Insolvency jurisdiction upholds contractual interest terms while requiring fair consideration of project security and financing requests.

The Tribunal held that an application connected with the corporate insolvency resolution process and the corporate debtor's continuance as a going concern was maintainable under its wide jurisdiction under the Insolvency and Bankruptcy Code. It refused to waive interest or reduce contractual rates, holding that the parties were bound by the sanction letters and loan documents and that the Tribunal could not rewrite the bargain during the loan period. It further directed fair consideration of the request for ad hoc security and related financing, holding that the no-objection request could not be declined merely because CIRP was pending and that going-concern preservation required transparent assessment in consultation with the CoC.

---

---

Issues: (i) Whether the application was maintainable before the Tribunal under the Insolvency and Bankruptcy Code, 2016; (ii) whether the requests for waiver of interest and reduction of contractual interest rates could be granted; (iii) whether the applicants were entitled to a no-objection certificate for creation of ad hoc security in favour of the development authority and for raising additional loans against the project land.

Issue (i): Whether the application was maintainable before the Tribunal under the Insolvency and Bankruptcy Code, 2016.

Analysis: The dispute was found to be intrinsically connected with the corporate insolvency resolution process and with the continuance of the corporate debtor as a going concern. The Tribunal treated its jurisdiction under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, read with Section 231 of the Insolvency and Bankruptcy Code, 2016, as wide enough to examine such issues.

Conclusion: The application was held maintainable.

Issue (ii): Whether the requests for waiver of interest and reduction of contractual interest rates could be granted.

Analysis: The Tribunal held that the parties were bound by the agreed contractual terms contained in the sanction letters and loan documents. It found that the applicable rate of interest flowed from the contract and that the Tribunal could not rewrite the bargain by waiving interest or altering the agreed rates during the currency of the loan.

Conclusion: These reliefs were rejected.

Issue (iii): Whether the applicants were entitled to a no-objection certificate for creation of ad hoc security in favour of the development authority and for raising additional loans against the project land.

Analysis: The Tribunal found that creation of ad hoc security was a condition precedent under the PMAY policy and that the request for no-objection certificate had been declined merely because the corporate debtor was in CIRP, without consideration on merits. It held that the corporate debtor had to be run as a going concern and that the request required fair and transparent consideration, with adequate security retained for the lender.

Conclusion: The applicants were held entitled to create ad hoc security and to seek additional loans against the project land, and the Administrator was directed to consider issuance of the no-objection certificate in consultation with the CoC.

Final Conclusion: The Tribunal upheld jurisdiction, refused interference with the contractual interest claims, and granted substantive relief for the project security arrangement and related financing, resulting in a partial allowance of the application.

Ratio Decidendi: In insolvency proceedings, the Tribunal may decide issues intrinsically connected with the corporate debtor's business as a going concern, but it cannot rewrite contractual interest terms; administrative refusal affecting project implementation must be considered on merits in a fair and transparent manner, consistent with preservation of the going concern.

---