Vinodkumar Mahasukhbhai Thaker Member ... vs Kurlon Limited & Anr & Ors

IN THE MATTER OF: Vinodkumar Mahasukhbhai Thaker ...Appellant(s)

Versus

M/s Kurlon Limited & Anr. ...Respondent(s)

Present:

For Appellant : Mr. Santosh Paul, Sr. Adv., with Ms. Ekta Mehta, Mr. Antarik Chakroborti, Ms. Aditi Rai & Mr. Aditya Sonawane, Advocates.

For Respondents : Mr. Gaurav Mitra, Sr. Advocate, Ms. Honey Satpal, Mr. Nipun Singhvi, Mr. Akash Agarwalla & Mr. Aman, Advocates.

ORDER

(Hybrid Mode)

INDEVAR PANDEY, MEMBER (T)

This Interlocutory Application No. 2832 of 2025 has been filed by M/s.

Kurlon Limited, presently known as M/s. Kanara Consumer Products

Limited/Respondent No.1 in CA (AT) (Ins.) No. 03 of 2024, being the

Financial Creditor, invoking Rule 11 of the National Company Law Appellate

Tribunal Rules, 2016, pursuant to the liberty granted by the Hon'ble 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 Limited, presently known as M/s. Kanara Consumer

Products Limited (Respondent No.1/Applicant herein) had advanced a

financial facility of Rs.52,50,000/- to India Green Reality Limited

(Corporate Debtor). The transaction was governed by the Loan

Agreement dated 25.04.2017, under which the facility was to remain

outstanding for the period from 24.04.2017 to 23.04.2019 and carried

interest at 1.75% per month.

ii. The Loan Agreement further provided that, in case of delay in

repayment, the borrowers would be liable to pay interest at 2% per Page 2 of 25 I.A. No. 2832 of 2025 in Company Appeal (AT) (Ins.) No. 03 of 2024 month on a pro-rata basis together with additional interest of 1% per

month on a pro-rata basis, resulting in a contractual default interest of

3% per month. Respondent No.1/Financial Creditor relies upon these

contractual terms for seeking modification of the rate of interest

awarded by this Tribunal.

iii. The underlying insolvency proceedings arose from the default in

repayment of the aforesaid financial debt, pursuant to which

proceedings under Section 7 of The Insolvency and Bankruptcy Code,

2016 (hereinafter referred to as the 'Code') were initiated by the

Financial Creditor. The CP (IB) No. 195 of 2019 was admitted by the

Adjudicating Authority on 22.12.2023 for a claimed amount of Rs.

71,61,091/-. The said order was challenged by Mr. Vinodkumar

Mahasukhbhai Thaker, the suspended member of Board of Directors of

Corporate Debtor in Company Appeal (AT) (Insolvency) No. 03 of 2024.

iv. During the pendency of the insolvency proceedings, an amount of

Rs. 65,00,000/- was paid by the Appellant/corporate Debtor, and the

dispute before this Tribunal was ultimately concerned, inter alia, the

adjustment of the said payment against the debt forming the subject

matter of CP (IB) No. 195 of 2019. This Appellate Tribunal set aside the

order admitting the Corporate Debtor into CIRP and directed that the

amount remaining after deduction of Rs.65,00,000/- from Rs.

71,61,091/- be paid by the Appellant/Corporate Debtor to Respondent

No.1/Financial Creditor, together with interest payable on it @ 9% per

Page 3 of 25 I.A. No. 2832 of 2025 in Company Appeal (AT) (Ins.) No. 03 of 2024 annum from the date the amount became due to be paid until the actual

payment, within two months from the date of the order.

v. Respondent No.1/Financial Creditor, being aggrieved by the

determination of interest @ 9% per annum, preferred Civil Appeal No.

