The NCLAT, Chennai Bench opined that the penal interest provision has to be dealt with as per the Settlement Agreement which the parties signed. The Bench propounded that the contractual interest liability is outside the purview of Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”). It was held that the interest continues to accumulate till the amount is repaid and therefore, there was no illegality in the decision of the Committee of the Creditors.
Further, it was expounded that Section 14 IBC does not specify any interest waiver during the period of moratorium. Hence, the contention that no interest could be charged after the claims have been admitted was bad in law.
On the issue of Promoter being MSME and still not being given preference, it was held that the IBC does not envisage any preference to be given to an MSME while accepting a resolution plan.
Brief Facts:
The present appeal has challenged the order of the NCLT vide which the resolution professional’s application under Section 30(6) of the IBC was allowed and the objections of the Appellant/Promoter of the Corporate Debtor were rejected.
Contentions of the Appellant:
It was argued that the NCLT had committed error in wrongly directing project wise Corporate Insolvency Resolution Process (“CIRP”). Further, that the Committee of Creditors was wrongly constituted.
It was also contended that the Resolution Plan value was less than the Liquidation value and also that the ‘Consortium’ was ineligible under Section 29A of the IBC as they were disqualified on account of non-filing of the Financial Statements of their Companies.
Contentions of the Resolution Professional:
It was argued that the moratorium does not put any brake to the contractual interest liability. Further, claim of the creditors does not stop the commencement of the CIRP.
Observations of the Tribunal:
It was noted that the issue was of capitalization of penal interest by the Bank and the same has to be seen in the light of IBC.
The Tribunal opined that the penal interest provision has to be dealt with as per the Settlement Agreement which the Appellant also signed.
Further, it was expounded that Section 14 IBC does not specify any interest waiver during the period of moratorium. Hence, the contention that no interest could be charged after the claims have been admitted was bad in law.
The role of the resolution professional was limited as it was held that the professional does not have any adjudicatory powers. Further, the claims of the creditors do not stop on initiation of the CIRP.
The Bench propounded that the contractual interest liability is outside the purview of IBC. It was held that the interest continues to accumulate till the amount is repaid and therefore, there was no illegality in the decision of the Committee of the Creditors.
On the issue of Promoter being MSME and still not being given preference, it was held that the IBC does not envisage any preference to be given to an MSME while accepting a resolution plan.
The decision of the Tribunal:
Based on the aforementioned analysis, the appeal was accordingly dismissed.
Case Title: Mr. Arun Kumar v. Ms. Sripriya Kumar & Ors.
Case No.: Company Appeal (At) (Ch) (Ins.) No. 431/2022
Coram: Justice M. Venugopal (Judicial Member), Shreesha Merla (Technical Member)
Advocate for Appellant: Adv. Mr. B.S.V. Prakash Kumar
Advocates for Respondent: Advs. Mr. Ranjana Jain, Mr. Srinandan K, Mr. N.P. Vijaykumar
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