Madhya Pradesh High Court
K.N. Resources Private Limited vs Khalsa Overseas Limited Regd. Office ... on 9 October, 2025
1 COMP-47-2016
IN THE HIGH COURT OF MADHYA PRADESH
AT JABALPUR
COMP No. 47 of 2016
(K.N. RESOURCES PRIVATE LIMITED Vs KHALSA OVERSEAS LIMITED REGD. OFFICE 13TH K.M. STONE )
Dated : 09-10-2025
Shri Vijayesh Atre - Advocate for the petitioner.
Shri Manoj Munshi - Senior Advocate with Shri Akshay Jha -
Advocate for the respondent No.1.
Shri H K Upadhyay - Advocate for Official Liquidator.
Shri Abhishek Arjaria - Advocate through Video Conferencing with
Ms.Vaishnavi Tripathi - Advocate for the respondent/Intervenor.
Shri Bahulashwa Nandan - Advocate for the respondent/Intervenor.
Pursuant to the order dated 18.8.2025, the matter is heard today on
affidavit Document No.45/2024 and Document No.12469/2025, taking into
consideration the direction of this Court for admission/winding up of the
respondent company issued vide order dated 22.1.2019 and 27.9.2024.
2. Counsel for the respondent no.1 has pressed upon the affidavit to
decide the issue of interest to be payable on the admitted amount of claim of
secured creditor/petitioner.
3. Taking exception to OLR No.3/2024, learned senior counsel for the
respondent/promotor has submitted that the interest is on a higher side which
is not permissible as per Rule 156 of the Company (Court) Rules, 1959
(hereinafter referred to as 'the Rules') on the admitted claim of the secured
creditor and it can only be charged maximum to the extent of 4% per annum
simple interest as per section 156 and 179 of the the Rules.
2 COMP-47-2016
4. The respondent/Promotor has filed an affidavit Document
No.45/2024 in compliance of the order dated 27.9.2024 passed by this Court
to deposit a sum of Rs.3 Crores with the Official Liquidator. It is stated that
the Promotor has expressed his willingness to discharge debt/liability of the
Company in liquidation from its own resources pursuant to the order of
winding up dated 22.1.2019. It is submitted that as per order dated 9.7.2024
this Court has directed the Official Liquidator to disburse an amount of Rs.2
Crores to the petitioner Company. The same has been reported by the
Official Liquidator through OLR No.3/2024. It is further submitted that as
per OLR No.5/2022 it has been informed to this Court about the availability
of Rs.2,66,79,196/- as against the sale proceeds of the plant and machinery
of Rs.3.22 Lacs. As per OLR No.3/2024, Rs.2 Crores has been disbursed to
the petitioner against a secured loan of Rs.3,90,00,000/-. It is submitted that
the Official Liquidator has accepted the claim of the petitioner of
Rs.5,23,38,300/- and out of claim amount of Rs.7,62,05,151/- claim of
Rs.2,38,66,851/- has been rejected. The respondent has submitted objection
that the amount of Rs.5,23,83,300/- which has been accepted, is not in
accordance with Rules 156 and 179 of the Rules. It is further submitted that
Rule 154 provides that the value of all debts and claims against the Company
shall, as far as possible, is estimated according to the value thereof at the date
of the order of the winding up of the Company. As observed hereinabove
that such value of the debt against the petitioner/secured creditor has been
found to be Rs.3,90,00,000/- by the order of winding up dated 22.1.2019
passed by this Court.
3 COMP-47-2016
5. It is submitted that the petitioner had claimed monthly compounded
interest and the OLR has accepted the claim of interest of the petitioner of
Rs.1,33,38,300/- under Rule 154 of the Rules. It is submitted that no
calculation and rate of interest for the accepted claim of interest of
Rs.1,33,38,300/- for the period from 1.4.2016 till the date of winding up on
22.1.2019 has been disclosed by the Official Liquidator and, accordingly,
erred in allowing the monthly compounding rate of interest exceeding 4% in
violation of Rule 156 of the Rules. It is submitted that as per Rule 156,
interest on any debt or certain sum payable at a certain time or otherwise,
whereon interest is not reserved or agreed for, and which is overdue at the
date of winding-up order, or the resolution as the case may be, the creditor
may prove for interest at a rate not exceeding 4% per annum up to that date
from the time when the debt or sum was payable. Thus, the OLR accepting
interest over the due above 4% as per Rule 156 is not acceptable and against
the law.
