Authority: National Company Law Appellate Tribunal, Principal Bench, New Delhi

Order Date: 13th July, 2026

Case Overview

The appeal was filed by Wild Dreams Trading Company Pvt. Ltd. (Financial Creditor/Appellant) against Ascendancy Financial Services Pvt. Ltd. (Corporate Debtor/Respondent) challenging the NCLT Chandigarh Bench's order dated 3rd February 2026 that dismissed the Appellant's Section 7 application under the Insolvency and Bankruptcy Code, 2016. The NCLT had dismissed the petition on the grounds that the interest component of Rs 45,08,010 could not be added to the principal debt of Rs 62,00,000 merely based on Tax Deducted at Source (TDS) deductions, bringing the total claimed amount below the statutory threshold under Section 4 of the Code.

The dispute arose from Inter Corporate Deposits (ICDs) totaling Rs 2,32,00,000 advanced by Wild Dreams to Ascendancy between 22nd July 2016 and 18th July 2024 under an oral agreement with interest rates of 11.50% per annum (2016-2018) later revised to 8% per annum. While Ascendancy repaid principal amounts for the first eight ICDs, it failed to pay any interest on these deposits. Additionally, only a partial payment of Rs 1,00,000 was made towards the Ninth ICD, and the entire principal amounts for the Tenth and Eleventh ICDs remained unpaid, leaving Rs 62,00,000 in outstanding principal and Rs 45,44,700 in accrued interest (net of TDS) as of 30th September 2024.

Crucially, the Corporate Debtor had consistently deducted and deposited TDS on the interest component with statutory authorities. Following a demand letter dated 13th September 2024 for Rs 1,07,08,010 (principal Rs 62,00,000 + interest Rs 45,08,010), Ascendancy responded on 19th September 2024 acknowledging the entire amount and seeking two weeks to arrange funds. After default continued, a second demand was issued on 8th October 2024, to which Ascendancy again sought more time citing financial difficulties without disputing the debt or interest.

The NCLAT found that the NCLT erred by considering TDS deductions in isolation while ignoring the Corporate Debtor's explicit written acknowledgment of the entire debt including interest. The appellate tribunal emphasized that the definition of "financial debt" under Section 5(8) of the IBC includes interest where it forms part of the financial arrangement, and that the threshold under Section 4 must be examined against the total financial debt (principal + interest), not just principal.

Final Outcome

The NCLAT allowed the appeal, setting aside the NCLT's order. It held that Wild Dreams had established the existence of a financial debt and default exceeding the statutory threshold. The Corporate Debtor was given 15 days from the date of the order to make full payment of the outstanding debt of Rs 1,07,08,010 along with due interest. Failure to pay would result in the Adjudicating Authority (NCLT Chandigarh) admitting the Section 7 petition and initiating Corporate Insolvency Resolution Process (CIRP) against Ascendancy Financial Services Pvt. Ltd.

Topics: Insolvency Proceedings, Corporate Debt Acknowledgement, Interest Calculation