TaxTMI 
TaxTMI 
2026 (8) TMI 1528
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....Supreme Court vide its order dated 07.04.2025 in Civil Appeal No. 4338 of 2025. 2. A Company appeal, CA (AT) (Ins.) No. 03 of 2024 preferred by Mr. Vinodkumar Mahasukhbhai Thaker, Member of the Suspended Board of Directors of India Green Reality Limited was disposed of by this Appellate Tribunal on 31.01.2025, whereby the order of the Adjudicating Authority admitting the Corporate Debtor into the Corporate Insolvency Resolution Process was set aside. While allowing the appeal, this Tribunal directed the Appellant to pay the balance financial debt, after adjustment of Rs. 65,00,000/-, together with interest payable on it @ 9% per annum. Aggrieved by the aforesaid order, the Respondent No.1/Financial Creditor approached the Hon'ble Supreme Court, which dismissed the Civil Appeal, with liberty reserved to Applicant to seek modification of the interest component before this Tribunal. In pursuance thereof, the present Interlocutory Application has been preferred seeking modification of the rate of interest awarded in the judgment dated 31.01.2025. Brief Facts of the case 3. The facts of the case relevant to deciding this Application are given below: i. M/s. Kurlon ....
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....ontending that the contractual rate of interest stipulated in the Loan Agreement had not been given effect to. vi. The Hon'ble Supreme Court, by order dated 07.04.2025, declined to interfere with the matter and dismissed Civil Appeal No. 4338 of 2025, while specifically reserving liberty in favour of the Financial Creditor who is the Applicant in the present IA, to seek modification of the rate of interest determined by the NCLAT. The order of Hon'ble SC is extracted below :- "ORDER We have heard learned senior counsel for the appellant and learned senior counsel for the respondents- Caveators. 2. We are not inclined to interefer in the matter. 3. The appeal is hence dismissed. 4. However, liberty is reserved to the appellant herein to seek modification of the rate of interest that has been determined by the National Company Law Appellate Tribunal. Pending application(s), if any, shall stand disposed of. New Delhi April 07, 2025" vii. Pursuant to the aforesaid order, Applicant/ Financial Creditor has preferred the present Interlocutory Application in IA No. 2832 of 2025 invoking Rule 11 of the NCLAT Rules, 2....
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....party subsequently considers its terms to be onerous. Where the contractual terms are clear, unambiguous and mutually accepted particularly when exhausted its binding effect, the Court is bound to give effect to the agreed intention of the parties as per contract. He placed reliance on Rajasthan State Industrial Development and Investment Corporation & Anr. v. Diamond and Gem Development Corporation Ltd. & Anr., (2013) 5 SCC 470, wherein the Hon'ble SC held that courts cannot rewrite the terms of a commercial contract. By reducing the contractual rate of interest to 9% per annum, this Tribunal effectively altered the bargain between the parties, which is contrary to settled principles of contract law. 7. He submitted that this very issue formed one of the principal grounds before the Hon'ble SC in the Civil Appeal, which ultimately had resulted in the matter, being remanded for reconsideration of the rate of interest. The Corporate Debtor's (CD) contention in the present proceedings had been that the contractual rate is exorbitant, unfair or unreasonable this plea is an afterthought, as no such objection was ever raised, when the Section 7 application was adjudicated. Ha....
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.... of the Respondent. 12. The Ld. Counsel submitted that the CD's objection that the present application amounts to a fresh recovery proceeding or constitutes a separate lis is wholly misconceived and devoid of merit. The present application neither seeks recovery of any new claim nor raises any issue requiring fresh adjudication. It has been filed only for modification of the rate of interest awarded by this Appellate Tribunal from 9% per annum to the contractual rate agreed between the parties. 13. It was submitted that the entitlement of the Applicant/Financial Creditor to receive interest on the outstanding dues was an issue which already stands adjudicated by this Tribunal in its judgment dated 31.01.2025. The Appellant did not challenge the aspect of grant of interest before any higher forum. The only issue requiring consideration is whether such interest ought to be awarded at the contractual rate, instead of the reduced rate fixed by this Tribunal. Therefore, the present application is confined to modification of an existing direction and does not involve adjudication of any fresh dispute between the parties. 14. Ld. Counsel submitted that Hon'ble SC gave liberty....
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.... judicial discretion in directing payment of the remaining amount with interest at 9% per annum after taking note of the fact that the entire principal amount and a substantial portion of the interest had already been repaid by the Corporate Debtor. The Applicant now seeks to substitute the said rate with the contractual default rate of 3% per month (36% per annum), thereby converting an outstanding amount of Rs. 6,61,091/- into an alleged liability of Rs. 1,31,84,877/-. Such a prayer is, in effect, a re-hearing of a concluded issue under the guise of modification. It was further submitted that Rule 11 of the National Company Law Appellate Tribunal Rules, 2016 does not confer any power of review and merely preserves the inherent powers of this Tribunal any provision of law vesting inherent power will not be inclusive of power of review, which has to be otherwise independently conferred to the Tribunal under a statute. The liberty granted by the Hon'ble SC only permitted the Applicant to approach this Tribunal and did not direct or warrant modification of the interest awarded. 18. He submitted that the Applicant's claim for interest at the rate of 3% per month is wholly e....
