Jindal Smi Coated Products Limited vs Astron Packaging Limited

Jindal SMI Coated Products Limited Having office at: Plot No. B-120, MIDC, Addl. Ambarnath Industrial Area, Anand Nagar, Ambernath District Thane-421506 Also at: Corporate Office at: 4-B-5, Gundecha Onclave, Kherani Road, Sakinaka, Andheri (East) Mumbai-400069 ...Appellant

Versus

Astron Packaging Limited Registered address at: 22/23/34. Mahagujarat Industrial Estate, Srakhej Bavla Highway, Village Moraiya, Ahmedabad-382210, India. ...Respondent

Present :

For Appellant : Ms Aishwarya Nabh, Advocate.

For Respondents: Adv. Shamik Sanjanwala, Adv. Aditya Tripathi and Ms Aarushi Gupta, Advocates. 2

JUDGMENT

(Hybrid Mode)

[Per: Ajai Das Mehrotra, Member (Technical)]

The present appeal is filed by Jindal SMI Coated Products Limited

(hereinafter referred to as the "Operational Creditor" or "Appellant") against

the impugned order dated 16.07.2024 passed by Ld. Adjudicating Authority,

Ahmedabad under Section 9 of the Insolvency and Bankruptcy Code, 2016

(hereinafter referred to as the "IBC") in C.P. (IB)/168(AHM)2024.

2. The application of the appellant, Operational Creditor, under Section 9 of

the IBC was disposed of by Ld. Adjudicating Authority vide order dated

16.07.2024 without issuing any notice to the Respondent, Corporate Debtor,

namely, Astron Packaging Limited (hereinafter referred to as the "Corporate

Debtor"). The Ld. Adjudicating Authority, vide order dated 16.07.2024 has

disposed of the application of the appellant through a laconic and cryptic order

as follows:

"The applicant complied with the orders and filed by affidavit the bank statements, Heard the Ld. Counsel for the applicant. It is observed that there was no purchase order and the interest was charged based on various invoices. Further various repayments had also taken place based on some settlement agreement to pay in instalments and there was a residual amount on which the applicant had given contradictory amounts of debt due in the application and the recoveries made from the Corporate Debtor, thereby the application is disallowed and rejected for the reason that this was an application cannot be used for pursuing recoveries agreed upon between both parties.

Application disposed off."

Company Appeal (AT) (Insolvency) No. 1846 of 2024 3

3. The facts of the case briefly, as stated by the appellant, are as under:

i) The appellant, operational creditor, had supplied goods to the Corporate

Debtor. The copies of the invoices are placed at page 135 to 152 of the Appeal

Paper Book (hereinafter referred to as the "APB"). As per the invoices, there was

a condition that interest @24% p.a. will be charged if payment is not made within

30 days.

ii) The appellant, through Aadhya Legal issued demand notice in Form 3 to

the Corporate Debtor on 22.12.2022. As per the said demand notice the total

operational debt is Rs.4,10,52,006/-, which includes principal amount of Rs.

2,9798,027/- and interest of Rs.1,12,53,979/- on delayed payments.

iii) The notice in Form 4 was issued on 22.12.2022 asking the Corporate

Debtor to make the payment of Rs.4,10,52,006/- within 10 days, otherwise the

Operational Creditor shall be constrained to file application for initiating the

Corporate Insolvency Resolution Process (hereinafter referred to as the "CIRP")

under Section 9 of the IBC.

4. The Learned Counsel for the appellant submitted that the order of the Ld.

Adjudicating Authority is unreasoned and non-speaking and totally arbitrary

and erroneous. It was categorically submitted that there was no settlement

agreement with the Corporate Debtor, as wrongly recorded by the Ld.

Adjudicating Authority in the said order dated 16.07.2024.

4.1 It is submitted that it is a settled law that quasi-judicial authorities must

assign reasons while dismissing or admitting a petition, and in this connection,

reference was made to the following judicial pronouncements:

i. Kranti Associates Pvt. Ltd. v. Masood Ahmed Khan, (2010) 9 SCC 496, (Relevant Para: 41,44 and 46);

Company Appeal (AT) (Insolvency) No. 1846 of 2024 4

ii. Ramkrishna Forgings Ltd. v. ACIL Ltd. (Resolution Professional) (2024) 2 SCC 122 (Relevant Para 38-39);

iii. Company Appeal (AT) (INS) No. 206 of 2023 in Parikshit Madanmohan Sharma v. MS Gopikrishnan & Ors. (Relevant Para: 5); and iv. Company Appeal (AT) (INS) No. 183 of 2024 in M/s Essar (India) Ltd. v. Prabhat Technologies (India) Ltd. & Ors. (Relevant Para: 15).

