NCLAT dismisses insolvency plea against PepsiCo; says IBC can't be invoked only for repayment of interest

The National Company Law Appellate Tribunal (NCLAT) on Wednesday dismissed an appeal filed by SNJ Synthetics Limited seeking the initiation of corporate insolvency resolution proceedings against food and beverage giant, PepsiCo India Holdings Private Limited..The NCLAT held that SNJ's insolvency petition under Section 9 (concerning operational debts) of the Insolvency and Bankruptcy Code, 2016 (IBC) was not maintainable since the principal amount of the debt claimed from PepsiCo had already been repaid and only a disputed claim for interest remained.A three-member Bench of Justice Ashok Bhushan (Chairperson), and Technical Members Barun Mitra and Arun Baroka observed that the IBC could not be invoked for the recovery of interest alone, especially when the underlying contract did not provide for such interest.It, therefore, upheld a decision by the National Company Law Tribunal (NCLT), Chandigarh, to dismiss the insolvency plea. "The Adjudicating Authority (NCLT) 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 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," the NCLAT held. .SNJ Synthetics, a micro, small and medium enterprise (MSME) that supplied PET preforms and thermoplastics to PepsiCo under a Supply Agreement dated October 9, 2018, had claimed that PepsiCo owed it an operational debt of ₹1.96 crore. This included ₹91.63 lakh towards the principal amount and ₹1.05 crore as interest at 24 per cent per annum for delayed payments.Following reconciliation of accounts during the pendency of NCLT proceedings, the principal amount was revised to ₹77.37 lakh, which PepsiCo paid on February 10, 2023. SNJ accepted this payment without prejudice but continued to press for the repayment of ₹1.05 crores as interest, arguing that the total operational debt (inclusive of such interest) exceeded the ₹1 crore threshold under Section 4 of the IBC..The NCLT, Chandigarh Bench, dismissed the SNJ's Section 9 petition on January 2, 2025, noting that no unpaid principal amount was outstanding and that the claim for interest was disputed. This was challenged by SNJ before NCLAT, where it contended that the interest was part of the operational debt and was clearly stipulated in invoices issued under a long-standing commercial relationship between the parties.It added that while the Supply Agreement was silent on interest, the said agreement did not bar such interest. PepsiCo’s failure to object to interest over the years amounted to acquiescence, SNJ said. However, the NCLAT rejected this argument and noted that the Supply Agreement did not contain any clause for interest on delayed payments. It held that invoices generated unilaterally by SNJ were insufficient to override the contract, especially in the absence of any past conduct or written agreement showing that PepsiCo had agreed to pay such interest.“Unilateral 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,” the appellate tribunal said..The NCLAT also observed that SNJ had failed to revise its interest claim even after the principal amount was scaled down. It noted that the unchanged figure lent credence to PepsiCo’s contention that the interest claim was being artificially inflated to cross the ₹1 crore threshold for moving an insolvency plea.The NCLAT distinguished the judgments relied on by SNJ, including Prashat Agarwal v. Vikas Parasrampuria and Anuj Sharma v. Rustagi Projects, stating that unlike those cases, there was no written provision for interest in the present Supply Agreement and no countersigned invoices.SNJ had also invoked the MSME Act and the Interest Act, 1978 to claim a statutory entitlement to interest on delayed payments. The NCLAT, however, clarified that it was not the appropriate forum to adjudicate such statutory claims.“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,” it said..The Tribunal concluded that there was no legally enforceable unpaid operational debt and that the Section 9 petition had been rightly dismissed by the NCLT..SNJ was represented by Senior Advocate Anupam Lal Das with Advocates Nithin Chowdary Pavuluri, Anirudh Singh, and Subham Saurabh..Pepsico was represented by Senior Advocate Krishnendu Dutta and Advocate Abhijeet Sinha with Advocates Avni Sharma and Simarpreet Kaur N..[Read judgment]