Financial Creditor’s Entitlement To Simple Or Compound Interest Not To Be Decided At Admission : NCLAT Delhi

The National Company Law Appellate Tribunal (“NCLAT”), Principal Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), while adjudicating an appeal filed in Holy Heights Infrastructures Pvt. Ltd v K.V. Foundations India Ltd., has held that the question as to whether the Financial Creditor is entitled to simple interest or compound interest is not to be decided at the stage of admitting Section 7 petition, when debt and default have been proved. Further, after collation of claims a Resolution Professional may form an opinion as to whether the Financial Creditor is entitled for simple or compound interest. Anyone aggrieved with the said opinion can approach NCLT for appropriate relief.BACKGROUND FACTSK.V. Foundations India Ltd. (“Financial Creditor”) filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC”), seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) against Holy Heights Infrastructures Pvt. Ltd. (“Corporate Debtor”). On 22.02.2023 the NCLT admitted the Corporate Debtor into CIRP since existence of financial debt and default in its payment had been proved. The Corporate Debtor filed an appeal before the NCLAT challenging the order dated 22.02.2023.NCLAT VERDICTDuring the pendency of the appeal, the Corporate Debtor sought adjournment to take steps to settle the matter with the Financial Creditor. However, the Financial Creditor did not accept the offer made by the Corporate Debtor. The Corporate Debtor submitted before the NCLAT Bench its willingness to pay the simple interest at the rate of 12%, whereas the Financial Creditor demanded 12% compound interest. The Bench observed that the issue whether the Financial Creditor is entitled for simple interest or compound interest, shall be looked into by the Resolution Professional when the claims are collated. The said issue is not to be decided at the time of admitting the Section 7 petition at the stage when the debt and default has to be proved. “We make it clear that the question as to whether the Financial Creditor are entitled for simple interest or compound interest, the Resolution Professional after collating the claim and considering the other materials may form the opinion. Anyone aggrieved with the said opinion, is at liberty to approach the adjudicating authority for appropriate relief.”The Bench held anyone aggrieved by the opinion of Resolution Professional regarding entitlement to simple or compound interest can approach NCLT for appropriate relief. The order of NCLT has been upheld and accordingly the appeal has been dismissed.Case Title: Holy Heights Infrastructures Pvt. Ltd v K.V. Foundations India Ltd.Case No.: Company Appeal (AT) (Insolvency) No. 422 of 2023Counsel For Appellant: Ms. Pallavi Parmai, Advocate. Counsel For Respondent: Mr. Vibhor Garg, Keshav Tiwari, Advocates for R-1 Mr. Karan Gandhi, Advocate for RP.Click Here To Read/Download Order

Financial Creditor’s Entitlement To Simple Or Compound Interest Not To Be Decided At Admission : NCLAT Delhi

Pallavi Mishra

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