Snj Synthetics Limited vs Pepsico India Holdings Private Limited

Company Appeal (AT) (Insolvency) No. 386 of 2025 [Arising out of the Impugned Order dated 02.01.2025 passed by the Adjudicating Authority, National Company Law Tribunal, Chandigarh Bench-I in Company Petition (IB) No.157/CHD/HRY/2021] In the matter of: M/s SNJ Synthetics Limited, Through its authorised person Mr. Sanjay Jalan having its Corporate Office at Factory & Admin Office: 149, Sri Venkateswara Co-operative Industrial Estate, Bollaram Village (Patancheru Mandal), District Sangareddy- 502 325. ...Appellant Versus M/s PepsiCo India Holdings Private Limited, Having its registered office at: Level 3-6, Pioneer Square, Sector 62, Near Golf Course Extension Road, Gurugram- 122101 Haryana, India. ...Respondent Present: For Appellant : Mr. Anupam Lal Das, Sr. Advocate with Mr. Nithin Chowdary Pavuluri, Mr. Anirudh Singh and Mr. Subham Saurabh, Advocates. For Respondent : Mr. Krishnendu Dutta & Mr. Abhijeet Sinha, Sr. Advocates with Ms. Avni Sharma and Ms. Simarpreet Kaur N., Advocates.

JUDGMENT

(Hybrid Mode)

Per: Barun Mitra, Member (Technical)

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

02.01.2025 (hereinafter referred to as 'Impugned Order') passed by the

Adjudicating Authority (National Company Law Tribunal, Chandigarh Bench-I)

in C.P. (IB) No.157/CHD/HRY/2021. By the impugned order, the Adjudicating

Authority has dismissed the Section 9 application filed by the M/s SNJ

Synthetics Ltd.-Operational Creditor seeking admission of M/s PepsiCo India Holdings Pvt. Ltd.-Corporate Debtor into the rigours of Corporate Insolvency

Resolution Process ("CIRP" in short). Aggrieved by the impugned order, the

present appeal has been preferred by the Appellant.

2. Coming to the relevant factual background and sequence of events in the

matter, put briefly, the Appellant-M/s SNJ Synthetics Limited, an MSME

Operational Creditor, engaged in manufacturing PET preforms and

thermoplastics maintained a long-standing business relationship with the

Respondent-M/s PepsiCo India Holdings Private Ltd. being the Corporate

Debtor. This relationship was formalised through a Supply Agreement dated

09.10.2018 and the transactions arising from this agreement were maintained

through periodically reconciled mutual and open accounts. The Appellant

continued fulfilling its obligations under the Supply Agreement and raised

invoices from 2018 to 2021. Since the dues remained unpaid, the operational

debt purportedly accumulated to Rs.1,96,80,953/- as on 28.02.2021. On

13.03.2021, the Appellant served a demand notice upon the Corporate Debtor

under Section 8 of the IBC, enclosing invoices and account statements. Although

the notice was acknowledged by the Respondent, no payments followed. The

Appellant subsequently filed Section 9 petition seeking initiation of CIRP of the

Corporate Debtor for the unpaid operational debt of Rs. 91,63,886/- towards

principal and Rs. 1,05,17,067/- towards interest on delayed payment @ 24%

p.a. The parties undertook a reconciliation of accounts during pendency of

proceedings following which the principal amount was revised to Rs. 77,37,886/-

. The Appellant however continued to claim interest at 24% p.a. On the direction

of the Adjudicating Authority dated 02.01.2023, the Respondent paid

Page 2 of 13 Company Appeal (AT) (Ins) No. 386 of 2025 Rs.77,37,886/- towards the reconciled principal amount on 10.02.2023 which

the Appellant accepted without prejudice but continued pressing for unpaid

interest amount of Rs.1,05,17,067/-. The matter was finally heard by the

Adjudicating Authority and impugned order was passed on 02.01.2025

dismissing the Section 9 petition by holding that CIRP could not be initiated

against the Corporate Debtor since the principal amount had already been paid

by the Corporate Debtor and therefore Section 9 petition is non-maintainable for

interest component alone.

