Unpaid interest alone cannot trigger CIRP once the principal debt is fully discharged; insolvency petition held not maintainable.

Unpaid interest alone cannot trigger CIRP under the Insolvency and Bankruptcy Code where the entire principal debt has already been discharged. Reading the definitions of "financial debt", "debt" and "claim" together, the tribunal treated interest as inseparable from a subsisting underlying debt and held that it cannot be pursued in isolation once the principal liability no longer exists. Proceedings maintained only to recover interest, without a surviving debt, were also noted as potentially contrary to the object of the Code and capable of attracting Section 65. The insolvency petition was therefore held not maintainable and dismissed.

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Issues: Whether the corporate insolvency resolution process can be triggered under Section 7 of the Insolvency and Bankruptcy Code, 2016 solely on the basis of unpaid interest after the entire principal debt has been discharged.

Analysis: The application was based on a financial debt claim where the principal amount had already been paid during the pendency of the proceedings, leaving only the claimed interest component. The definitions of "financial debt", "debt", and "claim" under the Insolvency and Bankruptcy Code, 2016 were read together to hold that interest cannot be pursued in isolation where the underlying debt no longer subsists. Reliance was also placed on the principle that proceedings pursued only for recovery of interest, without a surviving debt, are contrary to the object of the Code and may attract Section 65 of the Insolvency and Bankruptcy Code, 2016.

Conclusion: CIRP cannot be initiated or triggered solely on the basis of unpaid interest when the entire principal debt has already been discharged. The petition was therefore not maintainable and was dismissed.

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