NCLT Indore Rules Interest Not Admissible For Unsecured Claims Without Contractual Proof

(MENAFN- KNN India) Bhopal, Jan 1 (KNN) The National Company Law Tribunal (NCLT), Indore Bench, has ruled that interest on an unsecured financial claim cannot be admitted merely because interest has been allowed in the claim of another unsecured creditor.

The tribunal clarified that interest is admissible only when there is a clear contractual or documentary basis recorded in the corporate debtor's books.

Case Background

The ruling arose from the Corporate Insolvency Resolution Process (CIRP) of Pushp Ratna Realty Pvt. Ltd., admitted into insolvency on October 16, 2024.

Socrus Bio Sciences Ltd. and Socrus Pharmaceutical Ltd., both claiming to be unsecured financial creditors, sought admission of principal and interest on their loans-Rs 4.97 crore (including Rs 4.48 crore interest) and Rs 12.53 crore (including Rs 11.29 crore interest), respectively.

The Resolution Professional (RP) admitted only the principal amounts, rejecting the interest component due to lack of contractual proof. The applicants challenged this, alleging discriminatory treatment since interest had been admitted for another unsecured creditor, Ashok Kumar Jain.

They cited the Supreme Court's Swiss Ribbons Pvt. Ltd. v. Union of India judgment, arguing for equitable treatment among unsecured creditors.

Tribunal's Observations

The tribunal, comprising Judicial Member Brajendra Mani Tripathi and Technical Member Man Mohan Gupta, observed that“the claim of interest is a contractual obligation and cannot be claimed on the ground that it is being paid to someone else.” It held that equity among creditors does not override the statutory requirement for proof under the Insolvency and Bankruptcy Code (IBC).

The tribunal noted that the applicants failed to produce any loan agreement, balance sheet entry, or other documentation evidencing entitlement to interest. Reliance on parity with other creditors was deemed misplaced.

Referring to Swiss Ribbons, the tribunal clarified that the ruling distinguishes between financial and operational creditors but does not mandate uniform treatment of all unsecured financial creditors.

Key Takeaways

The tribunal concluded that financial debt under the IBC includes interest only if it is contractually agreed or reflected in the corporate debtor's records.

Unilateral claims without corroboration are inadmissible. Consequently, the RP's decision to admit only the principal amounts was upheld, and the application for interest and revision of the resolution plan was rejected.

(KNN Bureau)

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