Restoration Of Section 7 IBC Plea Not Maintainable After Payment Of Principal And Interest By Corporate Debtor Pursuant To NCLT’s Order: NCLAT
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench, comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member), has held that once the entire principal amount along with interest mentioned in Part IV of a Section 7 application under the Insolvency and Bankruptcy Code, 2016 (IBC) has been paid by the Corporate Debtor in pursuance of the NCLT’s order, the Financial Creditor cannot seek restoration of the application on the ground that further pendente lite interest remains unpaid.
Background
The appeals were filed under Section 61 of the IBC by Campbell Advertising Pvt. Ltd. and Dhankalash Distributors Pvt. Ltd., the financial creditors, challenging the order dated 10.07.2025 passed by the NCLT, New Delhi (Court-II), which had dismissed their restoration applications in Restoration Application Nos. 55 and 56 of 2025. The original Section 7 applications had been filed against Vipul Ltd. (Corporate Debtor) seeking initiation of the Corporate Insolvency Resolution Process (CIRP) for default of the amount claimed in Part IV of the petitions. During the course of hearing, it was noted by the NCLT that the entire principal amount along with agreed interest had been paid by the Corporate Debtor, and accordingly, the Section 7 petitions were disposed of.
However, the financial creditors later filed restoration applications, arguing that the pendente lite interest (interest accrued during the pendency of the Section 7 proceedings) was not fully paid and that the unpaid balance interest exceeded ₹1 crore — thus, according to them, the NCLT ought to have restored the Section 7 petitions.
Appellants’ Submissions
The appellants, represented by Senior Advocate P. Nagesh, argued that while the Corporate Debtor had agreed to pay interest during the pendency of proceedings, only ₹46.93 lakh had been paid, whereas the total pendente lite interest exceeded ₹1 crore. It was submitted that the Adjudicating Authority erred in refusing to restore the petitions despite non-payment of the full interest amount.
Respondent’s Submissions
The Corporate Debtor, represented by Advocate Sumesh Dhawan, opposed the appeals, arguing that the amount paid—₹46.93 lakh—represented the pendente lite interest calculated on the principal amount specified in Part IV, and not on the entire claim amount. It was submitted that since the entire principal amount and agreed interest were paid and acknowledged, the CIRP could not be revived. Reliance was also placed on the NCLAT’s earlier decision in Reliance Commercial Finance Ltd. v. Darode Jog Builder Pvt. Ltd. (Company Appeal (AT) (Insolvency) No. 1005 of 2022), wherein it was held that once the defaulted amount is paid pursuant to the Adjudicating Authority’s directions, there remains no purpose in continuing insolvency proceedings.
Tribunal’s Observations
The NCLAT examined the record and noted that in the NCLT’s earlier order dated 18.03.2025, it was explicitly recorded that the entire Part IV amount (principal and interest) had been paid by the Corporate Debtor. The NCLAT further noted that the Corporate Debtor had subsequently issued a cheque for ₹46.93 lakh towards pendente lite interest, and upon its dishonour, had made the payment through a bank draft, which was acknowledged by the financial creditors on 03.05.2025.The Appellate Tribunal held that no grounds existed for restoration of the Section 7 petitions once the debt and interest acknowledged under the NCLT’s earlier order were fully paid.
Referring to Reliance Commercial Finance Ltd. v. Darode Jog Builder Pvt. Ltd., the Bench reiterated: “When the Corporate Debtor has complied to deposit the entire defaulted amount of the Financial Creditor as permitted by the Adjudicating Authority, no purpose and occasion shall survive to still proceed with the Insolvency Resolution of the Corporate Debtor.” The Tribunal observed that insolvency proceedings are meant for resolution of default, and when no default subsists, the Section 7 application cannot be revived merely because the creditor later claims entitlement to additional interest. It further clarified: “In the event the Appellant’s case is that it is entitled for some more interest, it is always open for the Appellant to take such proceedings as available in law.”
Decision
The NCLAT upheld the NCLT’s reasoning and dismissed both appeals, holding that:
The entire debt and interest amount mentioned in Part IV stood paid and acknowledged.
The restoration application seeking revival of Section 7 proceedings had no merit.
The financial creditor’s claim for additional interest must be pursued through other legal remedies, not by reopening insolvency proceedings.
The NCLAT clarified that once the principal amount and agreed interest in a Section 7 petition are paid pursuant to the NCLT’s order, the financial creditor cannot seek restoration of the petition merely on the ground that additional pendente lite interest remains unpaid. The ruling reinforces that IBC proceedings cannot be used as a tool for recovery when no subsisting default exists.
Appearance
For Appellant: Mr. P. Nagesh, Sr. Advocate.
For Respondent: Mr. Sumesh Dhawan, Ms. Vatsala Kak, Mr. Shaurya Shyam, Mr. Sagar Thakkar, Ms. Khyati Khemka, Ms. Kavya Tekriwal, Ms. Varsha Mohanty, Advocates.
Cause Title: Campbell Advertising Pvt. Ltd. Versus Vipul Ltd.
Case No: Company Appeal (AT) (Insolvency) No. 1407 of 2025 & I.A. No. 5503 of 2025
Coram: Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member)
