench, has been given a show cause notice and reasonable opportunity to represent his or her or its case before the Bench or any officer authorised in this behalf. 

(2): In case the Bench decides to issue show cause notice to any person or company or a party to the proceedings, as the case may be, under sub-rule (1), the Registrar shall issue a show cause notice giving not less than fifteen days asking for submission of the explanation in writing within the period stipulated in the notice. 

(3): The Bench shall, on receipt of the explanation, and after oral hearing if granted, proceed to decide the matter of imposition of penalty on the facts and circumstances of the case.

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Excerpts of the Order;

# 1. This Company Petition is filed on 06.02.2024 by the Applicant- Phenix Building Solutions Private Limited (hereinafter referred to as ‘Operational Creditor’) against the Respondent- Mascot Suryapur LLP (hereinafter referred to as ‘Corporate Debtor’) under Section 9 of the IBC, 2016 read with Rule 6 of the IB (AAA) Rules, 2016 for initiation of CIRP, appointment of IRP and declaration of moratorium for default in payment of operational debt of Rs. 1,05,47,511/- comprised of the principal amount of Rs. 72,22,947/- and interest amount of Rs. 33,24,564/- at 0.3% compound interest from 15 days of date of each outstanding invoice to 30.12.2023.

# 2. On Perusal of Part-I of Form-5 revealed that the Applicant-Phenix Building Solutions Private Limited is having its registered address at M. B. House, 51, Chandroday Society, Opp. Golden triangle, Stadium Road, Ahmedabad, Gujarat, India, 380014. The Applicant’s Identification Number is U45201GJ2007PTC052112.

# 3. On Perusal of Part-II of Form-5, revealed that the Respondent – Mascot Suryapur LLP, having Identification Number: LLPIN: AAX-7637 is a Limited Liability Partnership incorporated on 13.07.2021 under the Limited Liability Partnership Act, 2008. The Respondent is having registered office at Block No. 86B, Resi: Puna Gam Village Makhinga, Taluka Palsana, Surat, Gujarat 394315 with Total Obligation of Contribution of Rs. 1,00,000 as per the Master Data available on the website of the Ministry of Corporate Affairs dated 26.12.2023 which is annexed with the Petition as Annexure-A/1.

# 4. On Perusal of Part-III of Form-5, it is revealed that the Applicant has not proposed any name of IP or IPE for the appointment of IRP under Section 13(1)(c) of the IBC, 2016.

# 5. On perusal of Part-IV of the Form-5 reveals that total operational debt as claimed by the Applicant the operational debt of Rs. 1,05,47,511/- comprised of the principal amount of Rs. 72,22,947/- and interest amount of Rs. 33,24,564/- at 0.3% compound interest from 15 days of date of each outstanding invoice to 30.12.2023.

# 6. The Applicant has placed the facts through this Petition in the following manner: –

6.1. It is stated that the Applicant, Phenix Building Solutions Pvt. Ltd. (“PBSPL”), is a Private Limited Company having its registered office at MB House, Stadium Road, Ahmedabad – 380014, Gujarat, engaged in the business of designing, manufacturing, and supplying customized prefabricated and pre-engineered building structures.

6.2. It is submitted that M&B Engineering Ltd. is a sister concern of Phenix Building Solutions Pvt. Ltd. (PBSPL), having common directors and shareholders. Its divisions, Phenix Construction Technology and Phenix Infra, are engaged in design, manufacture, supply, and installation of pre-fabricated/ pre-engineered building structures.

6.3. It is submitted that the Respondent, Mascot Suryapur LLP (“Mascot”), is a Limited Liability Partnership having its registered office at Puna Gam Village, Makhinga Taluka, Palsana, Surat, Gujarat — 394315, as per the records of the Ministry of Corporate Affairs.

6.4. It is submitted that Mascot, being desirous of setting up a pre-engineered building at Mascot Industrial Park, Surat, approached the Applicant for the same. Pursuant to discussions, PBSPL, the Applicant, submitted a techno-commercial proposal on 01.06.2021 to the Respondent for the supply of prefabricated buildings, followed by a final offer with a financial quote dated 29.06.2021 from M&B Engineering Ltd. (through its division Phenix Construction Technology) to the Respondent for the supply of prefabricated building as per Annexure-3.

