2019 (4) TMI 1987 - Tri - Insolvency and Bankruptcy

Condonation of delay in filing application by one of the Operational Creditors of the Corporate Debtor - filing of claim before the due date prescribed for filing of claims - HELD THAT - Although, the liquidator in the present case is correct in rejecting such time barred application for filing claim as he does not have any authority to entertain the same, however, section 42 comes to the rescue of a claimant when his/her claim is accepted/rejected by the Liquidator. The claimant can file an appeal before the Adjudicating Authority against such decision of the liquidator within fourteen days of the receipt of such decision. Rule 177 and 178 of Companies (Court) Rules, 1959 deal with the procedure on failure to prove the debt within the time fixed. As per Rule 177, if any creditor fails to file proof of his debt with the liquidator within the time specified in the advertisement referred to in Rule 148, such creditor may apply to the court for relief, and the court may, thereupon, adjudicate upon the debt or direct the liquidator to do so - As per Rule 178, any creditor who has not proved his debt before the declaration of any dividend or dividends shall be entitled to be paid out of any money for the time being in the hands of liquidator available for distribution of dividend, any dividend or dividends which he may have failed to receive before that money is applied to the payment of any future dividend or dividends, but he shall not be entitled to disturb the distribution of any dividend declared before his debt was proved by reason that he has not participated therein. Because the liquidation proceedings are yet to be finalized in the present case, no prejudice will be caused if the claim of the applicant is adjudicated and admitted. The delay in submission of the claim by the Applicant deserves condonation - the delay in the submission of the claim in accordance with the provisions of code is condoned - application allowed.

Summary

Issues:
Delay in filing claim by Operational Creditor
Condonation of delay in filing claim
Applicability of Section 38 of IBC, 2016
Appeal against the decision of Liquidator
Relevant case laws and rules for condonation of delay

Analysis:
The judgment revolves around an application by an Operational Creditor seeking condonation of delay in filing a claim rejected by the Liquidator due to missing the prescribed deadline. The Liquidation process of the Corporate Debtor began on 12.04.2018. The Applicant's claim pertains to unpaid balance from supplying coal to the Corporate Debtor, totaling &8377; 13,25,898/-. The Liquidator refused to accept the claim citing late submission after the specified time limit for claims receipt, as per Section 38 of IBC, 2016, which mandates claim submission within 30 days of liquidation commencement.

The Applicant argued unawareness of the liquidation and public announcement for claim submission as reasons for the delay. Despite the correctness of the Liquidator's decision to reject the time-barred claim, Section 42 of IBC allows appeal to the Adjudicating Authority against such rejections within fourteen days. Reference was made to the UCO Bank V. Nicco Corporation Ltd. case where the court dealt with similar condonation issues under Rules 177 and 178 of Companies (Court) Rules, 1959, allowing creditors to apply for relief in case of failure to prove debts within specified timeframes.

Additionally, the judgment cited the T.R. Rajakumari v. Motion Picture Producers Combine Ltd. case, establishing that creditors can prove debts before final asset distribution but cannot disrupt paid dividends. Considering the ongoing liquidation proceedings and absence of prejudice from adjudicating the Applicant's claim, the delay was condoned in line with the Code's provisions. The Liquidator was directed to assess and admit the Applicant's claim after verifying its authenticity. Ultimately, the application was allowed, and the order was issued accordingly.