2019 (8) TMI 1807 - Tri - Insolvency and Bankruptcy

Seeking admission of the claim towards damages and compensation - claim towards short fall in upliftment of furnace oil - HELD THAT - In view of the Clause 8 of this application, this Applicant is entitled for calculation of the payment for non-upliftment of furnace oil as per the quantity mentioned in Clause 8, therefore the Liquidator admitted the claim of 9,87,93,000 for non-upliftment of furnace oil. As to rent on fuel handling capacity, since the Applicant has charged it as 7,000, the Liquidator has admitted. As to investment made in storage facility for 2.35 Crores and 2.90 Crores towards interest vide an email dated 23.04.2019 claimed by this Applicant, the Liquidator rejected these components on the ground that there is no agreement entered into between the parties in respect to these components. Whether this Applicant is entitled to claim which is claimed as damages and compensation for 2.35 Crores and interest portion for 2.90 Crores? - HELD THAT - The Applicant is not entitled to claim anything that has not been crystallized in the agreement and that has not been agreed between the parties, therefore, this Liquidator has rightly rejected those two claims - When claim itself not claimable, for the sake of giving reasons in detail, that procedure is required to be repeated. For the Applicant has failed to place any material reflecting that this Corporate Debtor is obliged to pay on these two counts, we are of the view that not giving any reasons in detail cannot become a ground for invalidating the claim already considered and rejected by the Liquidator. Application dismissed.

Summary

Issues:
1. Entitlement to claim damages and compensation under Operational Debt.
2. Entitlement to claim interest component without a specific clause in the agreement.
3. Rejection of claims by the Liquidator.
4. Adequacy of reasons provided for rejection of claims.

Issue 1: Entitlement to claim damages and compensation under Operational Debt:
The Applicant, a Public Sector undertaking, filed an MA under the Insolvency and Bankruptcy Code, 2016, seeking admission of a claim against the Corporate Debtor for damages and compensation related to the supply of furnace oil. The Applicant had initiated arbitration proceedings citing a shortfall in upliftment of furnace oil and claimed damages for setting up infrastructural facilities. The Liquidator admitted certain claims based on the agreement between the parties but rejected the claim for damages and compensation, stating that such components were not covered in the agreement.

Issue 2: Entitlement to claim interest component without a specific clause in the agreement:
The Applicant also sought an interest component as part of the claim, despite no provision for interest in the original agreement. The Liquidator rejected this claim, emphasizing the absence of a binding agreement obligating the Corporate Debtor to pay interest. The Tribunal concurred with the Liquidator's decision, stating that the Applicant was not entitled to claim amounts that were not explicitly agreed upon in the contract.

Issue 3: Rejection of claims by the Liquidator:
The Liquidator accepted certain claims related to non-upliftment of furnace oil and rent on fuel handling capacity based on specific clauses in the agreement. However, the claims for damages, compensation, and interest were rejected due to the lack of agreement on these components between the parties. The Tribunal upheld the Liquidator's decision, emphasizing that claims must be based on crystallized agreements between the parties.

Issue 4: Adequacy of reasons provided for rejection of claims:
Although the Liquidator did not provide detailed reasons for rejecting the claims for damages, compensation, and interest, the Tribunal found the reasons given to be sufficient. The Liquidator's mention of the absence of a binding agreement for interest and inadmissibility of the investment in storage facility sufficed as reasons for rejection. The Tribunal dismissed the MA, emphasizing that claims must be ascertainable based on existing agreements to be considered valid.

In conclusion, the Tribunal upheld the Liquidator's rejection of the claims for damages, compensation, and interest, emphasizing the necessity for claims to be supported by agreements between the parties. The judgment highlights the importance of contractual clarity in determining the validity of claims in insolvency proceedings.