6.5. Thereafter, PBSPL issued a revised proposal on 30.06.2021 to the Respondent, which included Clause 7 providing for interest at 18% per annum on delayed payments as per Annexure-3. The Respondent issued a Letter of Intent dated 30.06.2021 accepting the terms of the revised techno-commercial proposal dated 30.06.2021, including payment terms and interest at @ 0.3% per week on a compound interest basis on delayed payments as per Annexure-3.

6.6. Subsequently, a Purchase Order No. MSLLP/2021-22/001 dated 28.07.2021 was issued in favour of M&B Engineering Ltd. for the supply of prefabricated building, which was later revised due to reduction in steel prices. Accordingly, Mascot issued a revised Purchase Order No. MSLLP/2021-22/011(R1) dated 23.12.2021 and a Work Order dated 23.12.2021, in favour of PBSPL for supply and erection of the prefabricated building.

6.7. The copies of the Techno-Commercial Proposal dated 01.06.2021, Final Offer with Financial Quote dated 29.06.2021, Revised Techno-Commercial Proposal dated 30.06.2021, Letter of Intent dated 30.06.2021, Purchase Order dated 28.07.2021, and the Revised Purchase Order and Work Order both dated 23.12.2021 are annexed as Annexure 3 with the Petition.

6.8. It is submitted that due to a further reduction in steel prices and an increase in erection costs, Mascot issued (a) a final Purchase Order No. MSLLP/2021-22/011(R2) dated 06.01.2022 in favour of PBSPL for Rs. 9,72,96,539/-, and (b) a final Work Order dated 06.01.2022 bearing No. MSLLP/2021-22/012 in favour of M&B Engineering Ltd. for Rs. 93,21,410/-. The Copies of the said final Purchase Order and Work Order dated 06.01.2022 are annexed as Annexure 4 with the main petition.

6.9. It is submitted that PBSPL duly executed the supply of prefabricated building as per the final Purchase Order, and M&B Engineering Ltd. (through its division Phenix Infra) carried out the erection work at site in a timely manner under Mascot’s supervision and to its satisfaction. Mascot accepted the work in stages without raising any dispute regarding quantity, quality, or timeliness and issued a Completion Certificate dated 15.03.2023 confirming successful completion of both the Purchase and Work Orders. The copy of the said Completion Certificate is annexed as Annexure 5 with the main petition.

6.10. It is submitted that invoices were raised on Mascot in accordance with stage-wise completion of supply and erection of the prefabricated building, all of which were duly received and never disputed by Mascot.

• a. PBSPL raised 53 invoices between 17.02.2022 and 15.03.2023 for supply of prefabricated building materials totalling INR 9,73,90,511.

• b. M&B Engineering Ltd. (through Phenix Infra) raised 3 invoices for erection totalling INR 93,21,410.

The copy of the 53 invoices raised by PBSPL along with a tabular summary is annexed as Annexure 6 collectively with the main petition.

6.11. It is submitted that, although Mascot had agreed to make stage-wise payments upon completion of each stage of supply/erection, they requested, and we agreed, to receive payment in lumpsum against the invoices raised. A table detailing the total value of invoices raised by PBSPL for supply and M&B Engineering Ltd. (through Phenix Infra) for erection, along with the lumpsum payments received to date, is as follows:

Name	Invoices Raised (in INR)	Payment Received (in INR)	Outstanding (in INR)
PBSPL (supply)	9,73,90,511	9,01,67,564	72,22,947
Phenix Infra (erection)	93,21,410	91,634 (@0.983% towards TDS for FY 2022-2023)	92,29,776

6.12. It is submitted that PBSPL maintained an account in its books in the name of Mascot, where payments received from Mascot were recorded on the credit side and invoices raised were recorded on the debit side. A copy of Mascot’s account from PBSPL’s general ledger, maintained in the ordinary course of business, is annexed as Annexure 7 with the main petition.

