2020 (9) TMI 942 - Tri - Insolvency and Bankruptcy

Liquidation of Corporate Debtor - requisite documents not submitted - HELD THAT - In order to consider any claim of a Party, concerned Party has to submit the requisite document(s) to the Concerned Authority to consider its claim. An Authority, which is required to consider a claim of a party, is entitled to ask the Party to substantiate its claim by producing relevant document(s) in addition to document(s) already furnished along with Claim. The contention of Applicant that documents already furnished along with its claim would suffice to accept its claim is not at all tenable, and it is liable to be rejected. The Liquidator is having every right to ask the Applicant to submit requisite documents as he thought it relevant to the issue in question. Moreover, the documents in question, asked for by the Liquidator, are prima facie, found to be relevant to the issue in question. Since the Corporate Debtor is in liquidation, the Liquidator is under statutory Obligation to scrutinise the Claims as per available records of Corporate Debtor with reference to the documents filed by respective claimants. Therefore, the stand Of the Liquidator in asking the Applicant to substantiate its claim by producing the requisite documents in question, is to be held within his rights. The Applicant, if so advised, can submit a suitable Representation to Liquidator, along with requisite documents as asked for, within a period of two weeks from the date of receipt of copy of this order - On receipt of above representation, the Learned Liquidator is directed to re-consider the claim as per law, and pass speaking order within two weeks thereafter, and communicate the same to the Applicant, immediately. Application disposed off.

Issues Involved:
1. Whether the claim of ?51,12,08,556/- by the Applicant/Financial Creditor should be considered in full.
2. Whether the transaction between the Applicant and the Corporate Debtor is covered under the Karnataka Prohibition of Charging Exorbitant Interest Act, 2004 and Karnataka Money Lenders Act, 1961.
3. Whether the Applicant/Financial Creditor’s claim should be treated as secured or unsecured.
4. Whether the Liquidator has the right to demand additional documents to substantiate the claim.

Issue-wise Detailed Analysis:

1. Claim Consideration:
The Applicant, M/s. Rajesh Exports Limited, filed I.A. No. 93 of 2020 seeking to consider its claim of ?51,12,08,556/- as of 11.04.2019, with an interest rate of 24% till realization. The claim was based on the Inter-Corporate Deposits (ICDs) extended to the Corporate Debtor, M/s. Innovative Studios Private Limited, secured by mortgage deeds and other transactional documents. The Applicant submitted its claim on 25.04.2019 and participated in the Committee of Creditors (COC) meeting, but was surprised to find its claim reduced to ?7,13,41,467/- with only 19.45% voting rights. The Applicant contended that the claim should be considered in full as it is secured by registered mortgage deeds.

2. Applicability of Karnataka Acts:
The Liquidator classified the transaction as unsecured, referencing the Karnataka Prohibition of Charging Exorbitant Interest Act, 2004, and the Karnataka Money Lenders Act, 1961. The Liquidator argued that the interest rate of 24% charged by the Applicant exceeds the maximum permissible rates under these Acts, which are 14% for secured loans and 16% for unsecured loans. The Applicant countered that these Acts do not apply as the transaction was between two companies and not individuals, and thus, the interest rate agreed upon was within legal parameters.

3. Secured vs. Unsecured Claim:
The Applicant asserted that the ICDs were secured by mortgage deeds and other relevant documents, making the claim a secured one. The Liquidator, however, treated the claim as unsecured, citing non-compliance with Section 77(3) of the Companies Act, 2013, which requires registration of charges. The Applicant argued that the responsibility for registering the charge lies with the Corporate Debtor, not the Applicant, and that its interests are protected under Section 77(4) of the Act.

4. Demand for Additional Documents:
The Liquidator requested additional documents to substantiate the Applicant's claim, including certified copies of statements, ledger extracts, tax auditor certificates, and any relevant court decisions. The Applicant contended that the documents already submitted were sufficient. The Tribunal held that the Liquidator has the right to request additional documents to verify the claim, as it is crucial to scrutinize claims thoroughly, especially during the liquidation process.

Judgment:
The Tribunal directed the Applicant to submit the requisite documents as requested by the Liquidator within two weeks. Upon receipt of these documents, the Liquidator is to reconsider the claim as per law and pass a speaking order within two weeks thereafter. No costs were awarded.

Conclusion:
The Tribunal upheld the Liquidator's right to demand additional documents to substantiate the claim and directed the Applicant to comply with this request. The claim will be reconsidered based on the additional documentation provided.

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