2021 (10) TMI 493 - Tri - Insolvency and Bankruptcy

Partial rejection of claim as Operational Creditors - seeking directions for the Respondent to accept the entire claim filed by the Applicant - Section 60(5) of the Insolvency and Bankruptcy Code 2016, with rule 11 of the National Company Law Tribunal Rules, 2016 - HELD THAT - The Petitioner has now filed his claim as a OC and the RP has admitted the claim of the Petitioner as Operational Creditor as per the documents and Audited Balance Sheet of the CD. On perusal of the documents, affidavits submitted and submissions made by both the sides, it is found that the claim made by the Petitioner is now as Operational Creditor and the same has been admitted by the RP as Operational Debt. The RP is to consider the claim amount to be admitted as per the provisions of IBC. In our considered view, nothing is surviving in this Petition now. It is made clear that no one should make any attempt to delay the process of CIRP by filing irrelevant IAs. If further IAs are filed without any substance to delay the CIRP, the same may be dismissed with costs. Application disposed off.

Issues Involved:
1. Whether the claim of the Applicant qualifies as a Financial Debt or Operational Debt.
2. Whether the Resolution Professional (RP) properly verified and adjudicated the claim.
3. Whether the RP has the jurisdiction to adjudicate claims.
4. Whether the rejection of the claim by the RP was justified.

Issue-wise Detailed Analysis:

1. Whether the claim of the Applicant qualifies as a Financial Debt or Operational Debt:
The Applicant initially filed a claim as a Financial Creditor for an amount of ?18,38,943.00, asserting that the loan provided was a Financial Debt. The Applicant supported this claim with various documents including the Extraordinary General Meeting (EGM) resolution, term sheet, audited financial statements, and minutes of board meetings. The Applicant argued that the loan was granted against consideration for time value of money, thus qualifying as a Financial Debt under Section 5(8) of the Insolvency and Bankruptcy Code (IBC), 2016. However, during the proceedings, the Counsel for the Petitioner agreed and submitted that the claim amount is an Operational Debt only and not Financial Debt. Consequently, the Petitioner filed the claim in the appropriate form as an Operational Creditor, which was admitted by the RP.

2. Whether the Resolution Professional (RP) properly verified and adjudicated the claim:
The RP initially rejected the claim of the Applicant as a Financial Creditor, citing that the documents provided did not substantiate the claim as a Financial Debt. The RP argued that the amount due was shown as an advance for fertilizer in the audited financial statements, indicating a business transaction rather than a loan. The RP also noted contradictions in the claim forms and supporting documents submitted by the Applicant. Despite repeated opportunities, the Applicant failed to provide sufficient evidence to substantiate the claim as a Financial Debt. The RP communicated the reasons for rejection via email and presented the matter before the Committee of Creditors (COC).

3. Whether the RP has the jurisdiction to adjudicate claims:
The Applicant argued that the RP does not have adjudicatory powers and should only collate claims as per the Supreme Court's ruling in Swiss Ribbons Pvt. Ltd. vs. Union of India. The Supreme Court held that the RP has administrative functions and cannot adjudicate claims. The Applicant contended that the RP failed to verify the documents and records of the Corporate Debtor before rejecting the claim. The RP, however, maintained that it verified the claim based on available records and found inconsistencies and contradictions.

4. Whether the rejection of the claim by the RP was justified:
The RP justified the rejection based on the nature of the transaction as reflected in the audited financial statements, which showed the amount as an advance for fertilizer rather than a loan. The RP argued that the essential elements of a Financial Debt were missing, and the transaction was a business sale/purchase transaction. The RP also cited the NCLAT ruling in Niyati Chemicals vs. Minepro Minerals Pvt. Ltd., which held that advances against business dealings do not qualify as Financial Debt under IBC. The Applicant's reliance on the Supreme Court's ruling in Orator Marketing Pvt. Ltd. vs. Samtex Desinz Pvt. Ltd. was deemed inapplicable as the facts and circumstances differed.

Conclusion:
The Tribunal concluded that the claim made by the Petitioner, now as an Operational Creditor, had been admitted by the RP as an Operational Debt. The Tribunal directed the RP to complete the Corporate Insolvency Resolution Process (CIRP) in a timely manner and find a viable resolution plan for the Corporate Debtor. The Tribunal also cautioned against filing irrelevant IAs to delay the CIRP process and disposed of the IA/50 OF 2021 as infructuous.

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