4338 of 2025, before the Hon'ble Supreme Court, contending 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 :-

"O R D E R

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"

Page 4 of 25

I.A. No. 2832 of 2025 in Company Appeal (AT) (Ins.) No. 03 of 2024 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, 2016, seeking modification of the

interest component in the judgment dated 31.01.2025. It is contended

that, since the Loan Agreement provides for 3% interest per month upon

default, the award of interest at 9% per annum is contrary to the agreed

contractual terms and that the contractual stipulation ought not to be

ignored or rewritten.

viii. Applicant/Financial Creditor has further stated that the direction

dated 31.01.2025 requiring payment within two months has not been

complied with. After adjustment of the payment of Rs.65,00,000/-

against the debt in CP (IB) No. 195 of 2019, Respondent No.1 claims

that Rs.1,31,84,877/- remains payable, calculated on the basis of the

contractual rate of 3% interest per month.

ix. The present IA accordingly seeks modification of the order dated

31.01.2025 to the extent of interest component as granted in

accordance with the terms of the Loan Agreement at 3% per month,

along with a direction to the Appellant to pay the outstanding amount

expeditiously.

Submissions of Applicant/Financial Creditor

4. The Ld. Counsel for the Applicant/Financial Creditor submitted that

while this Tribunal directed payment of the outstanding amount with interest

at 9% per annum, the parties had expressly agreed under the Loan Agreement Page 5 of 25 I.A. No. 2832 of 2025 in Company Appeal (AT) (Ins.) No. 03 of 2024 dated 25.04.2017, that in an event of default, interest would be payable at

the contractual rate of 3% per month on a pro-rata basis. It was submitted

that the Tribunal ought to enforce the contractual terms agreed between the

parties and modify the rate of interest accordingly.

5. He submitted that the Loan Agreement dated 25.04.2017 had expressly

provided for payment of interest @ 1.75% per month during the currency of

the loan and, in the event of default, interest at 2% per month together with

additional interest at 1% per month, thereby making the contractual rate of

default interest 3% per month on a pro-rata basis. The Appellant voluntarily

entered into the agreement and accepted all its terms and conditions. At no

stage during the ensuing proceedings under Section 7 of the Code did the

Appellant dispute either the execution of the Loan Agreement or the

contractual rate of interest stipulated therein.

6. Ld. Counsel further submitted that a contract freely entered into

between parties cannot be rewritten by a judicial forum upon its judicial

interference, merely because one 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

Page 6 of 25 I.A. No. 2832 of 2025 in Company Appeal (AT) (Ins.) No. 03 of 2024 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. Having accepted the Loan Agreement and after

having defaulted in repayment, the CD remains bound to honour the agreed

contractual rate of interest of 3% per month on the outstanding dues.

8. The Ld. Counsel submitted that the amount of Rs.71,61,091/- claimed

in the application under Section 7 of the Insolvency and Bankruptcy Code,

2016 represented the outstanding dues only up to the date of filing of the

application i.e. till February 2019. The said amount was never intended to be

the final liability of the Appellant, as the debt continued to remain unpaid

throughout the pendency of the proceedings. Since the Appellant failed to

discharge its repayment obligations despite the admitted default, interest

continued to accrue on the outstanding amount in accordance with the terms

of the Loan Agreement until actual payment.

9. It was submitted that there was a considerable gap of nearly six years

between the filing of the Section 7 application and the judgment of this

Appellate Tribunal dated 31.01.2025. During this entire period, the Appellant

remained in continuous default and consequently became liable to pay Page 7 of 25 I.A. No. 2832 of 2025 in Company Appeal (AT) (Ins.) No. 03 of 2024 contractual interest for the entire duration of such default. The

Applicant/Financial Creditor, therefore, cannot be deprived of the benefit of

the agreed contractual interest merely because adjudication of the

proceedings consumed considerable time, for a fault which was not

attributable to applicant i.e; Financial Creditor.

