2024 (5) TMI 332 - AT - Insolvency and Bankruptcy

Rejection of claim filed by appellant - Role of the Liquidator - Appellant states that the Respondent / CD, did not perform its part of the contract from its inception and did not establish the letters of credit as contemplated - HELD THAT - It is the Appellant s case that the CD having awarded the purchase order and the work order failed to honor its obligations and therefore, the Appellant could not get the expenditure incurred by it on these accounts to the tune of Rs.31.71 crore from the CD and therefore, it should be considered a debt due to be repaid by the CD and that the RP having admitted an amount of Rs.13.47 crore, payable by CD, to the Appellant, later changed his position to Rs.1.51 crore, as receivable from the Appellant to CD in contravention of the provisions of Insolvency and Bankruptcy Code, 2016 and the Liquidation Regulations. The Respondent / Liquidator fairly addresses these points by stating that the items of claim not admitted by her as due payable are those for which no documents such as invoice / dispatch documents were available in the records of CD and which were not also provided by the Appellant. She has also fairly answered the point by stating that the disallowed claims could be due to non-performance of CD which will require adjudication by a competent Civil Court / Arbitrator, before they can be translated into Dues within the framework of IBC and has cited the relevant law in form of a decision by the Hon ble Apex Court to support her assertion. It is also seen that the Respondent / Liquidator has given sufficient reasons for disallowing the claim of the Appellant in her letter to the Appellant. It is also seen that the AA / NCLT, Hyderabad have dealt on these issues in detail and given succinct reasons as to why they have accepted the submission and reasoning of the Liquidator as to why she has rejected the claim of the Appellant. They have rightly held that when claim and counter claims are involved Liquidator cannot decide the same and therefore the Liquidator rightly rejected the claim. The appeal is devoid of merits and deserves to be dismissed and is accordingly dismissed.

Summary

Issues involved:
The judgment involves issues related to the rejection of claims by the Liquidator, non-performance of contractual obligations, determination of dues, and the authority of the Adjudicating Authority to adjudicate on claims under the Insolvency and Bankruptcy Code, 2016.

Brief Facts:
The case involves an appeal filed challenging an order of the Adjudicating Authority under sections 60(5) and 61 of the Insolvency and Bankruptcy Code, 2016. The Corporate Debtor failed to honor its contractual obligations, leading to disputes over dues and claims by the Appellant, who was an Operational Creditor. The Resolution Professional initially admitted a sum of Rs. 13.47 crore payable to the Appellant, but later rejected the claim. The Liquidator, acting in accordance with the Code and Regulations, rejected the claim based on lack of documentation and the need for adjudication by a Civil Court or Arbitrator.

Submissions by the Appellant:
The Appellant argued that the Corporate Debtor did not fulfill its contractual obligations, leading to the cancellation of the contract. The Appellant claimed to be owed Rs. 31.71 crore by the Corporate Debtor, emphasizing the initial admission of Rs. 13.47 crore by the Resolution Professional. The Appellant contended that the Liquidator erred in rejecting the claim without proper adjudication and that the Adjudicating Authority should have considered the Appellant's performance under the contract.

Submissions by the Respondent:
The Respondent, acting as the Liquidator, rejected the Appellant's claim based on lack of documentation and the need for adjudication by a Civil Court or Arbitrator. The Respondent cited legal principles and regulations guiding the rejection of claims and emphasized the need for a proper determination of damages before a debt can be considered due and payable. The Respondent also highlighted the sale of the Corporate Debtor as a Going Concern and the limitations on entertaining claims at that stage.

Analysis & Findings:
The Tribunal analyzed the arguments presented by both parties and concluded that the Liquidator's rejection of the claim was justified based on the lack of documentation and the need for adjudication of disputes. The Adjudicating Authority's decision to uphold the Liquidator's rejection was deemed appropriate, considering the complexities of the claims and counterclaims involved. The Tribunal dismissed the appeal, granting the Appellant the liberty to pursue remedies in other forums.