6.13. It is submitted that despite Mascot issuing a completion certificate for successful execution of the project under the final Purchase Order dated 06.01.2022 (PO No. MSLLP/2021-22/011(R2)) for supply and final Work Order dated 06.01.2022 (WO No. MSLLP/2021-22/012) for erection, Mascot has failed or neglected to pay PBSPL an amount of INR 72,22,947 towards supply and to M&B Engineering Ltd. an amount of INR 92,29,776 towards erection of the prefabricated building.

6.14. It is submitted that PBSPL issued a letter dated 20.06.2023 calling upon Mascot to clear the outstanding dues, followed by several reminders dated 12.07.2023, 28.07.2023, 17.08.2023, and 09.11.2023. The Copies of these letters are annexed as Annexure 8 collectively with the main petition.

6.15. It is submitted that Mascot has not responded to any of the aforementioned letters. Consequently, PBSPL issued a legal notice through its advocate dated 30.11.2023 demanding payment of the outstanding dues. The copy of the legal notice is annexed as Annexure 9 with the main petition. However, no response or payment has been received from Mascot till the filing of the present petition.

6.16. It is submitted that for the pre-engineered building project at Mascot Industrial Park, Mascot issued a final Purchase Order dated 06.01.2022 (PO No. MSLLP/2021- 22/011(R2)) to PBSPL for supply and a Work Order dated 06.01.2022 (WO No. MSLLP/2021-22/012) to M & B Engineering Ltd. for erection. The project was completed successfully, and Mascot issued a completion certificate without any dispute. Despite reminders and a legal notice, Mascot has failed to pay PBSPL Rs. 72,22,947 /-.

6.17. It is submitted that PBSPL, under Section 8 of the IBC, 2016, issued a demand notice to Mascot dated 30.12.2023 for Rs. 1,05,47,511 (including principal amount of Rs. 72,22,947/- and interest Rs. 33,24,564/- calculated @ 0.3% per week on compound interest basis). The notice was sent to Mascot’s email, registered office (returned), and head office (delivered). The Copies with proof of service are annexed as Annexure 11 with the main petition. Despite receipt, Mascot has neither paid the amount nor raised any dispute under Section 8(2) of the Code.

6.18. It is submitted that an unpaid operational debt of INR 72,22,947 (principal) and INR 33,24,564 (interest at 0.3% per week on compound basis from 15 days post-invoice till 30.12.2023), totalling INR 1,05,47,511, is due and payable by Mascot, who has defaulted. The claim is within the period of limitation prescribed by law.

# 7. Pursuant to the order dated 17.09.2025, Reply was filed on 06.10.2025 vide Inward Diary No. D-6763 on behalf of the CD against the present petition denying all the averments made by the Applicant therein the petition. The contentions of the respondent are mentioned hereunder: –

7.1. It is submitted that Section 9 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) is not maintainable and is liable to be dismissed in limine due to following reasons:

• i. A pre-existing dispute exists;

• ii. The amount of debt claimed is less than Rs. 1,00,00,000/-;

• iii. No proof of default has been furnished.

7.2. It is submitted that the Respondent, engaged in constructing industrial and warehouse facilities, sought a pre-engineered building at Mascot Industrial Park, Surat for Amazon and issued a Purchase Order and Work Order to the Applicant and its division, M & B Engineering Ltd., on 06.01.2022.

• THERE ARE PRE-EXISTING DISPUTES BETWEEN THE PARTIES

7.3. It is submitted that the present Petition is liable to be rejected on the ground of pre-existing disputes. Prior to the demand notice, the Respondent had communicated via emails regarding defects in the materials supplied by the Applicant. Out of 28 sidewall columns received, 20 were defective, with holes measuring 450 mm instead of the specified 470 mm, causing delays in erection. The Applicant’s repeated mistakes were highlighted in an email dated 25.02.2022 (attached as Annexure-R1 with the main petition). These communications establish a pre-existing dispute, making the present petition meritless.