10. The Ld. Counsel further submitted that, it is a settled principle

governing financial transactions that any payments received from a borrower

are first to be appropriated towards the interest component before being

adjusted against the principal amount. After giving due credit to all payments

made by the Appellant, in terms of the judgment dated 31.01.2025, the

outstanding liability as on 31.07.2025 works out to Rs.1,30,64,877/-. The

said amount represents the dues payable after adjustment of all payments

and is computed strictly in accordance with the contractual terms agreed

between the parties.

11. Accordingly, he submitted that the Respondent is legally entitled to

recover the outstanding amount together with interest at the contractual rate,

as the continued accrual of interest is solely attributable to the Appellant's

prolonged default in repayment of the loan and not to any overt act or

omission on the part 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 Page 8 of 25 I.A. No. 2832 of 2025 in Company Appeal (AT) (Ins.) No. 03 of 2024 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 to Respondent, to

approach this Tribunal for modification of the rate of interest, and no

objection regarding maintainability was raised by the Appellant before the

Hon'ble Supreme Court. Consequently, the Appellant cannot now at this

matured stage of proceedings contend that the present proceedings are not

maintainable, as the application is fully supported by the order of the Hon'ble

Supreme Court and is confined to the limited issue for which liberty was

granted, as regards to payability of interest and at what rate.

15. He further submitted that the present application is a legitimate

invocation of the inherent powers of this Tribunal under Rule 11 of the

National Company Law Appellate Tribunal Rules, 2016. The application does

not seek recovery of any independent contractual claim or initiation of a fresh

Page 9 of 25 I.A. No. 2832 of 2025 in Company Appeal (AT) (Ins.) No. 03 of 2024 proceeding, but is confined to securing complete justice by seeking

modification of the rate of interest awarded in the judgment dated 31.01.2025,

in accordance with the contractual terms which was inter-se binding upon

the parties.

16. It was submitted that where the statutory framework by itself does not

expressly provide a procedural mechanism to address a particular situation,

this Appellate Tribunal is empowered to exercise its inherent jurisdiction to

secure the ends of justice and prevent miscarriage of justice. The Respondent

has approached this Tribunal only after obtaining express liberty from the

Hon'ble SC and, therefore, the present application squarely falls within the

scope of Rule 11. Reliance was placed on Glass Trust Co. LLC v. Byju

Raveendran, (2025) 3 SCC 625, wherein the Hon'ble SC recognised that the

inherent powers of the Tribunal may be exercised where no express provision

exists to meet the ends of justice. Accordingly, he prayed that the present

application be allowed and the rate of interest awarded in the judgment dated

31.01.2025 be modified to the contractual rate stipulated in the Loan

Agreement.

Submissions of Appellant / Corporate Debtor

17. Ld. Counsel for Corporate Debtor submitted that the present

Application is liable to be dismissed as it is, in substance, an attempt to seek

review of the judgment dated 31.01.2025, a jurisdiction which this Tribunal

does not possess under the realms of the Code. It was submitted that while

deciding the appeal, this Tribunal had consciously exercised its judicial

discretion in directing payment of the remaining amount with interest at 9% Page 10 of 25 I.A. No. 2832 of 2025 in Company Appeal (AT) (Ins.) No. 03 of 2024 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 exorbitant, arbitrary and contrary to settled law. In this

regard, reliance was placed upon the Constitution Bench judgment of the

Hon'ble SC in Central Bank of India v. Ravindra & Ors., (2002) 1 SCC

367, wherein it was held that the award of pendente lite and post-decree

interest is a matter of judicial discretion and not a mechanical enforcement

of the contractual rate. The Hon'ble SC further held that penal interest cannot

be capitalised or compounded and that charging interest upon penal interest

is opposed to public policy.

Page 11 of 25 I.A. No. 2832 of 2025 in Company Appeal (AT) (Ins.) No. 03 of 2024

19. It was submitted that although the Corporate Debtor has already repaid

the entire principal amount of Rs.52,50,000/-, and that the Applicant has

compounded penal interest year after year and inflated its claim to

Rs.1,31,84,877/-. Such a claim is directly contrary to the principles laid down

in Central Bank of India v. Ravindra & Ors (supra) and is also inconsistent

with Sections 50 and 51 of the Code, which empower the Adjudicating

Authority to avoid extortionate credit transactions. Accordingly, the direction

of this Tribunal awarding interest @ 9% per annum constitutes a fair and

proper exercise of judicial discretion.

