2025 (2) TMI 807 - AT - IBC

Rejection of claim submitted by the Appellant before the Liquidator - waterfall mechanism - entitlement to payment of dues in accordance with Section 53(1)(a) of the IBC - acceptance of belated claim of the Appellant by including interest - interest amount was claimed by the Appellant or not - remedy embodied in Section 42 of the IBC - Tenability of the contention of the Appellant that it was being forced by the Liquidator to modify/withdraw their claim Etitlement to payment of dues in accordance with Section 53(1)(a) of the IBC - HELD THAT - The receipt of the supplies had been acknowledged by the RP along with an assurance that the dues would be paid once funds became available. The Liquidator cannot be allowed to go back from the mutually agreed terms and conditions for provision of services particularly when the services had been accepted without any demur or objections. Acceptance of belated claim of the Appellant by including interest - HELD THAT - The Appellant for the first time claimed interest component on 25.06.2019 much after the date of supply of goods. All the correspondences exchanged before this date between the Appellant and Respondent show that no demand was made with regard to interest component. The claim for interest is an afterthought. Submission was pressed that reliance on invoices for interest is nothing but a unilateral document that has no binding effect on the Respondent. Having not added interest at the time of filing belated claim which claim stood already crystallised and admitted the Appellant cannot suddenly spring a surprise by adding an interest amount as part of claims after a lapse of more than two years from the date of supply - The Adjudicating Authority was not satisfied that the claim of interest had been adequately substantiated and validated by the Appellant before the Liquidator at the time of liquidation commencement. Whether at the time of filing of their claims any interest amount was claimed by the Appellant and how the Respondent had treated the claim filed by the Appellant? - HELD THAT - In the present facts of the case the Public Announcement seeking claims was issued by the Liquidator on 21.01.2019. The Appellant failed to file their claims on time. The Appellant then requested 14 days time on 22.01.2019 to file their claim. This request was not allowed by the Liquidator. Neither did the Appellant file their claims even during the extended period sought by them. Instead the Appellant filed their belated claim on 23.03.2019 which claim was rejected by the Liquidator on 30.03.2019. There are credence in the contention of the Respondent-Liquidator that failure to file claims during the liquidation process resulted in crystallization of the claims as per the invoice No. 11239/17 11240/17 and 11241/17 of 07.08.2017 aggregating to USD 173, 182.97. The impugned order agreed upon that the Appellant having once filed their claim amount without interest by their own volition they cannot question the non-inclusion of interest after efflux of such a long period of time. Whether the present application of the Appellant is an attempt to circumvent the specific remedy embodied in Section 42 of the IBC which provides that in case any claimant is aggrieved by the decision of the Liquidator in respect of admission of their claim the matter is to be brought to the notice of the Adjudicating Authority for seeking relief? - HELD THAT - The law is well settled that when a statute provides a particular remedy or that if a thing is to be done in a particular manner then it has to be done in that manner only. Having failed to challenge the rejection of their claims within the 14 days timeline prescribed under Section 42 of the IBC the Appellant has indirectly sought to revive their claim by filing a petition under Section 60(5) of the IBC. There are no reasons to disagree with the Adjudicating Authority that this issue cannot be re-agitated at this stage now by invoking Section 60(5) of the IBC. The Adjudicating Authority has therefore correctly held that there is merit in the submission of the Respondent that the Appellant was trying to circumvent the specific remedy under Section 42 of the IBC having failed to avail of it at the appropriate point of time. Tenability of the contention of the Appellant that it was being forced by the Liquidator to modify/withdraw their claim - HELD THAT - The Liquidator has an important role to play in the timely conduct of the liquidation process and it is required of him to complete the process within one year from the date of commencement of liquidation proceedings. In the present case we find that Liquidator has not committed any error in trying to complete the liquidation process on time which commenced way back in 2018. However since the Appellant was unwilling to give their NOC the progress of liquidation proceedings was facing a road-block on account of their non-responsive behaviour. Given the conspectus of facts the Adjudicating Authority is agreed upon that seeking of NOC from the Appellant by the Liquidator in respect of the dues of suppliers of the sub-contractors was within the scope of his duties to protect the assets of the Corporate Debtor and do not find any cogent grounds which show that the Liquidator was found wanting in his conduct in expeditiously settling the ongoing liquidation of the Corporate Debtor. Conclusion - i) The claims must be filed within the prescribed timeline and failure to do so results in the finality of the Liquidator s decision. ii) The interest claims must be substantiated and included in the original claim filed with the Liquidator and cannot be introduced later. iii) The Liquidator s request for an NOC to settle sub-contractors claims was justified and within the scope of his duties. No error has been committed by the Adjudicating Authority in rejecting the application. There are no cogent grounds to interfere with the impugned order. There is no merit in the appeal - appeal dismissed.