7.4. It is submitted that on 12.05.2022, the Respondent emailed the Applicant highlighting poor workmanship and defective materials in the Applicant’s work. A copy of the email is annexed as Annexure-R2.

7.5. It is submitted that on 10.01.2023, the Respondent highlighted quality issues in the warehouse, which the Applicant failed to address.

7.6. It is submitted that on 17.02.2023 and 09.03.2023, CBRE, acting as mediator, urged the Applicant to expedite work, noting project delays affecting the handover date. Further, the Respondent lodged a complaint on 18.09.2023 regarding substantial leakage during the first monsoon. Despite a ten-year warranty and repeated reminders, the Applicant failed to rectify the issues related to IQ, OQ, PQ, and HOTO. Consequently, the Respondent had to resolve the leakage and complete pending work.

7.7. The Respondent has placed reliance on the following case laws:

• i. Sri Bajrang Wind Park Developers v. Inox Wind Infrastructure Services Ltd., 2023 SCC OnLine NCLT 1234

• ii. Mobilox Innovations Private Limited vs. Kirusa Software Private Limited, reported in AIR 2017 Supreme Court 4532

• iii. Khimji Poonja Freight and Forwarders v. Ingram Micro India Pvt. Ltd., (2024) ibclaw.in 156 NCLAT

iv. Navin Madhavji Mehta v. Jaldhi Overseas Pte Ltd. and Ors., (2025) ibclaw.in 151 NCLAT

• THE APPLICATION IS NOT MAINTANBALE AS THE APPLICANT HAS COMBINED THE PRINCIPAL AND INTEREST AMOUNTS TO REACH THE MINIMUM THRESHOLD LIMIT AS STIPULATED UNDER SECTION 04 OF THE INSOLVENCY AND BANKRUPTCY CODE OF 2016

7.8. It is submitted that the petition is liable to be rejected for suppression of facts. The claimed amount of Rs. 1,05,47,511/- is artificially combined to meet the Section 4 threshold, while the Respondent has already paid 93% of the total. Further, the Applicant failed to provide the required Performance Bank Guarantee of Rs. 41,22,734/- showing the petition is not filed with clean hands.

7.9. It is submitted that interest cannot be included to constitute “Operational Debt,” and the Applicant was aware that the claimed amount does not meet the Section 9 threshold under the IBC, 2016. The Respondent states that the completion certificate issued on 15.03.2023 were coerced by the Applicant to obtain a stability certificate, despite significant pending work (emails dated 17.02.2023 and 09.03.2023). This demonstrates misuse of IBC proceedings to recover a disputed debt. Reliance has been placed in case of S. S. Engineers v. Hindustan Petroleum Corporation Ltd., reported in (2022)140 taxmann.com 524 (SC).

7.10. It is submitted that the Respondent is a going concern, paying its legitimate debts with strong commercial prospects. It is well-settled that before admitting an Insolvency Application, the Tribunal must ensure:

• i. There is no pre-existing dispute regarding the claimed debt.

• ii. The Respondent has lost its substratum and is unable to pay its debts.

# 8. Applicant filed their rejoinder to the reply of the CD on 14.10.2025 vide (Inward Diary No. D-6950). The Applicant has dealt with each and every subject as disputed items as under: –

8.1. It is submitted that the present Petition pertains solely to Purchase Order No. MSLLP/2021-22 dated 06.01.2022 issued by the Respondent to the Applicant for supply of prefabricated building materials. The Respondent had separately issued Work Order No. MSLLP/2021-22/012 to M&B Engineering Ltd. for erection of the said structure. The Applicant clarified that both contracts are distinct and independent with different scopes, obligations, and payment terms, and that any correspondence relating to the erection work is irrelevant to the present Petition.

8.2. It is further submitted that the Applicant duly performed its contractual obligations and the Respondent issued an unqualified and unconditional Completion Certificate dated 15.03.2023 acknowledging satisfactory completion of supply. Accordingly, any email or correspondence relied upon by the Respondent, being prior to the said completion certificate and pertaining to the erection work, cannot be treated as a “pre-existing dispute” within the meaning of Section 5(6) of the Code.

