September 21, 2026

Interest on Delayed Payments as Operational Debt under the IBC: Thresholds, MSME Claims and the Proper Forum

Examining the Non-Inclusion of Unagreed Interest as Operational Debt and MSME Claims before NCLT and MSEFC

Interest Claims and Operational Debt under the IBC – Analyzing the NCLT’s Stand

 

A supplier whose invoices remain unpaid may add interest to the principal when calculating the operational debt under the IBC. Whether this interest can be included when filing an insolvency application against the buyer under Section 9 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) has been considered differently by tribunals. The issue is particularly important where the principal amount is below the minimum default threshold of ₹1 crore and the claim reaches the threshold only after adding interest. For micro and small enterprises, the position is further complicated by the statutory interest available under the Micro, Small and Medium Enterprises Development Act, 2006 (“MSMED Act”).

Operational Debt and Interest Under IBC

Operational debt. Section 5(21) of the IBC defines “operational debt” as a claim in respect of the provision of goods or services, including employment, or a debt in respect of dues arising under any law and payable to a government or local authority.

Debt and claim. Section 3(11) defines “debt” as a liability or obligation in respect of a claim that is due from any person. Section 3(6) defines “claim” to include a right to payment, whether or not reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured or unsecured.

Minimum default. Section 4 provides that the insolvency provisions apply where the minimum amount of default is ₹1 crore, a figure fixed by the Central Government by notification S.O. 1205(E) dated 24 March 2020.

The operational creditor route. An operational creditor must first deliver a demand notice under Section 8. If the corporate debtor does not pay, or does not bring to the creditor’s notice the existence of a dispute, the creditor may apply under Section 9. Since the Supreme Court’s decision in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. (2018), a plausible pre-existing dispute has been a recognised ground for rejecting a Section 9 application; the proceeding is summary and not intended to adjudicate contested money claims.

Interest and the ₹1 Crore IBC Threshold

Where interest is contractually stipulated. In Prashat Agarwal v. Vikash Parasrampuria (NCLAT, New Delhi, 18 July 2022), the National Company Law Appellate Tribunal held that where interest on delayed payment was clearly stipulated in the invoices, it gave rise to a “right to payment” within Section 3(6) and therefore formed part of the “debt” under Section 3(11). On that basis, principal and stipulated interest could be aggregated to meet the threshold.

Where interest is not agreed. A different result has followed where no agreement on interest exists. In Siddharth Enterprises v. Shapoorji Pallonji and Company Pvt. Ltd. (NCLT, Mumbai Bench, 1 April 2024), the Tribunal held that interest not agreed between the parties cannot form part of “operational debt” under Section 5(21), and that the NCLT is not the forum for resolving an MSME’s claim to statutory interest. Reported decisions of the NCLAT in 2025 have likewise declined to treat the NCLT or NCLAT as the appropriate forum to determine liability for interest under the MSMED Act in Section 9 proceedings.

The distinction that emerges is between interest that the parties agreed to (in a contract, purchase order or accepted invoice terms) and interest that the creditor asserts only as a matter of statutory entitlement or unilateral demand. The first category has, in appropriate cases, been counted towards the debt; the second has generally been treated as requiring adjudication elsewhere.

The 2026 Illustration: Statutory Interest and the Threshold

The point was applied again in Ovaron Infrastructure & MEP Services v. Shapoorji Pallonji and Company Pvt. Ltd., C.P.(IB)/639/MB/2025 (NCLT, Mumbai Bench, 10 July 2026), as reported. The principal claimed was below ₹1 crore and the threshold was crossed only by adding MSMED Act interest and GST. The Tribunal dismissed the application, holding that the entitlement to statutory interest was itself a matter requiring adjudication and could not be established in summary insolvency proceedings. It also declined to treat correspondence discussing outstanding amounts, or tax deducted at source reflected in Form 26AS, as an unconditional admission of the operational debt.

NCLT decisions are not binding on other NCLT benches in the same manner as Supreme Court judgments, while NCLAT decisions depend on the facts and circumstances of each case. Accordingly, the position on interest as part of operational debt under the IBC remains fact-dependent rather than uniformly settled.

MSME Interest and the Facilitation Council

Sections 15 to 17 of the MSMED Act require a buyer to pay a micro or small enterprise supplier within the agreed period, which cannot exceed forty-five days from acceptance, and impose compound interest with monthly rests at three times the bank rate notified by the Reserve Bank of India where payment is delayed. Section 18 allows either party to refer a dispute over amounts due to the Micro and Small Enterprises Facilitation Council, which conducts conciliation and, if that fails, arbitration.

