Payment Made Against Specific Invoice Can't Be Adjusted Against Back-Dated Invoices: NCLT Delhi

The Delhi bench of the National Company Law Tribunal (NCLT) has issued a ruling that prevents arbitrary adjustments of payments made against specific invoices to be set off against older, outstanding dues in insolvency proceedings. This decision is aimed at safeguarding the rights and interests of operational creditors, who are often smaller businesses or vendors providing essential goods or services to the corporate debtor. By prohibiting such retroactive adjustments, the NCLT is ensuring that payments made for goods or services supplied during the period leading up to the insolvency are treated distinctly and are not unfairly used to settle older debts, which might be subject to the overall resolution plan and potential haircuts. This ruling is crucial in preventing creative accounting practices that could disadvantage operational creditors, who typically do not have the same level of security or bargaining power as financial creditors. It promotes transparency and fairness in the treatment of different classes of creditors within the insolvency framework.