8.3. It is also submitted that the email dated 18.09.2023 relied upon by the Respondent pertains to the warranty period and not to the payment of consideration for supply already completed and certified. The Applicant has contended that the alleged disputes have been raised for the first time in the Reply and are an afterthought, as no such disputes were raised in response to the Applicant’s reminder letters and legal notice demanding payment of dues.

8.4. It is further submitted that there is no denial of the operational debt by the Respondent; on the contrary, the Respondent’s own communications acknowledge the outstanding amount. The Applicant has also relied on judicial precedents to contend that the operational debt, including contractually agreed interest at 0.3% per week on compound basis, exceeds the threshold prescribed under Section 4 of the Code, and hence, the Petition is maintainable.

# 9. Vide order dated 15.10.2025; both parties were directed to file their Purshis for compilation of judgement. Pursuant thereto, Purshis for compilation of judgement came to be filed on behalf of the Applicant on 14.10.2025 vide Inward Diary No. D-7010, and on behalf of the Respondent on 16.10.2025 which is reflecting on DMS Portal and have been duly taken into consideration.

# 10. We have heard the arguments of Counsel for the Applicant as well as the counsel for the Respondent and have perused the material available on record. In lieu of the same, we summarise the facts below and are of the following opinion: –

10.1. The Applicant, Phenix Building Solutions Private Limited, has filed this petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, claiming an outstanding operational debt of Rs. 1,05,47,511/- comprising principal amount of Rs. 72,22,947 /- and contractual compound interest of Rs. 33,24,564/- at 0.3% per week from 15 days after the invoice dates until 30.12.2023.

10.2. On perusal of the records, it is evident that the Applicant had duly supplied prefabricated building materials as per the purchase orders issued by the Respondent, Mascot Suryapur LLP. The erection work is carried out by MB Engineering Ltd., a sister concern of the Applicant, for which a separate purchase order was issued by the Respondent and that transaction has no linkage with the transaction under consideration.

10.3. The Respondent issued an unqualified Completion Certificate dated 15.03.2023, acknowledging that all works related to the supply and erection were satisfactorily completed. This certificate stands undisputed at the time of filing the petition.

10.4. As per the Applicant, the invoices raised by the Applicant for the supply amounting to Rs. 9,73,90,511/- were received and acknowledged by the Respondent but payments against the Applicant’s invoices are outstanding to the amount of Rs. 72,22,947/- (principal), with claimed interest of Rs. 33,24,564/- totalling Rs. 1,05,47,511/-.

10.5. The Applicant issued a legal notice dated 30.11.2023 under Section 8 of the Code demanding payment of the operational debt. Despite receipt of the notice, the Respondent failed to respond or make payment till the institution of this petition.

10.6. The Respondent claims a pre-existing dispute based on alleged defects in the supplied materials, poor workmanship in erection, and subsequent leakage issues during warranty period. The Respondent relies on emails and correspondence highlighting these issues prior to the demand notice.

10.7. However, this Tribunal observes that the alleged pre-existing disputes mainly pertain to erection work carried out by MB Engineering Ltd., which is a distinct contract with separate scope from the supply contract that is the subject matter of this petition.

10.8. The Completion Certificate was issued unconditionally for the supply contract, which estops the Respondent from raising such contentions as pre-existing disputes in regard to the supply contract. Further, there is nothing on record to demonstrate that payments were withheld by the Respondent due to any dispute connected to the supply of material.

10.9. Reliance is placed on the judgments of the Hon’ble Supreme Court in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. AIR 2017 SC 4532, which hold that a dispute must be real and existing prior to the receipt of the demand notice and must be regarding the debt claimed in the petition. Merely contentious or extraneous issues cannot be treated as a dispute. Therefore, we are not inclined to agree with the claim of existence of pre-existing disputes.

