Brief Overview:
A set-off with respect to business transactions between Corporate Debtor and it’s creditor, which is in nature of adjustment of accounting entries is valid pre-CIRP admission.
Technical Details:
NCLAT upheld the validity of pre-CIRP set-off, which was exercised with respect to the business transactions between Corporate Debtor and the operational creditor and held that such set off was merely an adjustment of accounting entries, since instead of exchanging physical money, accounting adjustments were made.
Having upheld the pre-CIRP set off, the NCLAT dismissed the operational creditors Appeal against the NCLT’s order dismissing its Section 9 petition on account of the claim amount being less than the threshold limit required under Section 4 of the Code.
While dismissing the Appeal, NCLAT inter alia held that an operational creditor cannot add ‘interest’ to meet the threshold under Section 4 of the IBC, since there is a deliberate omission of the term ‘interest’ in the definition of operation debt under Section 5(20) of IBC, as against the definition of financial debt under Section 5(8) of the IBC, where ‘interest’ is specifically defined.
For further details, please see:
Khushbu Dye Chem Private Limited v. Chemical Suppliers India Private Limited
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