Cotton Supplier’s Interest Claim on Delayed CIRP and Liquidation Payments Fails After Full-and-Final Undertaking, NCLAT Upholds Rejection

The Appellant, an operational creditor and cotton supplier to the Corporate Debtor, claimed outstanding amounts for supplies made during the CIRP and liquidation periods.

The Adjudicating Authority had directed priority payment of its CIRP-cost dues, and an auditor later certified ₹6,95,24,683.35 as payable. That amount was paid after the Appellant’s authorised representative gave an undertaking that receipt would fully settle the claim and that no further proceedings would be pursued concerning it. The Appellant nevertheless sought ₹2,29,56,480.20 in interest for delayed payment. The Adjudicating Authority dismissed that application; on remand from the NCLAT, it again rejected the claim on its merits.

The NCLAT considered the Code’s treatment of CIRP costs, including Section 5(13) of the Insolvency and Bankruptcy Code, 2016, and Regulation 31 of the CIRP Regulations, 2016, in the context of the claim for interest.

It applied the principles that a claim for contractual interest requires a supporting contractual or other legally binding basis, and that a clear undertaking accepting payment in full and final settlement may operate as an estoppel against a later claim concerning the same dues.

It also considered Abhijit Guhathakurata v. AGC Networks Ltd. and Shailesh Verma v. Maharashtra State Electricity Distribution Company Ltd., distinguishing them on their facts, and held that M/s Associated Construction v. Pawanhans Helicopters Ltd. did not assist the Appellant because the undertaking in this case was not shown to have been given under compulsion.

The Appellant produced no invoice term or separate agreement providing for interest on delayed payment. The Indian Cotton Association circular relied upon was undated, unsigned, and unsupported by evidence that the Association had statutory or other binding authority to prescribe the claimed interest rate; it therefore supplied no legal basis for the claim.

Further, the auditor-certified amount had been paid, and the Appellant’s authorised representative had undertaken that the claim would be fully settled and that no further proceedings would be brought concerning it. The Tribunal rejected the assertion that the undertaking was given under financial duress or compulsion and held it to be an estoppel against a further claim relating to the supplies.

The cited decisions did not alter that conclusion because they were distinguishable on their facts.

Finding no ground to interfere with the Adjudicating Authority’s order, it dismissed the appeal, made no order as to costs, and disposed of the pending interlocutory applications.