Under the Insolvency and Bankruptcy Code, 2016 (IBC), interest can indeed be claimed as part of operational debt in certain circumstances

 Under the Insolvency and Bankruptcy Code, 2016 (IBC), interest can indeed be claimed as part of operational debt in certain circumstances, but there are some nuances and conditions to be aware of.

🔍 Understanding Operational Debt:

Operational debt is defined under Section 5(21) of the IBC, and it includes:

• Claims for goods or services,

• Claims related to employment dues,

• Statutory dues (e.g., taxes, duties).

While the principal debt for goods or services is an operational debt, interest (on overdue payments) can also be part of the operational debt if it arises out of the provision of goods/services or an agreement between the parties.

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✅ Claiming Interest as Operational Debt:

1. Interest on Overdue Payments:

   • If the agreement between the creditor and debtor specifies an interest rate on overdue payments (e.g., an invoice that specifies interest for late payment), interest can be claimed as part of the operational debt.

   • The interest would typically be calculated from the date the payment became due until the date of payment or until CIRP admission.

2. Nature of the Debt:

   • The interest must be related to a claim arising from a provision of goods or services. This means that interest tied to services rendered or goods supplied can be included.

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❌ Limitations on Claiming Interest:

However, there are certain conditions and limitations:

1. Interest on Financial Debt:

   • Interest on a financial debt (like a loan) is not part of operational debt, as financial debt is a separate category under the IBC.

   • Only interest on operational debt (goods, services, employment) can be considered as part of the operational claim.

2. Pre-Existing Dispute:

   • If there is a dispute regarding the principal debt or the agreement’s terms, then interest may not be claimed under IBC, especially under Section 9 for operational creditors. If the default or debt is disputed, the operational creditor must establish the clear debt due before claiming interest.

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🧑‍⚖️ Judicial Precedents:

• M/s. Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. (2017):
  The Supreme Court clarified that if the debt is disputed, the claim (including interest) cannot proceed under IBC.

• Innoventive Industries Ltd. v. ICICI Bank Ltd. (2018):
  While this case primarily deals with the default for financial creditors, the Court’s discussion underscores that interest on financial debts is distinct from operational debts under IBC.

• Dena Bank v. C. Shivakumar Reddy (2018):
  This case highlighted that interest on operational debt is allowed if it’s part of the agreement for goods/services supplied.

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🔑 Key Points:

• Interest on operational debts is permissible but only if it arises from goods/services or is stipulated in the agreement.

• Interest on financial debts (e.g., loans) is outside the scope of operational debt.

• Ensure that the interest claim is linked directly to the underlying operational debt (e.g., an overdue invoice or service payment).