2022 (2) TMI 420 - AT - Insolvency and Bankruptcy

Approval of Resolution Plan - claim of arbitration award was not considered - Appellant didn't invoke the 'Corporate Guarantee' and has filed incomplete information - time limitation - HELD THAT - It is not in dispute that the loan has not been taken by the concerned party as stated and the 'Corporate guarantee' has not been given by the CD - It is also not in dispute that the 'Principal Debtor' has committed a 'default' leading to issue of 'Termination cum Arbitration notice' way back on 07.03.2015 to the 'Corporate Guarantor' and others including the 'Guarantors' were asked to repay the outstanding dues which has been 'defaulted' by the 'Principal Debtor'. From the details available on record, it is amply clear that the Appellant has invoked the 'Corporate Guarantee'. The Appellant has invoked the Guarantee well within the expiry of the term of 'Loan Agreement' concerned - Admittedly, there is undischarged live liability and the amount due to the Appellant has not been paid by the 'Principal Borrower'/'Principal Debtor'. For the undischarged live liability for which the Guarantor /corporate Debtor is obliged to pay in terms of Guarantee Agreements and accordingly, Guarantor is fully responsible for the liability of the Principal Debtor. It is very much clear that the Appellant has submitted its claim within due time frame and with relevant papers and Guarantee is a continuing guarantee - All this do not suggests that the amount is not due and payable in law and there is no default. The CD/Respondent was made aware of the same well in time. The Resolution Professional had rejected the claim of the Appellant mainly on the ground of non-invocation of the corporate Guarantee. The Resolution Professional further submits that the arbitration award was put on the Adjudicating Authority record during the pendency of the application for the first time. Therefore, Resolution Professional submits that he is not responsible for the non-consideration of the documents since the same was never placed on Form 'C' stage - Based on the facts of the case, it is undisputed that the arbitration award against the Corporate Debtor was not placed before the Resolution Professional. Accordingly, the rejection of the claim was made without considering the arbitration award. Instead, the said award was placed before the Adjudicating Authority. The Adjudicating Authority has not taken cognizance of the award and rejected the application filed by the Appellant. Since the Appellants claim is also supported by an arbitration award, which has not been considered either by Adjudicating Authority or Resolution Professional. Therefore, it is appropriate that the claim of the Appellant should be reconsidered even based on the arbitration award - The Resolution Professional to consider the claims of the Appellant to proceed further in accordance with the law. Appeal allowed.

Issues Involved:
1. Invocation of Corporate Guarantee
2. Time-barred Claims
3. Admissibility of Claims during CIRP
4. Role of Arbitration Awards in Claim Adjudication
5. Compliance with Procedural Requirements

Detailed Analysis:

1. Invocation of Corporate Guarantee:
The Tribunal examined whether the Corporate Guarantee provided by the Corporate Debtor (CD) was properly invoked by the Appellant. The Appellant, a Non-Banking Finance Company (NBFC), argued that the Guarantee was invoked through Loan Recall Notices cum Arbitration Notices issued on 07.03.2015. The Tribunal found that the Appellant had indeed invoked the Guarantee within the term of the Loan Agreement, and the Guarantee was a continuing one, enforceable until the dues were fully discharged. The Tribunal noted that the Guarantee obligated the CD to discharge the dues within seven days from the demand.

2. Time-barred Claims:
The Tribunal upheld the Adjudicating Authority's decision that time-barred claims cannot be admitted during the Corporate Insolvency Resolution Process (CIRP). However, the Tribunal also referenced the Supreme Court's ruling in Dena Bank Vs. C.ShivaKumar Reddy, which allowed for the extension of the limitation period if there was an acknowledgment of debt by the Corporate Debtor before the expiry of the original limitation period. The Tribunal found that the claims were not time-barred as the Appellant had invoked the Guarantee well within the limitation period.

3. Admissibility of Claims during CIRP:
The Tribunal discussed the definitions of "claim," "financial creditor," and "financial debt" under Sections 3(6), 5(7), and 5(8) of the Insolvency and Bankruptcy Code (IBC). It concluded that the Appellant's claims were admissible as they were based on a financial debt, which included the amount due under the Corporate Guarantee. The Tribunal also emphasized that the claims were submitted within the stipulated timeframe following the initiation of CIRP.

4. Role of Arbitration Awards in Claim Adjudication:
The Tribunal noted that the Appellant had obtained Arbitration Awards against the Principal Borrowers, which were not set aside by any Competent Court. These Awards were presented as evidence of the debt owed. The Tribunal criticized the Resolution Professional (RP) for not considering these Awards when rejecting the claims. The Tribunal directed that the claims supported by Arbitration Awards should be reconsidered, highlighting that an Arbitration Award for payment of money falls within the ambit of a financial debt under the IBC.

5. Compliance with Procedural Requirements:
The Tribunal observed that the Appellant had submitted its claims with the necessary documentation within the required timeframe. However, it was noted that the Appellant had not initially provided complete information, including the Arbitration Awards, to the RP. The Tribunal found this procedural lapse significant but not fatal to the Appellant's case. It directed the RP to reconsider the claims, taking into account the Arbitration Awards and other relevant documents.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter to the Adjudicating Authority for a fresh decision on the Appellant's claims. It directed the Resolution Professional to reconsider the claims based on the Arbitration Awards and proceed in accordance with the law. The Tribunal emphasized that the claims should be reassessed even if they were initially rejected due to incomplete information. No order as to costs was made.

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