Foreign Currency Debt and the IBC Threshold

Ruling in PM Copper Wire & Cables by NCLT, Ahmedabad

Can a dollar debt cross the IBC threshold of Rs. 1 crore only because the rupee has fallen? That is the concern behind PM Copper Wire & Cables SDN BHD v. Relicab Cable Manufacturing Limited^[1] The IBC is not meant to be used as a debt recovery tool. A creditor should not be allowed to take an old foreign currency invoice, wait for a favourable exchange rate, and then use that movement alone to bring a company into insolvency. But the answer given in PM Copper appears not to be the right one.

In PM Copper, the operational creditor therein had a claim in US dollars. After adjustments, USD 123,597.38 remained unpaid. An earlier Section 9 petition had failed because the rupee value of that debt was below Rupees 1 crore. In the later petition, the creditor relied on a much later RBI reference rate and said that the same dollar debt now crossed the threshold as the rupee value depreciated.

The NCLT Ahmedabad rejected the petition. It held that the relevant date for conversion was the invoice date. The reason it gave was that the liability was quantified and crystallised on that date. The Tribunal also said that the invoice date reflected the true value of the transaction, and that a later rate would artificially enhance the rupee value and create jurisdiction where none existed. That reasoning has force at first sight. It identifies a real risk. But it rests on a confusion between two very different things.

Amount of Debt & Threshold amount

An invoice in dollars crystallises the debt in dollars. It does not convert the debt into rupees. If the contract says that USD 123,597.38 is payable, the debt is USD 123,597.38. If the buyer does not pay, the default is a failure to pay USD 123,597.38. Unless the contract says otherwise, nothing on the invoice date turns that dollar debt into an INR debt. This is the central point. The invoice date tells us the amount of the debt in dollars. The due date tells us when default occurred. But neither date tells us when Indian law must translate that dollar debt into rupees. That translation is needed only because Section 4 of the IBC prescribes the threshold in the currency of rupees. Foreign exchange conversion is therefore not part of the debt. It is not part of the default. It is a rupee valuation made for applying a statutory threshold.

Once this is seen, the question changes. The question is not when the debt arose. The question is when does the IBC require a foreign currency debt to be valued in rupees. The invoice date answer is weak because it treats the rupee value on the invoice date as the true value of the transaction. But true value in what currency? The parties did not bargain for an INR price. They bargained for a dollar price. The true contractual value was the dollar amount. The rupee value appears only because an Indian statute (i.e. IBC) asks whether the debt crosses a rupee threshold.

It is arguable, and as was indeed argued by the Operational Creditor in PM Copper, that the filing date of the Section 9 petition under IBC is the better answer to ascertain the foreign exchange conversion rate. Not because it always helps the creditor. It may not. If the rupee strengthens, the filing date rate may hurt the creditor. The filing date is better because that is when the creditor invokes the IBC. Section 5(11) of the IBC defines ‘initiation date’ as the date on which a creditor makes an application to the Adjudicating Authority. In a Section 9 case, that is the date on which the operational creditor asks the NCLT to open the corporate insolvency process against a corporate debtor. It is also the date on which the Tribunal must ask whether the Section 4 monetary threshold of Rupees 1 crore has been crossed^[2]. The date of default nonetheless remains important for the purpose of ascertaining the issue of limitation and whether the debtor substantively failed to pay. But that is altogether a different function. It does not decide when a foreign currency debt becomes a rupee amount.

A simpler way to put the point is this. A foreign currency debt remains a foreign currency debt until it is paid, contractually converted, adjudicated, or required by law to be valued in rupees. In an IBC Section 9 petition, the aforesaid last event occurs when the creditor files the petition under Section 9 of the IBC and asks the Tribunal to ascertain the threshold of Rupees 1 crore in terms of Section 4 of IBC.

Legal principles

The IBC’s own regulations support this. Regulation 15 of the CIRP Regulations^[3] says that a claim denominated in foreign currency must be valued in Indian currency at the official exchange rate as on the insolvency commencement date. The official exchange rate means the RBI reference rate, or a rate derived from it. Regulation 26 of the Liquidation Regulations^[4] follows the same idea for liquidation. It uses the liquidation commencement date. These provisions apply after the CIRP has begun. They do not directly decide the Section 4 threshold question, which falls for consideration before the insolvency commencement date i.e. the date on which a Section 9 petition is admitted by the Tribunal. But they manifestly show how the IBC treats foreign currency claims when it deals with them. It specifically uses a date linked to the insolvency process. It does not use an antecedent invoice date. It does not use the date of supply. It does not even use the date of default.

This creates a difficulty for the reasoning in PM Copper. Regulation 15 says that, after a Section 9 petition is admitted and CIRP begins, a foreign currency claim must be valued at the official exchange rate as on the insolvency commencement date. Take a simple example. Suppose the unpaid debt is USD 100,000. On the invoice date, it may be worth Rupees 80 lakhs. On the insolvency commencement date, it may be worth Rupees 85 lakhs. After admission, the IBC Regulations would value that same claim at Rupees 85 lakhs. The difficulty is this. On PM Copper’s reasoning, the same claim would first be valued at Rupees 80 lakhs to decide whether the Section 9 petition is maintainable, and then at Rupees 85 lakhs after the petition is admitted. This creates an odd consequence. The same dollar debt is measured by one exchange rate at the threshold stage and by another exchange rate after admission. The IBC gives no clear reason for that result.

