### Minimum Threshold Of Rupees One Crore Under Section 4 IBC Must Be Met On The Initiation Date Case Summary: Legal Principle: The mandatory threshold limit of ₹1 crore under Section 4(1) of the IBC must be satisfied on the "initiation date" (the date of filing the application) rather than the date of the Section 8 demand notice. Furthermore, unilateral part-payments by a Corporate Debtor before the filing of a Section 9 application that reduce the debt below the threshold render the petition non-maintainable. Fact Matrix: The Operational Creditor (Appellant) entered into an agreement to procure molasses from the Corporate Debtor (Respondent) and paid an advance of over ₹2 crore. Following the cancellation of the sale order, the Appellant sought a refund of ₹1,08,02,731 and issued a Section 8 demand notice. Prior to the Appellant filing the Section 9 application, the Corporate Debtor transferred ₹13,13,886 (claimed as salvage value for destroyed stock), bringing the outstanding principal to ₹94,88,845. The Adjudicating Authority dismissed the petition for failing to meet the ₹1 crore threshold. Key Findings: 1. Threshold Date: Under Section 5(11), the status of the debt is evaluated on the date the petition is filed. Since the debt fell below ₹1 crore before the filing date, Section 9 was not invokable. 2. Exclusion of Interest: Interest cannot be clubbed with the principal to reach the threshold unless it is explicitly stipulated in a contract or invoice; in this case, no such agreement existed. 3. Pre-existing Dispute: The court found a *bona fide* dispute regarding the destruction of goods by spontaneous combustion and regulatory revocation of lifting permissions, which existed prior to the demand notice. 4. Nature of IBC: The Tribunal reiterated that the IBC is for insolvency resolution and cannot be used as a substitute for a recovery mechanism for dues below the statutory limit.

The Appellant (Operational Creditor) entered into an agreement with the Respondent (Corporate Debtor) for the procurement of 55,000 quintals of molasses

The Appellant paid an advance of ₹2,02,63,750

Due to alleged export violations by the Appellant, the Molasses Controller & Excise Commissioner revoked lifting permissions, leading the Respondent to cancel the sale order on 06.03.2021

On 22.07.2021, a spontaneous combustion incident at the Respondent's plant destroyed the remaining molasses

Following a Section 8 demand notice for ₹1,08,02,731, the Respondent transferred ₹13,13,886 (salvage value) to the Appellant

The Appellant subsequently filed a Section 9 application on 20.08.2022, after the debt fell below ₹1 crore

The NCLT Allahabad Bench dismissed the petition on 02.02.2024 for failing to meet the threshold limit

Whether the mandatory threshold of ₹1 crore under Section 4 of the IBC is to be determined as of the date of the demand notice or the "initiation date" of the Section 9 application

Whether there existed a "pre-existing dispute" regarding the operational debt that would preclude the admission of a Section 9 application

Whether interest can be included to meet the threshold limit in the absence of an express agreement

The court primarily applied Section 4(1) of the IBC, which mandates a minimum default threshold of ₹1 crore, and Section 5(11), which defines the "initiation date" as the date of filing the application

It relied on *Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd.* regarding the bar on initiating CIRP where a bona fide pre-existing dispute exists

It further applied the principle from *Prashant Agarwal v. Vikas Parasrampuria*, holding that interest cannot be part of the "operational debt" for threshold purposes unless stipulated in the agreement or invoices

The Appellate Tribunal reasoned that the "initiation date" for insolvency proceedings is the date the Section 9 petition is filed, not the date of the Section 8 notice

Since the Respondent paid the salvage value prior to the filing, the outstanding principal (₹94,88,845) fell below the ₹1 crore threshold

The Tribunal rejected the Appellant’s inclusion of 24% interest to bridge the threshold, noting the absence of any contractual clause or documentary evidence justifying such interest

Furthermore, the court found a genuine pre-existing dispute concerning the cancellation of the contract due to regulatory violations by the Appellant and the subsequent destruction of goods by an "act of God" (spontaneous combustion), which were documented and reported to excise authorities prior to the demand notice

It further held that a bona fide pre-existing dispute existed between the parties regarding the contract's termination and the loss of material

The Appeal was dismissed, affirming the Adjudicating Authority’s order dated 02.02.2024

Parties were directed to bear their own costs