3. The Ld. Sr. Counsel, Shri Anupam Lal Das for the Appellant submitted

that the Adjudicating Authority erred in dismissing the petition merely on the

ground that the principal amount was paid. It was wrong on the part of the

Adjudicating Authority to hold that after principal amount was settled, CIRP

cannot be initiated solely for the interest component. The Adjudicating Authority

had erroneously overlooked the principle that operational debt, including

interest, must be considered in totality for determining the threshold under the

IBC and cannot be bifurcated.

4. Submission was pressed that bifurcation of operational debt into principal

and interest components lacked statutory sanction of IBC. It was asserted that

the statutory threshold limit prescribed under Section 4 of IBC must be

determined based on the aggregate of both principal amount as well as interest

thereof. Segregation of operational debt into principal and interest is contrary to

law and the Adjudicating Authority by treating the payment of principal amount

as a full and final settlement has unsettled this settled position thereby

undermining the statutory rights of the Appellant. Reliance was placed on the

Page 3 of 13 Company Appeal (AT) (Ins) No. 386 of 2025 judgement of this Tribunal in Prashat Agarwal v. Vikas Parasrampuria in

CA(AT)(Ins.) No. 690 of 2022 and Anuj Sharma v. Rustagi Projects Pvt. Ltd.

in CA(AT)(Ins) No. 550 of 2023 wherein it was held that interest stipulated in

invoices formed part of operational debt and must be aggregated with the

principal amount in computing the threshold limits under Section 4 of IBC.

5. It was submitted that the interest component of 24% p.a. on delayed

payment was part of the operational debt as interest was clearly stipulated in

the invoices issued by the Appellant. Since these invoices were issued pursuant

to the Supply Agreement of 09.10.2018, the interest component mentioned

therein constituted an integral part of the contractual relationship between the

two parties. Since these invoices bearing interest terms were issued regularly by

the Appellant and was acted upon by the Respondent without any protest, this

constituted a valid contract under Regulation 7(2)(b)(ii) of the Insolvency and

Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons)

Regulations, 2016 ("CIRP Regulations" in short). Reliance was placed on the

judgment of the Hon'ble Bombay High Court in Jatin Koticha v. VFC Industries

Pvt. Ltd. 2007 SCC Online Bom 1092 wherein it was held that unsigned

invoices accepted through conduct amounted to enforceable contracts.

Moreover, it was contended that the interest claim raised at the rate of 24% p.a.

was never objected to by the Respondent during years of their business dealings

or even at the accounting reconciliations undertaken. Objection to the payment

of interest amount was raised by the Respondent for the first time during the

hearing before the Adjudicating Authority which clearly shows that this belated

objection to interest claim was an afterthought.

Page 4 of 13 Company Appeal (AT) (Ins) No. 386 of 2025

6. It was also contended that the Appellant being an MSME, it was entitled

to protection and safeguards under MSME Act. Under Sections 15 and 16 of the

MSME Act, the buyer is statutorily required to make timely payments, failing

which, interest is payable. Hence, levy of interest at the rate of 24% p.a for

delayed payment mentioned in the Appellant's invoices was in conformity with

this statutory entitlement. It was further contended that even if the MSME Act

is not applied, the Appellant still remained entitled to compensatory interest

under the Interest Act, 1978 and general law. Thus, whether viewed through the

lens of the IBC, the MSME Act or the Interest Act, the Appellant's right to the

interest component is irrefutable. Hence, the findings returned by the

Adjudicating Authority vide the impugned order that CIRP cannot be initiated

solely for interest amount failed to appreciate the composite nature of

operational debt comprising of both principal amount and interest component

thereby rendering the impugned order legally unsustainable.