6. It is further submitted that the petitioner is not entitled for any
interest as per the Addendum to agreement between the petitioner and the
respondent filed along with the affidavit. The agreement was executed to
perform the job work of processing of soyabean seeds to extract oil
therefrom in the solvent extraction plant owned by the Company in
liquidation. The petitioner had provided funds to be repayable by adjustment
in processing charges. However, the petitioner in breach of the contract has
not provided sufficient quantity of seeds to process and as such the
respondent company could not do the job work and as such could not repay
4 COMP-47-2016
the amount given by the petitioner and, accordingly, a settlement agreement
in the name and style of Addendum to Agreement dated 21.10.2015,
annexure H, has been executed between the parties and agreed that the
company in liquidation will repay the amount advanced by the petitioner
company on or before 31.3.2016 and as such the agreement was only to the
extent of paying the amount advanced to the respondent and as such there
was no agreement of payment of interest over the advanced payment. In
the letter issued by the petitioner on 11.2.2016, annexure I, the petitioner
consciously has not demanded the interest over the outstanding dues of
Rs.3,90,00,000/-. It is further submitted that vide balance confirmation letter
dated 31.3.2016, the outstanding dues have been shown to be
Rs.3,90,00,000/- without interest, with the confirmation slip, annexure J.
7. The petitioner had issued a notice to the respondent when the due
advanced amount was not paid, vide notice dated 28.7.2016, annexure K,
and, for the first time, in the notice in para 14, such amount of interest has
been demanded w.e.f. 1.4.2016 till the actual date of payment. It is submitted
that the petitioner has never recorded such interest in the statement of
account on accrual basis of accounting and also not paid any tax over it to
demonstrate that such interest was not agreed between the parties. It is
submitted that the amount of Rs.3,90,00,000/- has been deposited through
Investor M/s Blue Ribbon Industrial Company Private Limited, Indore as per
the terms and conditions of the agreement entered with it on 26.11.2024,
hence prayed for acceptance of deposit of Rs.3,90,00,000/-, in compliance of
the order dated 27.9.2024 and also prayed for adjudication of claim of the
5 COMP-47-2016
petitioner by holding that the petitioner is not entitled for any interest over
such outstanding dues.
8. Per contra, it has been submitted by learned counsel for the Official
Liquidator and the petitioner/Secured creditor that the respondent has
submitted a proposal to take over the company by depositing the outstanding
admitted amount of claims. As the respondent has not been depositing the
amount, this court had given one chance to the respondent to deposit the
amount of Rs.3 Crores within 60 days from the date of order dated
27.9.2024. The respondent has deposited the amount and the rest of the
admitted amount and interest over it, is due against the respondent. It is
submitted that the respondent cannot take any objection to it, as the
respondent is only a proposer. He has to either accept the offer of the
Official Liquidator or refuse the offer. The admitted claims and the interest
over it is absolutely in consonance with Rule 156 and 179 of the Rules.
Above the said, the claim of the petitioner has been rejected by the Official
Liquidator. It is submitted that the respondent, by understanding and
knowing the admitted claims of debt have given the proposal and now, at this
stage, cannot bargain with this Court by creating dispute over the interest
amount and prayed that the interest as assessed by the Official Liquidator, be
affirmed by this Court.
9. Heard the learned counsel for the parties and perused the record.
10. It is evident from the order dated 22.1.2019 and 27.9.2024 that the
admitted debt claim of the petitioner company was found to be
Rs.3,90,00,000/- on the date of winding up order. As per the agreement
6 COMP-47-2016
between the parties, the respondent was required to pay back the admitted
debt claim on or before 31.3.2016. The petitioner, who is an ex-Director of
the respondent Company and now entered appearance as a Promoter, had
filed a certificate of charge before the Registrar of Companies in which such
amount has been admitted. The said certificate has been filed along with
Document No.12469/2025. Along with the certificate there is a Form No.
CHG-1 of application for registration of creation, modification of charge. In
column No.12 of the said application, rate of Interest has been entered as
interest at the State Bank Cash credit rate on the advance and loan granted to
the K.N.Resources Pvt. Ltd., i.e. petitioner company. However, no fixed rate
of interest is shown to be payable against the original amount of
debt/admitted claim.
11. On the board, the counsel for the petitioner has submitted copy of
the calculation of interest given by the State Bank of India from April, 2016
to March 2019, which vary from 11.30% to 9.95%. It nowhere suggests that
such interest would be payable on the interest accrued on the principal
amount making it compound.