20. Ld. Counsel submitted that no subsisting financial debt survives for

adjudication under the Code, as even though the Applicant had filed Company

Petition (IB) No. 195 of 2019 claiming an amount of Rs.71,61,091/, during

the pendency of the proceedings, the Corporate Debtor had repaid

Rs.65,00,000/-, thereby discharging the entire principal amount of

Rs.52,50,000/- along with a substantial portion of the interest. It was

precisely on account of this substantial repayment that this Tribunal, by its

judgment dated 31.01.2025, held the admission of the Section 7 application

to be a patent error and consequently set aside the admission order.

Therefore, the Applicant cannot continue to repeatedly invoke the insolvency

jurisdiction merely for recovery of an alleged differential amount of penal or

contractual interest after the principal debt itself stands fully discharged.

21. Ld. Counsel further submitted that the Applicant has taken

contradictory stand before different judicial forums regarding the amount

allegedly due to be payable towards interest. It was pointed out that in the

Page 12 of 25 I.A. No. 2832 of 2025 in Company Appeal (AT) (Ins.) No. 03 of 2024 proceedings pending before the Court of Small Causes (C.C. No. 0050156

of 2019), the Applicant's own counsel 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. Counsel submitted that the Code is intended to facilitate insolvency

resolution and not to serve as a mechanism for recovery of disputed

contractual dues. In support of this submission, reliance was placed upon the

judgment of the Hon'ble SC in Transmission Corporation of Andhra

Pradesh Limited v. Equipment Conductors and Cables Limited & Anr.,

(2019) 12 SCC 697, wherein it was categorically held that the Code is not a

Page 13 of 25 I.A. No. 2832 of 2025 in Company Appeal (AT) (Ins.) No. 03 of 2024 substitute for debt recovery proceedings. Reliance was also placed upon the

decision of this Appellate Tribunal in Ranjeet Singh v. Karan Motors

Private Limited, Company Appeal (AT) (Insolvency) No. 693 of 2020,

wherein it was observed that if a creditor seeks recovery of interest for delayed

payment, the appropriate remedy is before a competent civil court and not by

initiating or continuing insolvency proceedings. Similar reliance was placed

upon Amier Hamsa Ali Abbas Rawther (Liquidator) v. Chairman-cum-

Managing Director, NLC India Limited, Company Appeal (AT) (CH)

(Insolvency) No. 213 of 2025, wherein this Tribunal reiterated that

proceedings under the Code cannot be utilised as recovery proceedings for

disputed contractual claims. It was therefore the case of Appellant that any

residual claim regarding enhanced contractual interest can only be

adjudicated before the competent civil court or through arbitration,

particularly when the Loan Agreement dated 25.04.2017 itself contains an

arbitration clause.

24. It was submitted that during the hearing of the present Application, the

Appellant relied only upon those judgments, which had already been cited in

the reply and served upon the Applicant well in advance. Consequently, the

Applicant's request to file further written submissions on the ground that it

had no opportunity to examine those judgments is wholly untenable and

deserves to be rejected.