Summary

The judgment involves an appeal before the National Company Law Appellate Tribunal (NCLAT) concerning the rejection of a claim by the Liquidator in the liquidation proceedings of a Corporate Debtor under the Insolvency and Bankruptcy Code, 2016 (IBC). The appeal was filed by the Appellant against the order of the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench-I) which dismissed the Appellant's application challenging the Liquidator's decision.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in the judgment include:

• Whether the Appellant's claim, including interest on delayed payment, should be accepted as part of the Corporate Insolvency Resolution Process (CIRP) costs under Section 53(1)(a) of the IBC.
• Whether the Appellant's failure to file their claim within the prescribed timeline affects their entitlement to the claimed amount, including interest, under the liquidation process.
• Whether the Liquidator's actions in seeking a No Objection Certificate (NOC) from the Appellant for settling claims of sub-contractors were justified.
• Whether the Appellant's reliance on Section 60(5) of the IBC to challenge the rejection of their claim was appropriate.

2. ISSUE-WISE DETAILED ANALYSIS

Claim for Interest as CIRP Costs

• Relevant Legal Framework and Precedents: The Appellant argued that their claim, including interest, should be treated as CIRP costs under Section 53(1)(a) of the IBC. They cited precedents such as Prashant Agarwal Vs Vikash Parasrampuria, which held that interest on delayed payment specified in an invoice entitles a creditor to a right to payment under Section 3(6) of the IBC.
• Court's Interpretation and Reasoning: The Tribunal noted that the Appellant failed to include the interest component in their claim filed with the Liquidator. The claim for interest was raised much later, which the Tribunal found to be an afterthought. The Tribunal emphasized that claims must be crystallized on the liquidation commencement date as per Regulation 16 of the IBBI (Liquidation Process) Regulations, 2016.
• Key Evidence and Findings: The Appellant's invoices dated 25.06.2019 for interest were raised long after the liquidation commencement date and were not part of the original claim filed.
• Application of Law to Facts: The Tribunal found that the Appellant's failure to file their claim, including interest, within the prescribed timeline led to the rejection of their claim. The Tribunal agreed with the Liquidator's decision to reject the claim for interest as it was not substantiated at the time of filing.
• Conclusions: The Tribunal upheld the Liquidator's rejection of the interest claim, stating that the Appellant could not introduce interest claims after the liquidation commencement date.

Timeliness of Claim Filing

• Relevant Legal Framework: Section 42 of the IBC provides that a creditor may appeal against the Liquidator's decision within fourteen days of receiving the decision.
• Court's Interpretation and Reasoning: The Tribunal noted that the Appellant failed to challenge the Liquidator's rejection of their claim within the prescribed timeline under Section 42 of the IBC. The Tribunal emphasized that statutory timelines must be adhered to.
• Conclusions: The Tribunal concluded that the Appellant's failure to challenge the rejection in a timely manner led to the finality of the Liquidator's decision.

Liquidator's Request for NOC

• Relevant Legal Framework: The Liquidator's role under the IBC includes ensuring the timely completion of the liquidation process.
• Court's Interpretation and Reasoning: The Tribunal found that the Liquidator's request for an NOC from the Appellant to settle the claims of sub-contractors was within the scope of his duties. The Tribunal noted that the Liquidator acted fairly to avoid duplication of claims and to protect the interests of all stakeholders.
• Conclusions: The Tribunal held that the Liquidator's actions were justified and that the Appellant's refusal to issue the NOC was unreasonable.

3. SIGNIFICANT HOLDINGS

• The Tribunal held that claims must be filed within the prescribed timeline, and failure to do so results in the finality of the Liquidator's decision.
• The Tribunal emphasized that interest claims must be substantiated and included in the original claim filed with the Liquidator, and cannot be introduced later.
• The Tribunal concluded that the Liquidator's request for an NOC to settle sub-contractors' claims was justified and within the scope of his duties.
• The Tribunal dismissed the appeal, finding no merit in the Appellant's contentions and upholding the Adjudicating Authority's order.