7. Refuting the contentions of the Appellant, Shri Krishnendu Dutta and Shri

Abhijeet Sinha, Ld. Senior Counsels appearing for the Respondent contended

that there was no contractual basis for claiming interest since the Supply

Agreement dated 09.10.2018 which governed the business transactions between

the two parties did not contain any clause providing for interest on delayed

payments. It was submitted that the Adjudicating Authority had rightly held that

the Section 9 application was not maintainable once the undisputed principal

amount of Rs.77,73,886/- was fully paid by the Respondent during the pendency

of the proceedings. It was emphatically asserted that the appeal is a clear misuse

of the statutory provisions of IBC to recover a disputed and unsubstantiated

Page 5 of 13 Company Appeal (AT) (Ins) No. 386 of 2025 interest claim. Interest cannot be claimed merely on the basis of a stipulation to

that effect in a bill or invoice, unless it is proven that such a provision is based

on a contract or agreement on the part of the purchaser to pay interest. The

invoices relied upon by the Appellant are unilateral documents which were not

signed or acknowledged by the Respondent. No communication has been placed

on record wherein the Respondent had agreed to pay interest. Hence the claim

of interest is entirely untenable and contrary to the commercial understanding

between the parties.

8. Assertion was made that IBC is a remedy of last resort intended for

resolution of genuine insolvency and not for recovery proceedings. Thus, if an

Operational Creditor pursues the Section 9 application only for the realisation of

interest amount, as in the instant case, this violates the spirit, ethos and

principles of IBC and should be treated as an application pursued with malafide

intent. Submission was pressed that it is settled law that once the principal

amount is paid and only a contested interest claim remains, a petition under

Section 9 is not maintainable. The conduct of the present Appellant in persisting

with the Section 9 application despite having received full payment of the

principal amounts to an abuse of the process of law. Once the reconciled amount

was paid, only the claim with respect to interest survives. The liability towards

payment of interest being disputed by the Respondent could not become the

basis of the application under Section 9. The question of the whether an interest

liability had arisen and the quantum to be paid is subject matter to be

determined by a court of competent jurisdiction and cannot be agitated before

the Adjudicating Authority which is conferred only summary jurisdiction.

Page 6 of 13 Company Appeal (AT) (Ins) No. 386 of 2025

9. We have duly considered the arguments advanced by the Learned Counsel

for the parties and perused the records carefully.

10. It is the case of the Appellant that the total amount for maintainability of

claim will include both principal debt amount as well as interest on delayed

payment which was clearly stipulated in the invoice itself. It was asserted that

Regulation 7(b)(ii) of the Insolvency and Bankruptcy Board of India (Insolvency

Resolution Process for Corporate Persons) Regulations, 2016, recognizes an

invoice as sufficient proof of operational debt. In other words, interest payment

as operational debt can be demonstrated through invoice. In the present case,

the Respondent not having disputed the interest stipulation in the invoice either

at the time of placing orders or upon receipt of goods must be construed as

Appellant's acceptance of the entire debt including interest. Hence, the total

operational debt, including interest accrued at 24% p.a. surpasses the Rs. 1

crore threshold under Section 4 of the IBC, rendering their Section 9 petition

fully maintainable. Stressing that the principal amount and interest on delayed

payment as provided for in the invoice stipulation cannot be bifurcated, the

Appellant has relied on the judgment of this Tribunal in Prashat Agarwal

supra wherein it was held that when interest on delayed payment is clearly

stipulated in the invoice, this entitles the supplier to "right to payment" under

Section 3(6) of IBC and interest amount would form part of the "debt" under

Section 3(11) of IBC.

11. Coming to our analysis and findings, when we look at material on record,

it clearly reflects that the parties had established their business dealing basis a

Supply Agreement. The relevant clause viz. clause 9 which deals with 'Payment

Page 7 of 13 Company Appeal (AT) (Ins) No. 386 of 2025 Terms' and Schedule-D which deals with 'Contract Prices and Payment Terms'

do not provide for payment of interest. At the cost of repetition, for reasons of

clarity, we would like to extract these clauses though the same has been

reproduced at para 14.3 of the impugned order which reads as follows:

"9. PAYMENT TERMS

9.1 Seller shall issue Tax Invoice properly capturing all the relevant information and details as required under the GST law and rules/formats framed there under. The respective parties would be liable to pay GST, as applicable to the Government under the GST laws.

9.2 Notwithstanding anything contained in the agreement, both parties agree that in the event PIH is not able to avail Input Tax Credit due to reasons attributable to the Seller. PIH may hold the payment or debit an amount to the extent of input tax credit disallowed to PIH until the PIH actually avails Input Tax Credit.