PM Copper relied on Forasol v. ONGC^[5] to say that the date of conversion must be fixed at a definite and legally justifiable point in time. That proposition is unexceptionable. The difficulty lies in treating the invoice date as that point. But Forasol does not support the rule that foreign currency conversion should be on the invoice date. Forasol was not an insolvency case. It dealt with a foreign currency award. The Supreme Court had to decide the rate at which the foreign currency amount should be converted into rupees. The Court considered several possible dates, including the date when the amount became due, the date of filing, the date of decree, the date of payment, and the date of award. It did not say that the earliest date is always correct. DLF v. Koncar^[6] applies the same method wherein the Supreme Court did not mechanically choose the date of contract, arbitral award or payment. It looked at the statutory setting and held that, for a foreign award, the relevant date of foreign exchange conversion was when the award became enforceable under Section 49 of the Arbitration and Conciliation Act, 1996. The conclusion is therefore straightforward. There is no single conversion date for all cases. The date eventually fixed must fit the legal purpose. For a Section 9 petition under IBC, the legal purpose is different. The NCLT is not fixing the amount finally recoverable. It is only deciding whether the operational creditor can invoke the IBC at all. The conversion date should therefore be the date on which the Section 9 petition is filed.

The same approach appears in American law. Section 502(b) of the US Bankruptcy Code says that a claim must be determined in United States currency as of the date of filing of the bankruptcy petition. In In re Global Power Equipment Group Inc.^[7], the Delaware Bankruptcy Court applied this rule to euro claims and used the petition date exchange rate. The reason was that, once bankruptcy is filed, the foreign currency claim must be valued as a claim against the debtor’s estate. Section 502(b) fixes that value on the petition date. It does not use a later date, because that would allow the claim to rise or fall after the bankruptcy case has begun only because the exchange rate has moved. It also does not use an earlier date merely because the debt arose earlier. Earlier dates may matter where the claim has already been reduced to a final judgment before bankruptcy. But for a foreign currency claim being valued in the bankruptcy process itself, the statutory point of valuation is the petition date. The decision was later affirmed in appeal^[8] (Global Power, Bankruptcy Court, pp. 10 to 12 and 20, affirmed on appeal, p. 6)

The better rule?

The objection based on speculation can be stated shortly. It may be said that Section 9 would become speculative if the creditor can cross the Rupees 1 crore threshold only because the rupee has depreciated by the time the petition is filed. But that assumes that the creditor’s claim has changed. It has not. The creditor continues to claim the same dollar debt. Only its rupee value changes. That is an ordinary consequence of a foreign currency debt. The same risk may work against the creditor if the rupee strengthens before filing. A debtor who agrees to pay in dollars also accepts the risk of currency movement. It can pay on time, hedge its exposure, or agree on a fixed conversion date in the contract. If it does none of these, there is little reason for the law to freeze the debt at an old rupee value in the debtor’s favour. An invoice date rule creates further problems. It invents a rupee conversion which the parties did not agree to. It may reward delay by allowing the debtor to rely on an old exchange rate. It is also difficult to apply in running accounts with several invoices, different due dates, part payments, credit notes, debit notes and interest. It sits uneasily with the IBC’s own regulations, which value foreign currency claims at a process date after commencement. Conversion on the date of filing is therefore the cleaner rule. It gives one fixed date for applying Section 4 without rewriting the parties’ bargain.

The better rule is a modest legal principle. If the contract fixes a conversion date, that date should ordinarily govern. If it does not, and the debt remains payable in foreign currency, conversion for the limited purpose of Section 4 should be made at the filing date rate, using the official RBI reference rate or a derived rate. It is therefore advisable for cross border contracts to deal with this expressly. The contract should say which date and rate will apply if a foreign currency amount must be expressed in rupees for Indian proceedings, including insolvency, winding up, recovery or enforcement.

PM Copper rightly identifies the risk of currency movement being used to create insolvency jurisdiction. But the invoice date is not the answer. It fixes the debt in dollars, not the date on which that debt must be valued in rupees for Section 4. For a Section 9 petition, that date should be the filing date, because that is when the creditor invokes the IBC and the threshold is tested. The issue now deserves authoritative appellate clarification.

For inquiries, please reach out to the author:

Aayog Doshi, Partner at Evolve Legal

aayogdoshi@evolvelegal.in | +91 9714301155

Footnotes:

^[1] C.P. (IB)/63(AHM) 2026, NCLT-Ahmedabad decided on 17.04.2026

^[2] Mosco International Commodities Private Limited vs. SBEC Sugar Limited, NCLAT-Principal Bench: New Delhi in Company Appeal (AT) (Insolvency) No. 860 of 2024 (at paragraphs 52, 53); Devika Resourced Private Limited vs. Maa Manasha Devi Alloys Pvt. Ltd., NCLAT-Principal Bench: New Delhi in Comp. App.  (AT) (Ins.) No. 938 of 2024 & I.A No. 3418 3419 of 2024

^[3] IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016

^[4] IBBI (Liquidation Process) Regulations, 2016

^[5] 1984 (Supp) Supreme Court Cases 263

^[6] (2025) 1 SCC 343

^[7] In re: Global Power Equipment Group Inc., et al., decided on 14.02.2008 by the United States Bankruptcy Court, for the District of Delaware

^[8] In re: Global Power Equipment Group Inc., et al., decided on 29.01.2009 by the United States Bankruptcy Court, for the District of Delaware