Revoked settlement interest cannot continue; insolvency claim must be recomputed on the lower contractual rate.

A contractual interest rate fixed in a settlement and modification agreement cannot continue to be enforced after the settlement is revoked; once the creditor cancels the arrangement, the higher rate tied to that settlement falls away. Because the interest rate directly affected the financial creditor's admitted claim in the CIRP, the claim had to be reverified on the legally sustainable lower rate of 14.85% p.a. and the revised computation placed before the Committee of Creditors. The resolution process was required to proceed only after the corrected claim position was incorporated through the necessary addendum.

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Issues: (i) Whether the financial creditor could enforce interest at 22% p.a. after revoking the settlement and the connected modification agreement; (ii) Whether the admitted claim in the corporate insolvency resolution process required redetermination on the basis of the correct rate of interest and consequential adjustment in the resolution process.

Issue (i): Whether the financial creditor could enforce interest at 22% p.a. after revoking the settlement and the connected modification agreement.

Analysis: The settlement letter of 28.02.2011 and the modification agreement of 29.09.2011 expressly provided for interest at 22% p.a. on default, but the revocation letter dated 17.06.2013 cancelled the sanctioned settlement and forfeited the amounts paid under it. The earlier proceedings under SARFAESI were not treated as a final adjudication of the applicable rate of interest, and the Supreme Court had left the issue open for decision by the Tribunal. On the facts, the revoked settlement could not be selectively enforced to sustain the higher contractual rate after the creditor had brought the settlement to an end.

Conclusion: The rate of interest at 22% p.a. was not enforceable after revocation, and the higher rate could not be sustained.

Issue (ii): Whether the admitted claim in the corporate insolvency resolution process required redetermination on the basis of the correct rate of interest and consequential adjustment in the resolution process.

Analysis: Since the rate of interest directly affected the quantum of the financial creditor's claim in the insolvency process, the claim admitted on the basis of 22% p.a. had to be revisited. The Tribunal held that the Resolution Professional should reverify the claim on the lower rate, place the revised computation before the Committee of Creditors, and ensure that the resolution plan proceeded along with the necessary addendum reflecting the corrected claim position.

Conclusion: The admitted claim required redetermination on the basis of 14.85% p.a., with consequential correction in the resolution process.

Final Conclusion: The impugned determination of interest was set aside, the claim was directed to be recomputed on the lower rate, and the resolution process was to proceed only after incorporating the revised claim position.

Ratio Decidendi: A contractual rate of interest contained in a settlement cannot be enforced after the settlement is revoked, and where that rate determines the quantum of claim in insolvency proceedings, the claim must be recalculated on the legally sustainable basis before resolution approval is considered.

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