The Supreme Court has treated the Section 18 mechanism as a special statutory framework: see Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Pvt. Ltd. (Supreme Court, 31 October 2022). An award or settlement obtained through that route establishes the amount due, including statutory interest, in a way that a unilateral invoice demand does not.

Recent legislative change. Parliament has passed the Micro, Small and Medium Enterprises Development (Amendment) Act, 2026, which received assent on 13 August 2026. As reported in official and legal publications, it provides for time-bound mediation and arbitration before Facilitation Councils, payment of part of the awarded amount where a challenge remains pending, recovery of awards as arrears of land revenue, and routing of certain payments through Trade Receivables Discounting System platforms. As on 16 September 2026, these provisions were reported to be awaiting notification of their commencement, and readers should check whether they have since been brought into force.

Changes under the IBC from 26 May 2026

The Insolvency and Bankruptcy Code (Amendment) Act, 2026, largely in force from 26 May 2026, introduces important requirements for operational creditor applications under Section 9 of the IBC.

  • Information utility filing. Amended Section 215(3) states that an operational creditor shall, before filing a Section 9 application, submit financial information to an information utility, in the manner specified by the Insolvency and Bankruptcy Board of India. Under new Section 215(4), information not authenticated by the debtor within the specified period is deemed authenticated.
  • Penalty for concealment. New Section 67C empowers the Adjudicating Authority to impose a penalty of not less than ₹1 lakh and up to ₹2 crore where an operational creditor conceals, in a Section 9 application, that the corporate debtor had notified a dispute or had made full and final payment. New Section 64A separately permits penalties for frivolous or vexatious proceedings.

These provisions increase the importance of accurate disclosure of the debt, any interest component and any dispute.

Key Takeaways

The treatment of interest as part of operational debt under the IBC depends on how the interest arises and whether it is disputed. The following points summarise the key principles on the ₹1 crore threshold, MSMED Act interest, and Section 9 compliance.

  • Interest may count towards the ₹1 crore threshold where it forms part of the agreed terms and is not subject to a genuine dispute, as recognised in Prashat Agarwal.
  • Interest that is not contractually agreed, or that depends on establishing a statutory entitlement under the MSMED Act, has generally been treated as unsuitable for determination in a Section 9 proceeding.
  • The MSMED Act provides a separate mechanism for resolving statutory interest claims; an award or settlement through that mechanism stands on a different footing from an unadjudicated demand.
  • From 26 May 2026, operational creditors are subject to the applicable information-utility filing requirement under amended Section 215 and statutory penalties for concealing disputes or payments in Section 9 proceedings.

Legal Information Disclaimer

This article provides general information about Indian law as it stood on 16 September 2026. It is not legal advice, and reading it does not create an advocate–client relationship. Statutes, rules and judicial interpretations change, and their application depends on the facts of each matter. Readers should consult the current official text of the laws and judgments cited and should not act on this information without advice specific to their circumstances. This article is published for legal awareness and education and is not intended to advertise or solicit professional work.

Sources / Authorities

  1. Insolvency and Bankruptcy Code, 2016 — Sections 3(6), 3(11), 4, 5(21), 8, 9, 64A, 67C, 215 (as amended) — IBBI – Legal Framework
  2. Ministry of Corporate Affairs, Notification S.O. 1205(E) dated 24 March 2020 (minimum default of ₹1 crore under Section 4)
  3. Insolvency and Bankruptcy Code (Amendment) Act, 2026 (No. 6 of 2026) — Gazette text (IBBI); commencement Notification S.O. 2625(E) dated 22 May 2026 — IBBI
  4. Micro, Small and Medium Enterprises Development Act, 2006 — Sections 15, 16, 17 and 18
  5. Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026 — Press Information Bureau release on passage by Parliament — PIB
  6. Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., (2018) 1 SCC 353, Supreme Court of India, 21 September 2017
  7. Prashat Agarwal v. Vikash Parasrampuria, NCLAT, New Delhi, 18 July 2022 — summary, IBC Laws
  8. Siddharth Enterprises v. Shapoorji Pallonji and Company Pvt. Ltd., NCLT, Mumbai Bench, 1 April 2024 — summary, IBC Laws
  9. Ovaron Infrastructure & MEP Services v. Shapoorji Pallonji and Company Pvt. Ltd., C.P.(IB)/639/MB/2025, NCLT, Mumbai Bench, 10 July 2026 — report, LiveLaw Business
  10. Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Pvt. Ltd., Supreme Court of India, 31 October 2022

 

By Komal Ahuja
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