25. Ld. Counsel finally submitted that once the application under Section

7, admission had been set aside on account of substantial repayment, the

Applicant cannot indirectly convert the insolvency proceedings into a debt

Page 14 of 25 I.A. No. 2832 of 2025 in Company Appeal (AT) (Ins.) No. 03 of 2024 recovery mechanism by seeking enhancement of the rate of interest through

the present Application. The judgment dated 31.01.2025 conclusively

determined the issue by directing payment of the balance amount along with

interest at 9% per annum, and the present Application is nothing but an

attempt to reopen a concluded adjudication 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 clearly provides that in case of

default, the borrower is liable to pay interest at the rate of 2% per month

Page 15 of 25 I.A. No. 2832 of 2025 in Company Appeal (AT) (Ins.) No. 03 of 2024 together with an additional 1% per month, amounting to 3% per month. The

Appellant never disputed this contractual stipulation at any stage of the

proceedings. It is the case that once the parties had consciously agreed to

such rate of interest, the same ought to have been given effect to and the

award of interest at 9% per annum amounts to rewriting the contract. It is

further submitted that the amount claimed in the Section 7 Application

represented the dues only up to February 2019 and that interest continued

to accrue thereafter until payment. The Applicant also argues that the present

Application is not in the nature of a review, but merely seeks modification of

the rate of interest in terms of the liberty granted by the Hon'ble Supreme

Court.

29. The Corporate Debtor, on the other hand, submits that the present

Application seeks to reopen a final judgment under the guise of modification.

It is argued that while deciding the appeal on 31.01.2025, all the facts,

including the terms of the Loan Agreement, were before this Tribunal. After

considering those facts, interest at 9% per annum was consciously awarded

as part of the final relief. It is further submitted that during the pendency of

the insolvency proceedings, the Corporate Debtor had already repaid the

entire principal amount of Rs.52.50 lakh along with a substantial part of the

interest by paying Rs.65 lakh, and it was primarily on account of these

repayments that the admission of the Corporate Debtor into CIRP was set

aside. According to the Corporate Debtor, permitting contractual default

interest at 3% per month at this stage would enlarge the liability to more than

Rs.1.31 crore, despite the principal having already been discharged, which

Page 16 of 25 I.A. No. 2832 of 2025 in Company Appeal (AT) (Ins.) No. 03 of 2024 would be wholly disproportionate. It is also contended that Rule 11 does not

confer any power to review a final judgment and that proceedings under the

Insolvency and Bankruptcy Code cannot be converted into proceedings for

recovery of penal contractual interest.

30. Having noticed the rival submissions, we shall now examine whether

the Applicant has been able to show any legal or factual ground which would

justify modification of the judgment dated 31.01.2025.

31. At the outset, it is necessary to examine the nature of the Judgment

sought 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

Page 17 of 25 I.A. No. 2832 of 2025 in Company Appeal (AT) (Ins.) No. 03 of 2024 appreciating the overall facts and circumstances of the case, founded upon

the factual rationality.

32. The principal submission of the Applicant is that since the Loan

Agreement specifically provides for payment of interest at the rate of 3% per

month in the event of default, this Tribunal ought to have awarded interest

strictly in accordance with the contract. According to the Applicant, once the

parties had voluntarily agreed to such terms, there was no occasion for this

Tribunal to substitute the agreed rate with interest at 9% per annum.

33. We are unable to accept this submission in the manner canvassed by

the Applicant for the reasons which have been discussed in subsequent paras.

34. There can be no dispute that parties are ordinarily bound by the terms

of the contract voluntarily entered into between them. Equally, Courts and

Tribunals do not ordinarily rewrite commercial contracts merely because one

party subsequently finds the terms to be onerous. However, that principle

cannot be applied in isolation without considering the nature of the

proceedings before the Court and the relief that is ultimately granted. Once a

dispute reaches a judicial forum, the Court is required not merely to read the

contract, but also to mould the relief in accordance with law after considering

the conduct of the parties, the surrounding facts and to ensure justice within

the framework of law. The framework here being the Insolvency and

Bankruptcy Code. Therefore, while contractual terms undoubtedly constitute

an important factor, they are not the only factor governing the relief to be

granted by the Court.

Page 18 of 25 I.A. No. 2832 of 2025 in Company Appeal (AT) (Ins.) No. 03 of 2024

35. In the present case, the direction awarding interest at 9% per annum

did not arise because this Tribunal ignored the terms of the Loan Agreement.

