2026 (3) TMI 854 - AT - IBC

Interest entitlement in CIRP denied where claim lacked contractual or board resolution support and statutory substantiation was unmet

Entitlement to contractual interest in a corporate insolvency requires documentary substantiation; absent a contract or board resolution evidencing an ... Entitlement to contractual interest in insolvency proceedings - failed to produce any contractual or documentary basis - substantiation of financial claim - administrative role of resolution professional. Whether the appellants were entitled to interest on their unsecured loans as part of their admitted claims in the CIRP - HELD THAT:- The Adjudicating Authority's finding that the appellants failed to establish any contractual or documentary basis for entitlement to interest at 18% (or at any rate) was upheld. The Court applied the statutory requirement that financial claims in CIRP be substantiated by cogent evidence under the relevant provisions and regulations, observing that the principle of equity among creditors does not override the statutory requirement to substantiate claims. The balance-sheet entries and the appellants' pleadings were found insufficient to prove a contractual right to the interest claimed and no material was placed before the Authority to justify admission of interest. [Paras 8, 16, 17, 23] Appellants not entitled to interest as claimed; rejection of interest component sustained for lack of contractual or documentary proof. Administrative duty of the resolution professional in collating claims - HELD THAT:- The Court observed that the Resolution Professional performs administrative functions in collating claims and must admit claims based on the documentation received. The RP admitted only the principal amount because no documents demonstrating entitlement to interest were furnished to the RP; the separate admission of interest in respect of another creditor was supported by a specific board resolution and was not challenged in the application. In absence of supporting material placed before the RP or the Adjudicating Authority, there was no error in the RP's action. [Paras 21, 22, 24] No error in the Resolution Professional admitting only the principal amount where no documentary basis for interest was produced; RP's action sustained. Final Conclusion: The impugned order rejecting the applications was upheld and both appeals are dismissed; the findings that interest was not payable for want of contractual or documentary proof and that the Resolution Professional correctly admitted only the principal amount are sustained. Issues: Whether the appellants were entitled to have their claims admitted with interest (claimed at 18% per annum) in the Corporate Insolvency Resolution Process.Analysis: The Adjudicating Authority found that the appellants failed to produce any contractual or documentary basis establishing entitlement to interest at the claimed rate. The Resolution Professional, performing administrative functions of collating claims, admitted only the principal amount in the absence of evidence supporting an interest claim. The record contained a specific board resolution recording interest for another creditor; no comparable contractual documentation or board resolution supporting the appellants' claimed interest was placed on record. The Adjudicating Authority applied the statutory requirement of substantiating financial claims under Section 5(8) and Section 18 of the Insolvency and Bankruptcy Code, 2016 read with Regulations 13 and 14 of the IBBI (CIRP) Regulations, 2016.Conclusion: The appellants are not entitled to have their claims admitted with interest; the claim for interest is rejected and the appeal is dismissed in favour of the respondent.