Interest On Unsecured Financial Claims Cannot Be Allowed Without Contractual Proof: NCLT Indore
Pranav B Prem
The National Company Law Tribunal (NCLT), Indore Bench, has held that interest on an unsecured financial claim cannot be admitted merely on the ground of parity with another creditor, unless there is clear contractual or documentary proof establishing the entitlement to such interest. The Tribunal clarified that interest is a contractual obligation and cannot be claimed simply because another unsecured creditor has been allowed interest in the same corporate insolvency resolution process (CIRP).
A coram comprising Judicial Member Brajendra Mani Tripathi and Technical Member Man Mohan Gupta observed that equity among creditors cannot override the statutory requirements under the Insolvency and Bankruptcy Code, 2016. The Tribunal categorically held that “the claim of interest is a contractual obligation and can’t be claimed on the ground that it is being paid to someone else”
The ruling arose from an application filed by Socrus Bio Sciences Ltd. and Socrus Pharmaceutical Ltd. during the CIRP of Pushp Ratna Realty Pvt. Ltd., which was admitted into insolvency on October 16, 2024. The applicants claimed to be unsecured financial creditors and submitted claims seeking admission of both principal and interest. Socrus Bio Sciences claimed a total of ₹4.97 crore, of which ₹4.48 crore was towards interest, while Socrus Pharmaceutical claimed ₹12.53 crore, including ₹11.29 crore as interest.
The Resolution Professional (RP), however, admitted only the principal amounts reflected in the corporate debtor’s books of account and rejected the interest component. Challenging this decision, the applicants alleged discriminatory treatment, contending that the RP had admitted interest in the claim of another unsecured creditor, Ashok Kumar Jain, and that the principle of equality among creditors, as recognised by the Supreme Court in Swiss Ribbons Pvt. Ltd. v. Union of India, required similar treatment for them as well.
The applicants argued that interest forms an integral part of “financial debt” under Section 5(8) of the IBC and that denial of interest solely in their case was arbitrary. They further contended that the RP ought to have admitted interest at least at a reasonable rate or up to the insolvency commencement date, instead of rejecting it entirely.
Opposing the application, the RP submitted that the applicants had failed to produce any loan agreement, balance sheet entry, or documentary material demonstrating a contractual entitlement to interest. It was pointed out that even prior to the initiation of CIRP, no interest had ever been paid to the applicants. The RP also stated that the memorandum of understanding relied upon by the applicants did not contain any clause providing for payment of interest, and that self-prepared Excel sheets could not substitute documentary proof.
After examining the records, the Tribunal found that no agreement or contemporaneous document had been placed on record to establish that the applicants were entitled to interest at 18 percent or at any rate whatsoever. It further noted that the applicants’ reliance on parity with another creditor was misplaced, particularly when there was no evidence showing the basis on which interest had been admitted in the other case.
Referring to Swiss Ribbons, the Tribunal clarified that the judgment explains the distinction between financial and operational creditors but does not mandate equal treatment among all unsecured financial creditors. It held that there is no universal requirement of equitable parity, and that priority and treatment of claims depend on security status and contractual terms, not on mere comparison with another creditor
The Tribunal also emphasised that under Regulations 13 and 14 of the CIRP Regulations, the RP is required to verify claims strictly on the basis of the corporate debtor’s books of account and supporting evidence. It reiterated that financial debt includes interest only if it is contractually agreed or evidenced in the records of the corporate debtor, and that unilateral or unsupported claims cannot be admitted.
In view of these findings, the NCLT upheld the RP’s decision to admit only the principal amounts claimed by the applicants and rejected the plea seeking admission of interest and revision of the resolution plan. The application was accordingly dismissed, with the Tribunal holding that no infirmity or illegality had been committed by the Resolution Professional in rejecting the interest component of the claim.
Appearance
For Applicant: Advocate Chiranjeev Saboo
For Respondent/RP: Advocate Ayush J. Rajani
Cause Title: Socrus Bio Sciences Ltd V/s Hasti Mal Kacchara Resolution Professional Pushp Ratna Realty Pvt. Ltd
Case No: IA 377(MP)/2025 in CP(IB) No. 26(MP)/2024
Coram: Judicial Member Brajendra Mani Tripathi, Technical Member Man Mohan Gupta