Rather, it was passed after taking into consideration the subsequent

developments which had taken place during the pendency of the proceedings.

By the time the appeal was finally decided, the Corporate Debtor had already

discharged the entire principal amount and had also paid a substantial

amount towards interest. It was precisely because of these subsequent

payments that this Tribunal found the continuation of CIRP to be unjustified.

Therefore, the award of interest at 9% per annum was a conscious exercise of

judicial discretion while balancing the equities between the parties after the

principal liability had been discharged.

36. The Applicant has also argued that interest continued to accrue after

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

Page 19 of 25 I.A. No. 2832 of 2025 in Company Appeal (AT) (Ins.) No. 03 of 2024 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 were found to be unsustainable because

of substantial repayment, the remaining dispute essentially became one

relating to the quantum of interest payable between the parties.

38. At this stage, the Applicant seeks to substitute the judicially awarded

rate of 9% per annum with contractual default interest of 3% per month,

which, according to its own calculations, would increase the outstanding

claim to more than Rs.1.31 crore. We find that such relief cannot be examined

merely by looking at the contractual clause in isolation. The consequence of

granting such prayer must also be kept in view. The principal amount of the

loan already stands repaid. The insolvency proceedings have already been set

aside. What survives is only a dispute regarding the extent of interest payable.

If, despite these circumstances, contractual default interest at the rate of 36%

per annum is permitted to be enforced through modification of the earlier

judgment, the liability would increase manifold solely on account of penal

interest. Such a consequence would substantially alter the very basis on

which the appeal had earlier been decided which could not be done under the

garb of modification by even partially revisiting the judgments on merits. The

objective of the Code is the resolution of corporate insolvency and not the

recovery of claimed amount. Once it was held that CIRP proceedings against

the CD would not survive and it's also a going concern, awarding such

Page 20 of 25 I.A. No. 2832 of 2025 in Company Appeal (AT) (Ins.) No. 03 of 2024 usurious rates of interest, would lead to corporate debtor actually slipping

into insolvency, which would be against the objectives of the Code.

39. We also find considerable force in the submission of the Corporate

Debtor that the liberty granted by the Hon'ble Supreme Court cannot, by

itself, be read as an approval of the Applicant's claim. The order of the Hon'ble

Supreme Court merely granted liberty to approach this Tribunal for seeking

modification of the rate of interest. Therefore, the burden still lies upon the

Applicant to establish that modification of the final judgment was at all

warranted on legal as well as factual grounds. Mere grant of liberty cannot

automatically entitle the Applicant to the relief sought.

40. We also cannot lose sight of the fact that while passing the Judgment

dated 31.01.2025, this Tribunal had already exercised its discretion after

considering the complete factual 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:

Page 21 of 25

I.A. No. 2832 of 2025 in Company Appeal (AT) (Ins.) No. 03 of 2024 "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 governed by the provisions of the Arbitration and Conciliation Act, 1996 or any statutory amendments thereof or any statute enacted for the replacement therefore. The language of the arbitration proceedings shall be English. The expenses of the arbitration shall be borne in such manner as the arbitrator or arbitral tribunal, as the case may be, may determine. The award including interim award(s) of the arbitral tribunal shall be final, conclusive and binding on all the parties concerned. The arbitral tribunal may, from time to time, lay down the procedure to be followed in conducting the arbitration proceedings and shall conduct the arbitration proceedings in such manner as it considers appropriate."

42. The Applicant has relied upon Rajasthan State Industrial

Development and Investment Corporation & Anr. v. Diamond and Gem

Development Corporation Ltd. & Anr., (2013) 5 SCC 470, particularly

paragraph 23, to submit that the terms of a contract must be given their

actual meaning and that a Court cannot make a new contract for the parties.

