Appeal denied for 18% interest on delayed lease rent during CIRP; no contract or acceptance found

The NCLAT dismissed the appeal seeking 18% interest on delayed lease rent payments during the CIRP period. The Lease Deed provided for a 5% annual rent enhancement but did not stipulate interest on delayed payments. The tribunal held that unilateral inclusion of interest in invoices without acceptance or payment by the corporate debtor (CD) is ineffective. Prior rulings confirmed interest claims require either contractual provision or conduct evidencing acceptance. The CIRP cost claim including 18% interest was also rejected as the Lease Deed had expired before CIRP commencement. The appeal lacked merit and was dismissed.

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ISSUES:

Whether interest at 18% per annum on delayed lease rent payments during the Corporate Insolvency Resolution Process (CIRP) period can be claimed when the Lease Deed does not provide for interest.Whether unilaterally raised invoices including interest can override the terms of a written Lease Deed lacking an interest clause.Whether payment of interest included in invoices or conduct of parties can establish mutual consent to pay interest despite absence of express contractual provision.Whether lease rent payable during the CIRP period can be treated as CIRP cost.

RULINGS / HOLDINGS:

The claim for interest at 18% per annum on delayed lease rent payments during the CIRP period was rejected because the Lease Deed dated 16.03.2016 did not contain any provision for payment of interest, and unilaterally generated invoices including interest without mutual consent cannot override the bi-partite agreement.The Adjudicating Authority correctly treated the lease rent payable from 25.09.2019 during the CIRP period as CIRP cost, a part of which was allowed.Invoices raised unilaterally by one party, even if including interest, do not create binding obligations to pay interest in the absence of evidence of mutual consent or conduct demonstrating acceptance of such terms by the other party.Acceptance of interest claims requires proof of payment of interest or conduct amounting to acceptance; mere inclusion of interest in invoices is insufficient.

RATIONALE:

The Court applied the principle that "If in terms of any agreement interest is payable to the Operational or Financial Creditor then the debt will include interest," but where no such provision exists, only the principal amount constitutes the debt.Reliance was placed on precedents establishing that a written contract need not be signed by both parties but must show mutual consent, which was absent here regarding interest.Unilateral invoices including interest cannot recast or override the terms of a written bi-partite agreement without mutual consent or conduct evidencing acceptance.The Court distinguished prior cases where interest was accepted and paid by the Corporate Debtor, emphasizing that in the present case, no such payment or acceptance was shown.The decision aligns with the legal framework under the Insolvency and Bankruptcy Code (IBC), where CIRP costs include lease rent during the moratorium but do not automatically include interest absent contractual basis.No doctrinal shift or dissent was noted; the judgment reaffirms established principles regarding contractual obligations and claims during CIRP.

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