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....recorded on 20.06.2025 that, after adjustment of the amounts already paid, only approximately Rs. 11,00,000/-remained payable towards interest. However, in the present Interlocutory Application, the Applicant seeks to recover an exorbitant amount of Rs. 1,31,84,877/- allegedly payable towards interest in respect of the very same loan transaction. Such inconsistent stands clearly demonstrate that the Applicant is blowing hot and cold before different judicial forums and has not approached this Tribunal with clean hands. Consequently, the Applicant is not entitled to any relief. 22. It was further submitted that the Applicant cannot attribute any delay in payment to the Corporate Debtor, since instead of accepting the benefit of the judgment dated 31.01.2025 and permitting the compliance to be ensured, within the period granted by this Tribunal to expire, the Applicant itself preferred Civil Appeal No. 4338 of 2025 before the Hon'ble SC on 10.03.2025, even before expiry of the two-month period granted for compliance. Having itself challenged the judgment before the Hon'ble SC, the Applicant cannot subsequently allege non-compliance by the Corporate Debtor. 23. Ld. Couns....
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....udication under the guise of modification. It was case of the Appellant, that if the Applicant is genuinely aggrieved by the contractual rate of interest, its remedy lies before the competent civil court or in arbitration in accordance with the Loan Agreement and not before this Tribunal exercising jurisdiction under the Code. Summing up his arguments, Ld. Counsel prayed that this Appellate Tribunal may be pleased to dismiss IA No. 2832 of 2025 with costs and maintain the rate of interest at 9% per annum, as awarded by this Tribunal vide judgment dated 31.01.2025. Analysis and Findings 26. We have gone through the documents available on record and heard the parties. 27. The present Application has been filed pursuant to the liberty granted by the Hon'ble Supreme Court while dismissing the Civil Appeal preferred against the Judgment dated 31.01.2025. The only question which restrictively arises for our consideration is whether the direction contained in the said judgment awarding interest at the rate of 9% per annum deserves to be modified and substituted with the contractual rate of interest provided under the Loan Agreement. 28. The Loan Agreement dated 25.04.2017 ....
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....ught to be modified. The Judgment dated 31.01.2025 was not an interim order passed during the pendency of the proceedings. It was rather a final adjudication by which the appeal itself was finally disposed of after considering the pleadings, documents and submissions advanced by both sides. While deciding the appeal, this Tribunal took note of the fact that during the pendency of the insolvency proceedings, the Corporate Debtor had already repaid Rs. 65 lakh, thereby clearing the entire principal amount of Rs. 52.50 lakh and also paying a substantial portion of the interest claimed by the Financial Creditor. Keeping these facts in view, the admission of the Corporate Debtor into Corporate Insolvency Resolution Process was held to be unsustainable and was accordingly set aside. However, at the same time, this Tribunal directed the Corporate Debtor to pay the remaining balance together with interest at 9% per annum from the date the amount became due till its payment. Thus, the rate of interest was not fixed casually or without consideration. It formed part of the final relief granted after appreciating the overall facts and circumstances of the case, founded upon the factual rationa....
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....fter filing of the Section 7 Application and, therefore, the contractual rate ought to be applied till the date of actual payment. It is true that the loan transaction and the contractual obligations between the parties continued to subsist. However, it is equally important to notice that the present proceedings arise under the Code. The object of the Code is to determine whether insolvency proceedings deserve to continue against the Corporate Debtor. It is not intended to function as a forum for recovery of every contractual claim or for enforcing every term of a commercial agreement irrespective of the stage of the dispute. 37. The facts of the present case demonstrate this distinction. The Section 7 Application was originally filed on the basis of an alleged financial debt of Rs. 71,61,091/-. During the pendency of the proceedings, however, the Corporate Debtor paid Rs. 65 lakh, thereby wiping out the entire principal amount and substantially reducing the outstanding liability. It was these very repayments which persuaded this Tribunal to hold that the admission of the Corporate Debtor into insolvency proceedings was a patent error. Once the insolvency proceedings themselves ....
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.... matrix before it. The Applicant has not pointed out any factual error, inadvertent omission or circumstance which was not within the knowledge of this Tribunal while deciding the appeal. The terms of the Loan Agreement were already part of the record. The repayments made by the Corporate Debtor were also fully known. After considering all these facts, this Tribunal consciously awarded interest at 9% per annum. The present Application, therefore, substantially seeks a different conclusion on the very same set of facts. 41. We further take note of the terms and conditions of the Loan Agreement in case of default. The last para of the Loan Agreement dated 25.04.2017 provides for arbitration and the same is extracted below: "In the event of any claim(s), dispute(s) or difference(s) arising directly or indirectly out of this Agreement, or the interpretation thereof or anything done or omitted to be done pursuant thereto or the performance or non-performance, defaults, breaches, of this Agreement ("Dispute(s)"), such Dispute(s) shall be referred to the sole arbitrator appointed by the Lender. The seat of arbitration shall be at Mumbai, India and the arbitration shall be gove....
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....k of India v. Ravindra, (2002) 1 SCC 367, the Constitution Bench of the Hon'ble Supreme Court held that grant of interest after a matter reaches the Court is not automatic and need not always follow the contractual rate. The Court can award a lower rate where, considering the facts of the case, the contractual interest is disproportionate to the principal amount. Such discretion, however, has to be exercised fairly and for proper reasons. The Hon'ble Supreme Court also held that penal interest cannot be capitalised, and further interest cannot be charged upon the penal interest. In these proceedings, the Corporate Debtor had paid Rs. 65 lakh, which covered the entire principal and a substantial part of the interest. Despite this, the Applicant's computation results in a claim of about Rs. 1.31 crore by continuing to apply the contractual default rate. Therefore, the issue before us is not whether the contractual clause exists, but whether that rate should be applied in the present circumstances. Having regard to the substantial payment already made, the repayment of the entire principal and the fact that this Tribunal had already awarded interest at 9% per annum. The pr....