2021 (3) TMI 295 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - time limitation of insolvency resolution - applicant was unable to submit his claims within the stipulated time before the IRP/RP and is requesting for condoning the delay in filing the claims - HELD THAT - It is the matter of record that on November 2, 2018 the Adjudicating Authority passed an order admitting the application filed under section 9 of the IB Code against the corporate debtor and public announcement was made in compliance of the provision of the IB Code inviting claims from the creditors/stakeholders, if any, or as the case may be. It is also a matter of record that the corporate debtor owes liability towards L T Finance Ltd., and the same has been assigned to Kotak Mahindra Bank Ltd. (present applicant) - Hence, taking the plea that the applicant had no knowledge of the CIRP cannot be believed upon since the applicant has purchased the liability from L T Finance Ltd. On perusal of the record, it is found that the applicant has approached the IRP on April 18, 2020 where the resolution plan was already passed on March 19, 2020. Under such circumstances, when the IRP/RP has already been discharged, definitely he will show his inability to accept the claim. Furthermore, the instant application is filed on August 14, 2020 on such a belated stage when the corporate debtor has already been acquired by the successful resolution applicant in due process of law. Hence, the total process cannot be reversed as there is no such provision under the IB Code. Moreover, the CIRP was completed in a time bound manner. It is pertinent to mention herein that as per the legal principle of Indian Contract Act, 1872, i. e. caveat emptor , it is the applicant's/buyers' duty to be aware of his responsibilities. Mere plea of ignorance or playing blame game will not aid in reaping the desired results. Further, in number of cases, the courts have taken the view that insolvency resolution is a time bound process and it needs to be completed within the stipulated period - the applicant is not maintainable and hence, is rejected.

Summary

Issues:
Review of order under section 60(5) of the Insolvency and Bankruptcy Code, 2016.

Detailed Analysis:
1. Facts of the Case: The application was filed under section 60(5) of the Insolvency and Bankruptcy Code, 2016 seeking a review of the order dated March 19, 2020, passed by the Adjudicating Authority. The case involved CIRP initiated against the corporate debtor, admission of the application, appointment of IRP and RP, and approval of the resolution plan by the Adjudicating Authority.

2. Secured Creditor's Claim: The applicant claimed to be a secured creditor under a deed of assignment dated March 29, 2019, involving L&T Finance and Kotak Mahindra Bank. The applicant alleged that the IRP/RP did not inform them about the initiation of CIRP against the corporate debtor, leading to a delay in submitting their claims.

3. Timeline of Events: The timeline of events included the execution of a memorandum of settlement, passing of an award, issuance of a notice by the Bombay High Court, initiation of CIRP, and submission of claims by the applicant.

4. Adjudicating Authority's Decision: The Adjudicating Authority noted that the applicant, being aware of the liability purchased from L&T Finance, should have followed up with the corporate debtor regarding the consent award passed by the arbitrator. The Authority found the applicant's lack of knowledge regarding the CIRP initiation implausible, given the substantial amount involved and the reminders sent to the corporate debtor.

5. Belated Application: The Authority observed that the applicant approached the IRP after the resolution plan was already passed, and the application was filed at a belated stage. The Authority emphasized that the CIRP process cannot be reversed, especially after the corporate debtor has been acquired by a successful resolution applicant.

6. Legal Principles and Time-Bound Process: The Authority referred to the legal principle of "caveat emptor" from the Indian Contract Act, 1872, highlighting the buyer's duty to be aware of responsibilities. Emphasizing the time-bound nature of insolvency resolution, the Authority rejected the applicant's claim, stating that ignorance or blame game tactics would not yield favorable outcomes.

7. Conclusion: The Authority concluded that the applicant's claim was not maintainable and hence rejected it. The instant application was disposed of with the above observations, affirming the completion of CIRP in a time-bound manner.

This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive understanding of the case and the Adjudicating Authority's decision.