9.3 Payment terms will be net no. of days as specified in price note in SCHEDULE 'D' i.e. 30 days from the later of the invoice received date or the date that the product is received at the Buyer's plant. If the payment due date falls on a Saturday, Sunday or holiday, the payment due date will be the next business day following such Saturday, Sunday or holiday. Payment will be deemed made if by electronic funds transfer ('EFT'), upon evidence of actual transfer to the Seller Account, Seller will issue an invoice, transport documents to the Buyer on the basis of the scheduled delivery.

Schedule - D Contract Prices and Payment terms Prices as per the price note duly signed in Dec 2017

SNJ 21st DEC 2017

The Payment terms for soft tolling under new vendor remains as 30 days from the date of receipt of invoice.

The additional cost for doing soft tolling with Pepsico India is Rs. 2.25 Rs / KG, by adding 1% wastage in edition to the purchase price of the resin.

Pricing will be can be mutually revised after Dec 2018."

Page 8 of 13 Company Appeal (AT) (Ins) No. 386 of 2025 Neither the Appellant nor the Respondent has questioned the veracity of the said

clause and Schedule-D of the Supply Agreement. We do not find either of the

two parties to have claimed that there was any amendment with respect to the

above payment terms as envisaged in the Supply Agreement which undisputedly

did not provide for payment of interest on delayed payments. Furthermore, there

is no previous instance of payment of interest by the Corporate Debtor. Even in

the reconciliation sign-off dated 12.06.2018, which was signed by both parties,

no reference to interest was made.

12. Since there has been no amendment of the Agreement, the terms agreed

between the parties in the Supply Agreement prevail over unilateral invoices.

Even though invoices can play a crucial role in defining the rights and

obligations between parties, however, there has to be an element of mutual

consent, which can be discernible from conduct. When the ingredient of levy of

interest on delayed payment is absent in the written contract, stipulation of

interest payment in invoices can override the written contract only if there is

mutual consent and mutual understanding between the parties in this regard

which in the present case has not been demonstrated by conduct and practice.

There is no evidence of payment of interest by the Respondent which has been

substantiated by the Appellant. We are therefore inclined to agree with the

Adjudicating Authority that unilaterally generated invoices signed by only one

party cannot overrun or recast the terms of bi-partite agreements and create

binding obligations on the other party to pay interest.

13. In this regard attention has been adverted by the Respondent to the

judgement of this Tribunal in Krishna Enterprises vs. Gammon India Limited

Page 9 of 13 Company Appeal (AT) (Ins) No. 386 of 2025 in CA (AT) (Ins) No. 144 of 2018 wherein it has been held therein that if no

interest was payable, in terms of the contractual agreement, then only the

principal amount would constitute the claim, basis which Section 9 application

can be filed. We find the ratio of the above judgment to be squarely applicable to

the facts of the present case and for easy reference reproduce the relevant

portion of the said judgment as below:

"4. It is submitted that the 'debt' includes the interest, but such submission cannot be accepted in deciding all claims. If in terms of any agreement interest is payable to the Operational or Financial Creditor then debt will include interest, otherwise, the principle amount is to be treated as the debt which is the liability in respect of the claim which can be made from the Corporate Debtor.

5. In the present appeals, as we find that the principle amount has already been paid and as per agreement no interest was payable, the applications under Section 9 on the basis of claims for entitlement of interest, were not maintainable. If for delayed payment Appellant(s) claim any interest, it will be open to them to move before a court of competent jurisdiction, but initiation of Corporate Insolvency Resolution Process is not the answer."

(Emphasis supplied)

14. We also agree with the Adjudicating Authority that the facts of the present

case are distinguishable from the Prashat Agarwal judgment supra in view of

the fact that in the present case the payment of interest clause on delayed

payment does not figure in the Supply Agreement which was a bi-partite

agreement. Moreover, the invoices basis which interest has been claimed by the

Appellant in the present case were not even counter-signed by the Respondent

thereby making the imposition of interest unilateral. There is nothing to

substantiate that the Respondent has accepted the obligation to pay interest on

delayed payment. Even the reliance placed on Anuj Sharma judgment supra

also does not come to the rescue of the Appellant as in that case also the

Page 10 of 13 Company Appeal (AT) (Ins) No. 386 of 2025 Purchase Order containing interest clause on advance payment was issued basis

a Distributorship Agreement which contained the terms of payment and delivery.

