Dispute Over Interest Rates Does Not Fall Under the Ambit of Initiation of CIRP | SC

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  • Last Updated on 20 December, 2023

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Dispute Over Interest Rates

Case Details: Vinay Yadav v. Anita Jindal - [2023] 157 taxmann.com 157 (SC)

Judiciary and Counsel Details

    • Dinesh Maheshwari & Sudhanshu Dhulia, JJ.
    • Neeraj Kishan Kaul, Sr. Adv., Toshiv Goyal, Dhruv Sharma, Chirag Pathor, Advs. & Aman Mohit Hingorani, AOR for the Appellant.
    • B.K. Satija, AOR, Himanshu Satija, Ms Neha Mehta, Harshit K. & Ms Aditi Gupta, Advs. for the Respondent.

Facts of the Case

In the instant case, the Financial Creditor advanced a certain amount to Corporate Debtor as a short-term loan, and Corporate Debtor issued two post-dated cheques for Rs. 57 lakhs and Rs. 30.5 lakhs with an intention of providing security for amount lent.

However, the said cheques were returned unpaid by bank with remark ‘insufficient funds’. Consequently, the Financial Creditor initiated proceedings against corporate debtor under Negotiable Instrument Act.

During ongoing proceedings, the Corporate Debtor paid an amount of Rs. 67.90 lakhs with 6 % interest vide a demand draft as per directions of Trial Court. Subsequently, the Financial Creditor filed an application under section 7 of the Insolvency and Bankruptcy Code, 2016 for initiation of CIRP against corporate debtor.

The application claimed an amount of Rs. 87.50 including 18 % of interest. The NCLT admitted said application and consequently, initiated CIRP against the corporate debtor.

Further, the NCLAT by impugned order set aside NCLT’s order on ground that having accepted 6 % interest, the Financial Creditor was now claiming an interest at 18 % per annum, recovery proceedings of this nature do not fall within scope and ambit of words ‘for any purpose other than resolution’ as defined under section 65 of the Insolvency and Bankruptcy Code, 2016.

Supreme Court Held

Consequently, an appeal was preferred with the Supreme Court. The Supreme Court observed that view as taken by NCLAT, particularly with reference to factual matrix of instant case, was a just and proper view of matter, more particularly with reference to latest view of Supreme Court as reflected in Vidarbha Industries Power Ltd. v. Axis Bank Ltd. [2022] 140 taxmann.com 252/173 SCL 355.

Therefore Supreme Court dismissed the instant appeal against the order of NCLAT.

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