10.10. On the issue of admissibility of interest for the purpose of threshold computation under Section 4 of the Insolvency and Bankruptcy Code, 2016, it is pertinent to note that Clause 7 of the Techno-Commercial Proposal dated 01.06.2021 as well as the Revised Techno-Commercial Proposal dated 30.06.2021 (Annexure-3) stipulates that any overdue payment shall attract interest at the rate of 0.3% per week on a compounded basis, to be levied upon the Buyer (Respondent). However, a careful perusal of the record reveals that the said Clause 7 did not find place in the Final Offer Letter dated 29.06.2021 issued by the Applicant/Operational Creditor. Further, the LOI dated 30.06.2021 (para 6.5) explicitly defers terms to a future ‘Contract Agreement’, which was never executed, rendering Clause 7 non-binding. In fact, the Respondent never accepted or acknowledged the applicability of the said clause either through the Letter of Intent dated 30.06.2021 or through the subsequent Purchase Order dated 06.01.2022 (Annexure-4).

8.1. On the contrary, the Letter of Intent dated 30.06.2021 explicitly records the mutually agreed terms between the parties, which do not incorporate or make any reference to the imposition of interest at the rate of 0.3% per week on a compounded basis. This clearly indicates that the stipulation regarding interest, as contained in Clause 7 of the earlier proposals, was not part of the final contractual understanding between the parties and therefore cannot be relied upon by the Applicant/Operational Creditor for the purpose of meeting the minimum threshold requirement prescribed under Section 4 of the Code. The relevant extract of the said Letter of Intent is as follows:

“We will issue a separate detailed Work Order in due course with details.

This letter is not an Official Purchase Agreement. All the terms and. conditions of the proposed transaction would be stated in the Contract Agreement, to be agreed and executed by both parties. “

8.2. Along with the same, the 53 invoices (Attached as Annexure 6 with the Petition) raised by the Applicant/ Operational Creditor are silent on “interest at 0.3% per week on a compounded basis on overdue payments”.

8.3. The principal outstanding amount claimed by the Applicant is Rs. 72,22,947/-, representing the value of goods supplied under 53 invoices raised during the period from 17.02.2022 to 15.03.2023, as detailed in Annexure-6. It is further observed that the Applicant has relied upon Clause 7 of the Techno-Commercial Proposal dated 01.06.2021 and the Revised Techno-Commercial Proposal dated 30.06.2021, which stipulate that any overdue payment shall attract interest at the rate of 0.3% per week on a compounded basis. However, the record shows the proposals were preliminary and neither signed nor incorporated into the final agreements. Consequently, the aforesaid clause cannot be deemed to form part of the concluded contract between the parties. Therefore, the claim for interest based thereon cannot be sustained for the purpose of computing the default amount or determining the threshold under Section 4 of the Insolvency and Bankruptcy Code, 2016.

8.4. Rather, the Letter of Intent dated 30.06.2021 issued by the Respondent states that a separate detailed Work Order would be issued and that the Letter of Intent is not an Official Purchase Agreement with all terms and conditions to be stated in the Contract Agreement to be agreed and executed by both parties. Further, the Purchase Order dated 06.01.2022 also does not incorporate Clause 7 on interest. No Contract Agreement incorporating the interest clause was executed between the parties.

8.5. Further, the applicant has claimed an interest of Rs 33,24,564. The same is computed in the application at the rate of 0.3% per week for the period starting from 15 days after the invoice date and ending on 30.12.2023. As discussed above, there is no legal basis for this computation of interest. Additionally, the Applicant has not demonstrated by furnishing any document like raising of invoice for interest, accounting of interest in its annual financial statements (audited accounts), offering interest income for the purpose of computation of income for filing income tax return or payment of tax on the claimed interest, indicating that the claim is unsupported and unilateral.

8.6. Therefore, the claim of interest amounting to Rs.33,24,564/-, calculated at the rate of 0.3% per week from 15 days after the respective invoice dates until 30.12.2023, cannot be treated as forming part of the Operational Debt. This is for the reason that Clause 7 of the Techno-Commercial Proposal, under which such interest has been claimed, was never accepted or incorporated in the final contractual arrangement between the parties. The said clause does not find mention in either the Letter of Intent dated 30.06.2021 or the Purchase Order dated 06.01.2022, both of which govern the transaction between the Applicant and the Respondent. Accordingly, in the absence of any binding contractual stipulation regarding payment of interest, the said interest component cannot be taken into account for the purpose of determining the default amount or for satisfying the threshold requirement under Section 4 of the Insolvency and Bankruptcy Code, 2016.

