The Ahmedabad Bench of the National Company Law Tribunal (NCLT) has held that for the purpose of determining whether the minimum default threshold under Section 4 of the Insolvency and Bankruptcy Code, 2016 is met in a case involving operational debt denominated in foreign currency, the foreign currency amount must be converted into Indian Rupees with reference to the exchange rate prevailing on the date of the invoice, being the date on which the liability stands quantified and crystallized, and not with reference to the date of default or any subsequent date.
Applying this principle, the Tribunal held that conversion of the outstanding amount of USD 1,23,597.38 as on September 19, 2019 resulted in the debt falling below the statutory threshold of Rs. 1 crore under Section 4 of the Code, and therefore the Section 9 petition was not maintainable.
The Division Bench comprising Shammi Khan (Judicial Member) and Sanjeev Sharma (Technical Member) observed that the principal issue was the relevant date for converting foreign currency debt into Indian Rupees for determining the statutory threshold under Section 4 of the IBC, namely whether such conversion should be made with reference to the date of invoice, date of default, or any later date adopted by the Operational Creditor.
The Tribunal held that where the operational debt arises from invoices denominated in foreign currency, conversion for the purpose of Section 4 must be undertaken on the basis of the exchange rate prevailing on the date of the invoice, since the invoice is the point at which the liability stands quantified and crystallized and reflects the true value of the transaction at the time the debt is incurred.
Further, the Tribunal observed that the Operational Creditor’s attempt to apply the RBI reference rate prevailing on January 19, 2026 to an invoice dated September 19, 2019 amounted to an artificial enhancement of the rupee equivalent of the same debt based solely on subsequent currency fluctuations. It held that such re-computation is impermissible and cannot be allowed to create jurisdiction where none existed at the relevant time.
The Tribunal also observed that the statutory threshold under Section 4 IBC is a jurisdictional requirement and, although it is to be examined at the stage of filing of the application, such determination must be based on the real and crystallized value of the debt at the time when the liability was incurred and not on artificial enhancement arising from subsequent events.
Briefly, the Operational Creditor, PM Copper Wire & Cables SDN BHD, filed a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 against Relicab Cable Manufacturing Limited seeking initiation of CIRP for an alleged operational debt of Rs. 1.12 crores equivalent to USD 1,23,597.38. The claim arose from a sales contract dated September 07, 2019 for supply of 1.60 MM annealed copper wire on CIF Nhava Sheva basis, pursuant to which 24.384 metric tons were supplied and invoiced on September 19, 2019 for USD 1,48,742.40.
The Corporate Debtor accepted delivery of the goods without contemporaneous objection. Under the agreed payment terms, payment was due within 45 days from the bill of lading dated September 19, 2019, and the due date fell on November 03, 2019. The Corporate Debtor made a refundable security deposit of USD 20,000 on October 04, 2019, and the Operational Creditor issued a price settlement credit of USD 5,145.02 on October 23, 2019, leaving an outstanding amount of USD 1,23,597.38.
The Operational Creditor had earlier filed a Section 9 petition, which was dismissed on June 12, 2023 on the ground that, upon conversion into Indian Rupees, the debt did not meet the statutory threshold under Section 4 of the Code. In the present petition, the Operational Creditor recomputed the debt using the RBI reference rate as on January 19, 2026 and contended that the threshold of Rs. 1 crore was crossed.
Appearances:
Advocate Tanaya Shah, for the Applicant/ Operational Creditor