12. From bare perusal of the calculation submitted by the petitioner in
the application Document No.12496/2025 from 1.4.2016 till order dated
22.1.2019, it has been calculated on the compound interest and claim amount
has been claimed as Rs.5,23,38,300/- and thereafter 4% interest as per rule
156 and 179 after the order of winding up. In between, Rs.2 crores have
been received by the petitioner on 26.7.2024. As such, 4% rate of interest
was due deducting the amount of Rs.2 crores on the amount due w.e.f
7 COMP-47-2016
22.1.2019 to 26.7.2024 at the rate of interest charged by the SBI.
13. Counsel for the respondent has relied on the judgment of the Apex
court in the case of Lata Construction & Ors. Vs. Dr.Rameshchandra
Ramniklal Shah & Anr. reported in (2000)1 SCC 586 with regard to effect of
novation of contract. He has relied on the judgment of the Apex court in the
case of KSL & Industries Limited Vs. National Textiles Corporation Ltd.,
2012 SCC Online Del 4189 to state that original contract holds no
enforceability upon novation of the contract. He has relied on the judgment
of the Apex court in the case of Bilahari Investments P.Ltd. Vs.
Commissioner of Income Tax, 2006 SCC Online Mad 1309 to state that
effect of mercantile system of accounting. He has relied on the judgment of
the Apex court in the case of Gopal Mahto V. Official Liquidator, 2024 SCC
Online Jhar 1552 to state that in case interest has been agreed on then it shall
not exceed the interest at the rate of 4% p.a. He has relied on the judgment
of the Apex court in the case of Pravin S.Shah Vs. Rashtriya Mill Mazdoor
Sangh, Bombay, 2008 SCC Online Bom 1223 to state that no interest shall
be payable beyond date of winding up order unless there is surplus. He has
also relied on the judgment of the Apex court in the case of In Re : Crips
Laboratories Ltd., 2008 SCC Online AP 841 to state that where the rate of
interest is not agreed on, the OL may prove the rate of interest not exceeding
4% p.a. He has further relied on the judgment of the Apex court in the case
of IDBI Ltd. Vs. Official Liquidator, 2011 SCC Online Bom 641 to state that
the Official Liquidator is bound by Rules 154, 156 and 179 of the Companies
(Court) Rules, 1959. He has further relied on the judgment of the Apex court
8 COMP-47-2016
in the case of Federal Bank V. Official Liquidator, 2002 SCC Online Ker
559, S.Anthony V. Shanmugam, (1994)80 CompCas 531 and in the case of
A.P. State Financial Corporation V. Magna Hard Tempt Ltd. (In Liqn) &
Anr., 2008 SCC Online AP 843 to state that in case interest has been agreed
on then it shall not exceed the interest at the rate of 4% p.a. He has
further relied on the judgment of the Apex court in the case of Indian Link
Chain Manufacturers Ltd., 2016 SCC Online Bom. 4330 to state that no
interest shall be payable beyond date of winding up order unless there is
surplus. He has relied upon the judgment of the Apex Court in the case of
U.P.Oil Mills Agency, Kanpur Vs. Saraswati Soap and Oil Mills Ltd.
reported in AIR 1954 All 129 to state that interest is payable only upto the
date of presentation of winding up petition. He has further relied upon the
judgment of Apex court in the case of J.K. (Bombay) P. Ltd. V. New Kaiser
- I Hind Spg & Wvg. Co. Ltd. and ors., AIR 1970 SC 1041 , to state that
effect of winding up order is to be applied in satisfaction of its liabilities pari
passu. Neither no new rights can be created nor no uncompleted rights can
be completed. In the case of Nirupama pal V. Kalipada roy Chowdhury &
Ors., reported in AIR 1985 Cal 346, Mattor Chitts and Finance (P) Ltd. V.
Mary Baby, reported in (1998) 94 Comp Cas 595 (Kerala) and Haryana
Financial Corporation V. The Official Liquidator, reported in (2007)139
CompCas 500 (P&H), it is held that interest if not payable if not agreed and if
agreed, interest is not payable beyond the date of winding up. In the case of
Kerala State Financial Corporation Vs. Official Liquidator, 1993 SCC
Online Ker. 435, it is held that under rule 156 if there is no contract regarding
9 COMP-47-2016
payment of interest then secured creditor will not get interest after the date of
winding up. In the case of D.Khosla & Co. Vs. UOI, SLP (C) 812/2014
order dated 7.8.2014, it is held that interest over interest is not permissible.
