2021 (10) TMI 939 - Tri - Insolvency and Bankruptcy

Rejection of claim due to delay in filing - appeal filed by the Creditor against the decision of Liquidator - Section 42 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - The Liquidator in the present case rejected a time barred application for filing claim as he does not have any authority to entertain the same. However, Section 42 comes to the rescue of a claimant when his claim is rejected by the Liquidator. The claimant can file an appeal before the Adjudicating Authority against such decision of the Liquidator within fourteen days of the receipt of such decision. The present appeal can be filed within fourteen days from the date of receipt of decision of Rejection from the Liquidator; however, the appeal has been filed after 22 days (appeal filed on 31.12.20 while rejection was on 09.12.20) which is beyond the time provided in Section 42 IBC. Further, there is no rebuttal on the point that the Appellant being husband of the Suspended Director of CD had knowledge of the ongoing CIRP proceedings. There are no merit in the pleas taken by the Appellant - in the light of the well settled law, the Appellant is unable to show the sufficient cause for condoning the delay in submitting the claim by the Appellant - appeal dismissed.

Summary

Issues: Delay in filing claim under Section 42 of the Insolvency and Bankruptcy Code, 2016.

The judgment deals with an appeal filed by a Creditor under Section 42 of the Insolvency and Bankruptcy Code, 2016, against the decision of the Liquidator for rejecting the claim due to a delay in filing. The Appellant had granted an unsecured loan to the Corporate Debtor based on representations by its directors. The Corporate Insolvency Resolution Process (CIRP) was initiated, and the Liquidation application was admitted. The Liquidator made a public announcement inviting claims from creditors, with a specified last date for submission. The Appellant filed the claim after the deadline, citing lack of awareness about the liquidation process and challenges due to the Covid-19 pandemic. The Liquidator rejected the claim, emphasizing the lack of provision in the IBC to condone such delays. The Liquidator also raised concerns about the Appellant's relationship with a Suspended Director of the Corporate Debtor. The Liquidator relied on legal precedents to support the rejection of the time-barred claim, highlighting the importance of adhering to timelines in such proceedings.

The Liquidator argued that there was no provision in the IBC to condone the delay in filing a claim beyond the stipulated timeline. The Liquidator maintained that the Appellant failed to demonstrate sufficient cause for the delay and suggested that the appeal was filed with ulterior motives due to the Appellant's relationship with a Suspended Director of the Corporate Debtor. Legal precedents were cited to support the position that delays in filing claims require sufficient cause to be shown, and the entire delay period must be explained. The Liquidator emphasized that the rejection of a time-barred claim was within the scope of the authority granted and highlighted the importance of adhering to the regulations governing such processes.

The Tribunal analyzed the provisions of Section 42 of the IBC, which allow a creditor to appeal to the Adjudicating Authority against the decision of the Liquidator regarding the acceptance or rejection of claims within fourteen days of receiving such a decision. The Tribunal noted that the Appellant's appeal was filed beyond the specified time frame, rendering it invalid. The Tribunal also considered the Appellant's failure to refute the knowledge of ongoing CIRP proceedings due to the relationship with a Suspended Director of the Corporate Debtor. Ultimately, the Tribunal found no merit in the Appellant's arguments and concluded that the Appellant failed to show sufficient cause for condoning the delay in submitting the claim. Therefore, the Tribunal dismissed the appeal, emphasizing the importance of complying with the established legal principles and timelines in insolvency proceedings.