2021 (2) TMI 1268 - Tri - Insolvency and Bankruptcy

Seeking to direct the Liquidator to accept the claim submitted by the Applicant and treat the Applicant as a secured financial creditor - rights and privileges of a secured financial creditor under the Insolvency and Bankruptcy Code, 2016 - reconstitution of SCC within 7 days from the date of disposal of this Application - HELD THAT - The object of the Code is to see that the CIRP Process/Liquidation process is to be continued in a time-bound manner as prescribed in the Provisions of the Code and Rules made there under. The CIRP and the Liquidation process, if not completed within the stipulated period, the object of the Code will be defeated. The contention of the learned Senior Counsel for the Applicant that the Applicant can avail opportunity with reference to Public Notification issued by Liquidator, even though its claim was rejected during CIRP by IRP/RP, is not correct and not tenable. While it is true that all claimants, which include claimants during CIRP, have to make/reiterate their claim again to Liquidator, but old claimants will reiterate their claim made earlier in CIRP, and fresh claimants, who have not availed opportunity during CIRP, can make their claim - the Liquidator cannot ignore the decisions taken by IRP/RP and reverse them except any new development takes place in such claims. Moreover, there cannot be two claims in respect of same debt. It is not in dispute that RP, as early as on 3rd March, 2020 replied to the Applicant stating that its claim has been updated on the website of the Corporate Debtor and stand rejected. Since the Liquidator has accepted the claims of Allottee in question, the Applicant cannot ask to replace them, that too without impleading those allottees in the instant Application. The Respondent has considered the case of Applicant and rejected its case with cogent reasons and thus the impugned rejection cannot be found fault with. The Applicant, admittedly has right against the allottees in question to proceed basing on various documents executed between the parties - the Applicant failed to make out any case so as to interfere in the impugned action of Respondent. Application dismissed.

Summary

Issues Involved:
1. Whether the Liquidator should accept the claim submitted by the Applicant (Axis Bank Limited) and recognize it as a secured financial creditor.
2. Whether the Applicant can re-submit its claim during the liquidation process after it was rejected during the CIRP process.
3. Whether the Liquidator acted arbitrarily in rejecting the Applicant's claim.
4. Whether the Applicant has any right to appeal against the decision of the Liquidator.

Detailed Analysis:

Issue 1: Acceptance of Claim and Recognition as Secured Financial Creditor
The Applicant, Axis Bank Limited, sought to direct the Liquidator to accept its claim and treat it as a secured financial creditor under the Insolvency and Bankruptcy Code, 2016. The Applicant argued that it had provided financial assistance to home buyers for a project developed by the Corporate Debtor, and the loans were disbursed to the Corporate Debtor at the request of the home buyers. The Applicant contended that it should be entitled to all rights and privileges of a secured financial creditor. However, the Liquidator rejected the claim, stating that the disbursement was made to the allottees (home buyers) and not directly to the Corporate Debtor, thus not meeting the criteria of a financial creditor under the Code.

Issue 2: Re-submission of Claim During Liquidation Process
The Applicant argued that it had the right to submit its claim again during the liquidation process, even though it was rejected during the CIRP process. The Applicant cited the public announcement made by the Liquidator and claimed that liquidation is a separate proceeding, providing a second opportunity to claimants. The Tribunal, however, clarified that while claimants must reiterate their claims during liquidation, old claimants cannot submit new claims if they were already rejected during CIRP unless new developments occur. The Tribunal emphasized that the liquidation process is a continuation of the insolvency proceedings and not an entirely separate stage.

Issue 3: Alleged Arbitrary Rejection by Liquidator
The Applicant accused the Liquidator of acting arbitrarily by rejecting its claim without proper consideration. The Liquidator, in response, asserted that the claim was rejected based on a thorough verification process and in accordance with the provisions of the Code. The Liquidator also referenced previous judgments, including the case of Indiabulls Housing Finance Ltd. vs. Rudra Buildwell Projects Private Limited, to support the decision. The Tribunal found that the Liquidator's actions were in line with the legal requirements and could not be deemed arbitrary.

Issue 4: Right to Appeal Against Liquidator's Decision
The Tribunal highlighted that if the Applicant was aggrieved by the decision of the Liquidator, it should have appealed under Section 42 of the Insolvency and Bankruptcy Code within fourteen days of receiving the decision. The Applicant failed to exercise this right. The Tribunal noted that the Liquidator had communicated the rejection of the claim to the Applicant, and the Applicant did not take the appropriate legal recourse within the stipulated time.

Conclusion:
The Tribunal concluded that the Applicant failed to make a case for interfering with the Liquidator's decision. The Liquidator was found to be conducting the liquidation process in accordance with the law. Consequently, the Tribunal dismissed the application filed by Axis Bank Limited, reaffirming that the Applicant could pursue its claims against the individual allottees as per the relevant agreements and legal provisions. No order as to costs was made.