8.7. The Hon’ble NCLAT in Jai Narain Fabtech Pvt. Ltd. v. Cheema Spintex Ltd., (2025) ibciaw.in 238 NCLAT, decided on 04.04.2025 held that interest not accepted by the Respondent through signed agreements cannot be included in the operational debt for threshold purposes under Section 4 of the Insolvency and Bankruptcy Code, 2016. Wherein the Applicant claimed interest on unsigned invoices, the Appellate Tribunal excluded interest holding principal below Rs. 1,00,00,000/- threshold and dismissed the petition as the interest clause was unilateral.

8.8. The judgments in Prashant Agarwal vs. Vikash Parasrampuria 2022 SCC Online NCLAT 3781, dated 15.07.2022 and Anuj Sharma vs. Rustagi Projects Pvt. Ltd. reported in 2023 SCC Online NCLAT 310, dated 04.07.2023 relied upon by the Applicant pertain to cases where interest was expressly incorporated in accepted agreements, which is not the case here.

8.9. The Letter of Intent dated 30.06.2021 and Purchase Order dated 06.01.2022 do not constitute a concluded binding contract incorporating the interest clause, as no separate Contract Agreement was executed. Thus, no concluded contract under Section 10 of the Indian Contract Act, 1872, incorporates the interest clause, rendering it unilateral and excludable (affirmed in Jai Narain Fabtech Pvt. Ltd. Supra).

8.10. The minimum amount of default under Section 4 of the Insolvency and Bankruptcy Code, 2016 is not met as the principal amount of Rs.72,22,947/- is below the threshold limit of Rs. 1,00,00,000/-.

8.11. As per the proviso to Section 4(1) IBC, the minimum amount of default is Rs. 1,00,00,000/-, computed on the principal debt plus any contractually stipulated interest. Here, absent a binding interest stipulation, only the principal qualifies as interpreted in Jai Narain Fabtech Put. Ltd. v. Cheema Spintex Ltd. (supra), excluding unilateral claims.

# 9. In view of the above, the petition does not satisfy the requirement under Section 4 of the Insolvency and Bankruptcy Code, 2016 as the minimum amount of default is not met.

# 10. Accordingly, CP (IB) No.73/9/AHM/2024 is hereby dismissed for want of threshold limit.

# 11. It is observed that the Applicant has artificially aggregated the principal and interest amounts solely to meet the threshold limit prescribed under Section 4 of the Insolvency and Bankruptcy Code, 2016, and has sought to invoke the insolvency resolution process as a tool for recovery of dues rather than for bona fide resolution of insolvency. As discussed above, the claim of interest is unsupported and unilateral action and we consider that the sole purpose of computing the interest was to add it to the unpaid principal amount so as to cross the threshold of Rs one crore.

# 12. Such conduct amounts to an abuse of the process of law and misuse of the provisions of the Code, as the interest claim is unsupported by any binding contractual term, rendering the aggregation mala fide as the artificial aggregation of un-agreed interest to circumvent the threshold constitutes abuse of process (S.S. Engineers v. Hindustan Petroleum Corporation Ltd. & Ors., (2022) ibclaw.in 92 SC, supra), with clear intent for recovery over resolution.

# 13. Accordingly, a penalty of Rs. 5,00,000/- is hereby imposed upon the Operational Creditor under Section 65 of the Insolvency and Bankruptcy Code, 2016, being a reasonable proportion of the artificial inflation of the unpaid amount.

# 14. The Applicant/Operational Creditor is directed to pay an amount of Rs.5,00,000/- (Rupees Five Lakh only) as penalty under Section 65 to the “Gujarat State Legal Services Authority” within seven days from the date of this order and proof of payment be filed before this Tribunal.

# 15. Re-list for reporting compliance of order on 14.1 1.2025.

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