No Automatic Right to Interest Under IBC; Regulation 16A(7) Does Not Mandate Inclusion in Resolution Plan, Rules NCLT Mumbai
Pranav B Prem
The Mumbai Bench of the National Company Law Tribunal (NCLT) comprising Justice Sushil Mahadeorao Kochey (Judicial Member) and Mr. Charanjeet Singh Gulati (Technical Member) has held that there is no provision under the Insolvency and Bankruptcy Code, 2016 (IBC) mandating automatic inclusion of interest on the principal amount in a resolution plan. Specifically, the Bench clarified that Regulation 16A(7) of the CIRP Regulations, 2016 pertains only to the determination of voting share of creditors in the same class and does not confer any right to interest in the resolution plan amount.
Background
Klassic Wheels Limited (“Applicant”) filed an application under Section 60(5) of the Code seeking directions against Amit Vijay Karia, Resolution Professional of Siddhi Raj Housing Projects Private Limited (“Corporate Debtor”), for inclusion of the entire admitted claim of ₹5,06,65,920 under the approved Resolution Plan. The applicant had originally submitted its claim on 13.05.2023, amounting to ₹3,73,87,355 as consideration paid to the Corporate Debtor for a flat in the “Altus” project at Worli.
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While the applicant did not initially include any claim towards interest, it later asserted that it was entitled to statutory interest at 8% per annum under Regulation 16A(7) of the CIRP Regulations and requested the RP to revise the claim. This request was made via email on 22.06.2024, during the e-voting process on the resolution plan, which was due to close on 25.06.2024.
Contentions
The applicant argued that under Regulation 16A(7), the financial debt of a homebuyer-creditor in a class includes interest at 8% per annum unless a different rate has been agreed. It contended that exclusion of interest in the resolution plan violated the statutory mandate and discriminated against it as a creditor within a class.
Per contra, the RP and the Successful Resolution Applicant (SRA) opposed the application, arguing that the applicant had failed to claim interest earlier and only raised the issue belatedly, when the resolution process was at its final stage. It was submitted that the CIRP process is time-bound, and the applicant’s failure to act diligently for over a year barred it from seeking enhancement of its claim at such an advanced stage.
Tribunal’s Analysis and Findings
The NCLT examined Regulation 16A(7) and noted that the provision pertains solely to the computation of voting share for creditors in a class. The Bench categorically held: “The said Regulation only prescribes the method for determining the voting share of a creditor in a class and does not confer any automatic entitlement to interest in a resolution plan. Hence, Regulation 16A(7) does not vest any right in the Applicant for enhancement of the claim amount.”
The Tribunal further observed that neither the IBC nor the CIRP Regulations provide any statutory right for automatic inclusion of interest in claims. It emphasized that the Code is a complete code in itself, and any substantive entitlement like interest must be explicitly provided within its framework. Since no such provision exists, the claim for interest was not maintainable.
The Bench also took note of the timing of the applicant’s revised claim. It found that the original claim was submitted in May 2023 without any reference to interest, and that the revised request came over a year later, just three days before the CIRP was scheduled to close.
Referring to the Supreme Court’s ruling in RPS Infrastructure Ltd v. Mukul Kumar & Anr. (2023), the Tribunal highlighted the importance of finality in CIRP timelines: “The mere fact that the Adjudicating Authority has not yet approved the plan does not imply that the plan can go back and forth, thereby making the CIRP an endless process.” The Tribunal held that permitting such belated revisions would undermine the objectives of the Code and disrupt the sanctity of the resolution process.
Verdict
The National Company Law Tribunal, Mumbai Bench, dismissed the application filed by Klassic Wheels Ltd., holding that there is no statutory right to interest under the IBC or the CIRP Regulations. The Tribunal found that Regulation 16A(7) only governs the allocation of voting share among creditors in a class and does not mandate inclusion of interest in the admitted claim for the purpose of a resolution plan. The Bench also noted that the applicant had accepted the principal amount admitted by the RP for over a year without objection and sought to revise its claim only days before CIRP closure. Such a delayed claim, the Tribunal held, was barred by the principles of laches and would frustrate the time-bound objectives of the Code. Accordingly, the application was dismissed.
Appearance
For the Applicant: Adv. Yash Jariwala (PH)
For the Respondent No.1: Adv. Amir Arsiwala (PH)
For the Respondent No.2: Adv. Ankit Lohia (PH)
Cause Title: Klassic Wheels Limited Hirkesh Vs Amit Vijay Karia and Anr.
Case No: IA/5159/2024 IN C.P. (I.B) No. 715/MB/2021
Coram: Sh. Sushil Mahadeorao Kochey, Hon’ble Member [Judicial], Sh. Charanjeet Singh Gulati, Hon’ble Member [Technical]
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