There is no dispute with this general principle. However, in the present case,

we are not changing, rewriting or re-interpreting the Loan Agreement. The

clause providing for 2% interest per month plus an additional 1% per month

in case of default, making it 3% per month, is clear and its existence is not in

dispute. The question before us is different: whether, after considering the

facts of the case, we should modify the 9% per annum interest already

awarded by us in our final Judgment dated 31.01.2025. At the time of passing

Page 22 of 25 I.A. No. 2832 of 2025 in Company Appeal (AT) (Ins.) No. 03 of 2024 that judgment, the entire principal amount of Rs.52.50 lakh had already been

paid, and the Corporate Debtor had paid Rs.65 lakh, which included the

entire principal and a substantial part of the interest. These payments were

taken into account while setting aside the admission of the Corporate Debtor

into CIRP and while directing payment of the remaining amount with interest

at 9% per annum. The matter before us was for adjudication under the

Insolvency and Bankruptcy Code for corporate insolvency resolution. The

objective of the Code is to keep the corporate debtor as a going concern. The

interest rate allowed was keeping in mind this objective of the Code. The code

could not be used as recovery forum as a separate mechanism for recovery of

its claims was available to the lender.

43. In Central Bank 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

Page 23 of 25 I.A. No. 2832 of 2025 in Company Appeal (AT) (Ins.) No. 03 of 2024 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 principle

laid down in Ravindra supports the exercise of judicial discretion rather than

mechanically applying the contractual rate of 36% per annum.

44. The decisions in Transmission Corporation of A.P. Ltd. v.

Equipment Conductors & Cables Ltd., (2019) 12 SCC 697, Ranjeet Singh

v. Karan Motors Pvt. Ltd., and Amier Hamsa Ali Abbas Rawther

(Liquidator) v. CMD, NLC India Ltd., Company Appeal (AT)(CH)(Ins.) No.

213 of 2025, also help us understand the limited purpose of proceedings

under the Insolvency and Bankruptcy Code. The Hon'ble Supreme Court has

made it clear that the IBC is not a substitute for an ordinary recovery

proceeding. The same principle has been followed by this Tribunal, including

in cases where the dispute essentially concerns delayed payment or a

contractual claim for interest. What remains between the parties is essentially

a dispute regarding the amount of interest payable under the Loan

Agreement. The Applicant now seeks to apply the contractual default rate of

3% per month or 36% per annum to this remaining liability. In these

circumstances, permitting the present insolvency proceedings to be used for

recovery of enhanced contractual interest would, in substance, turn the

proceedings into a recovery proceeding. We are therefore of the view that while

the Applicant may pursue such contractual claim before a forum competent

to decide it, as provided in the Loan Agreement, the same cannot be used as

Page 24 of 25 I.A. No. 2832 of 2025 in Company Appeal (AT) (Ins.) No. 03 of 2024 a basis to reopen the final judgment passed in the insolvency proceedings and

substitute the rate of interest already fixed by us.

45. Viewed from this perspective, we find that the direction awarding

interest at 9% per annum strikes a fair balance between the competing rights

of the parties. It ensures that the Financial Creditor is compensated for the

delayed payment, while at the same time recognising the undisputed fact that

the Corporate Debtor had already repaid the entire principal amount together

with a substantial portion of the interest even before the appeal was finally

decided. Replacing that rate with contractual default interest of 3% per month

would convert the corporate insolvency resolution proceedings which have

been closed by this Tribunal, into a recovery proceeding, which would be

contrary to the objectives of the Code.

46. Accordingly, we do not find any rationale to modify the interest rate

which was fixed at 9% per annum on the balance amount in the Judgment

dated 31.01.2025. The IA No. 2832 of 2025 is dismissed. No order as to costs.

[Justice Sharad Kumar Sharma] Member (Judicial)

[Arun Baroka] Member (Technical)

[Indevar Pandey] Member (Technical) Place: New Delhi Dated: 24.08.2026

Harleen Pragya (LRA)

Page 25 of 25 I.A. No. 2832 of 2025 in Company Appeal (AT) (Ins.) No. 03 of 2024