4.2 It is submitted that appellant had filed all relevant documents before the

Ld. Adjudicating Authority, including invoices, debit notes, ledgers, NESL Form

C, email correspondences and bank statements in its application under Section

9 of the IBC.

4.3 The Learned Counsel for the appellant submitted that the Respondent had

made partial payment aggregating to Rs. 3.23 Crores, which was legally adjusted

first against accrued interest and then against the principal, as per settled

accounting practice.

4.4 It is submitted that though the demand notice was issued for Rs.

4,10,52,006/-, after accounting for the payment made the application under

Section 9 of the IBC was filed for non-payment of its admitted dues of Rs.

1,16,74,316.97/- which along with interest amounts to Rs. 1,39,91,869/-.

4.5 It is submitted that the Ld. Adjudicating Authority erred in passing the

said order relying on absence of formal a purchase order. Further it is submitted

that as per provisions of IBC, there is no statutory requirement that the

operational debt must be supported by a purchase order.

4.6 It is submitted that the contractual interest forms part of operational debt

as held in following judicial pronouncements:

Company Appeal (AT) (Insolvency) No. 1846 of 2024 5

(i) Prashant Agarwal v. Vikas Parasrampuria, Company Appeal (AT)

(Insolvency) No. 690 of 2022; and

(ii) Jatin Koticha v. VFC Industries Pvt. Ltd., [(2007) SCC OnLine 1092].

4.7 It is submitted that considering the aforesaid facts, the impugned order is

legally untenable and liable to be set aside.

5. The Learned Counsel for the Respondent, who appeared on advance

notice, on the other hand referred to page 32 of the APB, which is an email dated

22.11.2022 from the Corporate Debtor to the Operational Creditor wherein the

following was communicated to the Operational Creditor by the Corporate

Debtor:

Company Appeal (AT) (Insolvency) No. 1846 of 2024 6

5.1 It is the submission of the Learned Counsel for the Respondent that the

Respondent had already paid the entire principal amount and some amount of

interest also and this was duly considered by the Ld. Adjudicating Authority

while disposing of the application of the Operational Creditor.

5.2 It is the submission of the Learned Counsel for the Respondent that the

application under Section 9 of the IBC was filed by the appellant primarily to

recover disputed interest and that the insolvency process was misused to effect

recovery.

5.3 It is submitted that CIRP under Section 9 of the IBC cannot be initiated

for interest demand as held in following judicial pronouncements:

(i) Rohit Motawat v. Madhu Sharma, Proprietor Hind Chem Corporation & Anr.,

[Comp. App. (AT) (Ins) No. 1152 of 2022], and

(ii) Permali Wallace Pvt. Ltd. v. Narbada Forest Industries Pvt. Ltd., 2023 SCC

OnLine NCLAT 1465.

5.4 In its written submissions, the Respondent has submitted as under:

"Respondent has no objection to the remand of the matter to the NCLT, provided there are no observations on the merits of the matter while remanding such matter, and all issues are kept open."

6. We have considered the submissions and perused the record. It is clear

that the Ld. Adjudicating Authority has not assigned any reasons for rejecting

the application filed under Section 9 of the IBC by the appellant. The

submissions made by the applicant/appellant have not been recorded, no notice

was issued to the Respondent and no reply was sought from the Respondent on

the claim of the applicant. It is apparent that impugned order is deficient in not

recording in detail submissions and the reasons for dismissing the application.

Company Appeal (AT) (Insolvency) No. 1846 of 2024 7

Recording of reasons in judicial and quasi-judicial orders are life and soul of

such orders. Recording of reasons are necessary not only for the satisfaction of

the party who had lost the battle but also for the appellate court to appreciate

the findings recorded by the Tribunal. In the interest of justice, we set aside the

impugned order and remand the matter back to the Ld. Adjudicating Authority

for hearing it afresh, after providing an opportunity of being heard to the parties.

All issues are kept open. Both the parties are at liberty to make their submission

before the Ld. Adjudicating Authority. It is clarified that nothing contained in the

order should influence the final decision of the Ld. Adjudicating Authority, as we

have not made any observation on the merits of the case. The appeal is allowed

accordingly. No order as to costs. Pending application(s), if any, are also closed.

[Justice Mohammad Faiz Alam Khan] Member (Judicial)

[Mr. Ajai Das Mehrotra] Member (Technical)

Place: New Delhi Dated: 14.10.2025 Ram N.

Company Appeal (AT) (Insolvency) No. 1846 of 2024