14. It is seen from the agreement dated 1.10.2014, annexure H, that the
respondent has agreed to treat the financial facility given by the petitioner as
a loan and for which interest at the State Bank Cash Credit rate on the
advanced loan was agreed to be recovered from the payment of processing
bills. Similarly, in the aforesaid agreement, an addendum has been executed
on 21.10.2015 and it is agreed that the amount advanced to the respondent
shall be paid back on or before 31.3.2016 to the petitioner.
15. It is true that no rate of interest is mentioned in the addendum, but,
in the original agreement the interest payable at the rate of State Bank Cash
Credit facility has been agreed upon. Counsel for the respondent has
submitted that once new agreement (Addendum) has been executed, it is
novation of the earlier agreement and no terms of the earlier agreement is
applicable between the parties and as such the petitioner is not entitled for
any interest.
16. It is seen from the Addendum agreement that it is in continuation
of the earlier agreement dated 1.10.2014 by which it is officially settled
between the parties that the loan which has been given to the respondent over
the period of time shall be treated to be advance and as such it cannot be
gathered that no interest is payable over it. As the addendum is continuation
of the earlier agreement, rate of interest agreed by the parties shall be
payable as per Rule 156. Rule 156 is quoted hereinbelow :-
10 COMP-47-2016
"R.156. Interest - On any debt or certain sum payable at a certain
time or otherwise, whereon interest is not reserved or agreed for,
and which is overdue at the date of the winding-up order, or the
resolution as the case may be, the creditor may prove for interest at
a rate not exceeding four per cent per annum up to that date from
the time when the debt or sum was payable, if the debt or sum is
payable by virtue of a written instrument at a certain time, and
if payable otherwise, then from the time when a demand in writing
has been made, giving notice that interest will be claimed from
the date of demand until the time of payment".
17. The present case falls within second clause where the debt or sum
is payable by virtue of a written instrument and as such rate of interest is
payable when a demand in writing has been made, giving notice that interest
will be claimed from the date of demand until the time of payment.
18. Admittedly, the notice dated 28.7.2016, annexure K, has been
issued pursuant to the terms of the agreement fulfilling the requisite
ingredients of Rule 156. As such, the petitioner is entitled for interest as
agreed by the parties.
19. The Hon. Apex court in the case of M/s D Khosla and Company
Vs. Union of India passed in S.L.P.(C) No.812/2024 has held as under :-
"19. The Interest Act, 1978 vide sub-section (3) of Section 3
specifically lays down that nothing in Section 3 which permits the
court to award interest shall empower the court to award interest
upon interest. It means that ordinarily the courts are not entitled to
award interest upon interest unless specifically provided either
under any statute or under the terms and conditions of the contract.
24. In the light of the above legal provisions and the case law on
the subject, it is evident that ordinarily courts are not supposed to
grant interest on interest except where it has been specifically
provided under the statute or where there is specific stipulation to
that effect under the terms and conditions of the contract. There is
no dispute as to the power of the courts to award interest on
interest or compound interest in a given case subject to the power
conferred under the statutes or under the terms and conditions of
the contract but where no such power is conferred ordinarily, the
courts do not award interest on interest.
25. Neither the Act specifically empowers the arbitrator or the
11 COMP-47-2016
court to award interest upon interest or compound interest nor
there is any other provision which provides for grant of compound
interest or interest upon interest. Even Section 34CPC is silent in
this regard whereas sub-section (3) of Section 3 of the Interest Act
specifically prohibits the same."
20. As per the aforesaid enunciation of law, it is clear that parties have
never agreed for compound interest nor it can be granted as per the principle
of law quoted herein above.
21. Therefore, in the considered opinion of this Court, the interest is
payable over the admitted dues as per the rate agreed by the parties
prevailing at the time (SBI rate of interest). The rate of interest of State
Bank Cash Credit rate has been passed on board. The Official Liquidator
shall verify from the SBI and, accordingly, calculate the sum due by applying
the simple interest as per the rate of SBI passed on the Board and after
deducting the amount already deposited, make a final assessment of the
amount to be paid by the respondent till the order of winding up of the
Company (i.e. order dated 22.1.2019) and thereafter at the rate of 4% per
annum on the amount payable after 22.01.2019.
23. The OLR is also directed to clarify that how the respondent has
participated in the present proceeding of winding up by giving a proposal
whether such unilateral proposal is acceptable under the law ?
24. Accordingly, Document No.45/2024 and Document
No.12469/2025 are disposed of.
List the matter as per schedule.
(DEEPAK KHOT)
JUDGE
12 COMP-47-2016
HS