15. We further notice that the Adjudicating Authority has taken note that the

Respondent has paid off the principal amount to the Appellant after

reconciliation. The principal amount was paid off after it was revised downwards

by the Appellant from Rs 91.63 lakhs to Rs 77.37 lakhs. The Adjudicating

Authority has also noticed the stubborn reluctance on the part of the Appellant

to revise the interest amount corresponding to reduced principal amount.

Despite clear directions by the Adjudicating Authority on 20.04.2023 to furnish

a detailed computation, the Appellant has been intransigently sticking to the

same figure of interest amount leading the Adjudicating Authority to rightly

question the basis and legitimacy of the interest claimed. For reasons of fairness

and transparency, the Appellant should have offered a credible explanation to

the Adjudicating Authority as to why the claim of interest amount remained

unchanged inspite of scaling down of principal amount post reconciliation. This

opacity on the part of the Appellant lends force to the contention of the

Respondent that the interest component of Rs 1.05 Cr was being insisted upon

to artificially to cross the threshold limit of Rs 1 Cr.

16. In the given circumstances when the principal amount claimed by the

Appellant has already been paid, we agree with the Adjudicating Authority that

there was no legally enforceable unpaid operational debt as required under

Section 9(5) of IBC to trigger CIRP. We are also guided by the decision rendered

by this Tribunal in case of S.S.Polymers Vs Kanodia Technoplast Limited in

CA(AT)(Ins.) No. 1227 of 2019 in which a similar issue had arisen and this

Page 11 of 13 Company Appeal (AT) (Ins) No. 386 of 2025 Tribunal had held that claim of interest basis one-sided invoices cannot be the

foundation for a Section 9 application. The relevant extracts of the judgment is

as reproduced below:

"3.The Adjudicating Authority has noticed that a sum of Rs.25,00,000/- out of Rs.32,71,800/- was paid to the Appellant by 31st December, 2018 through RTGS(s). The remaining amount of Rs.7,71,800/- was also paid by 'Corporate Debtor' to the Applicant by 17th January, 2019 through NEFT(s). The said amounts were paid before the admission of the application under Section 9 of the I&B Code. Even after receiving the total amount due, the Appellant pursued the application under Section 9 of the I&B Code for a sum of Rs.2,16,155/- towards interest. In these background, the Adjudicating Authority observed that in the absence of any Agreement, no such amount can be claimed.

4. The Learned Counsel for the Appellant relied on 'Invoices' to suggest that in the 'Invoices', the claim was raised for payment of interest. However, we are not inclined to accept such submission as they were one side Invoices raised without any consent of the 'Corporate Debtor'.

5. Admittedly, before the admission of an application under Section 9 of the I&B Code, the 'Corporate Debtor' paid the total debt. The application was pursued for realisation of the interest amount, which, according to us is against the principle of the I&B Code, as it should be treated to be an application pursued by the Applicant with malicious intent (to realise only Interest) for any purpose other than for the Resolution of Insolvency, or Liquidation of the 'Corporate Debtor' and which is barred in view of Section 65 of the I&B Code.

6. We find no merit in this Appeal and it is accordingly dismissed."

(Emphasis supplied)

17. The preambular objective of the IBC being insolvency resolution has been

oft emphasised by the Hon'ble Supreme Court in a catena of judgements. The

provisions of IBC cannot be turned into a debt recovery proceeding. Hence, 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 Page 12 of 13 Company Appeal (AT) (Ins) No. 386 of 2025 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. 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.

18. For the aforesaid reasons, we find no merit in the Appeal. There is no good

ground which warrants interference of the impugned order. Appeal stands

dismissed. No costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

[Arun Baroka] Member (Technical)

Place: New Delhi Date: 07.05.2025

Abdul/Harleen

Page 13 of 13 Company Appeal (AT) (Ins) No. 386 of 2025