2021 (8) TMI 34 - AT - Insolvency and Bankruptcy

Approval of Resolution Plan - Seeking consideration of claim of Respondent on merits - Section 61 of the Insolvency and Bankruptcy Code, 2016 - For inviting claims, service through paper publication is not proper service - HELD THAT - In exercise of the powers conferred under Ss. 5, 7, 9, 14, 15, 17, 18, 21, 24, 25, 29, 30, 196 and 208 read with s. 240 of IBC, the Insolvency and Bankruptcy Board of India framed the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (Regulations). Regulation 6 provides the manner of public announcement. There is no allegation against the erstwhile IRP that he has not made a public announcement as per the manner provided in Regulation 6. There is no provision in the Regulations that for inviting claims, the IRP/RP is required to effect personal service. The RP has not made necessary efforts to get the records from ex-management - HELD THAT - It is not the case of the Respondent that RP has deliberately acted so the rightful creditors may not able to file their claims and thereby they may not become the member of CoC. It is pointed out that the RP has indeed made sincere efforts to procure the records of the Corporate Debtor. The IRP has also filed an Application under Section 19 of the IBC seeking proper direction of the Ld. Adjudicating Authority to the ex-management to provide all the records. This fact is not denied by the Respondent in his reply to the Appeal. Thus, we are unable to hold that the RP has failed to do his bounden duty as assigned in the IBC and Regulations. The RP has not gathered information about the creditors of Corporate Debtor - HELD THAT - Ld. Adjudicating Authority is not pointing out that what type of efforts RP should make to ascertain the Creditors. Aforesaid finding is a general remark, therefore we cannot hold that the RP has failed to perform his duty assigned in the IBC and Regulations. The RP has hurriedly wrapped up the company with a Resolution Plan - HELD THAT - It is apparent that the CIRP was conducted by the IRP/RP as per the provisions of IBC and Regulations and there is nothing on record to presume that the IRP/RP have hurriedly wrapped up the company with the Resolution Plan. The RP should not have summarily rejected the claim of the Respondent on the ground that claim has not been filed within time and the Resolution Plan has already been approved by the CoC - HELD THAT - Whenever any claim is filed after extended period provided in Regulation 12 (2) of the Regulations, the RP should have rejected the claim. The Legislation has not provided any discretion to RP for admitting the claim after the extended period. When the Resolution Plan has already been approved by the CoC and it is pending before the Adjudicating Authority for approval, at this stage, if new claims are entertained the CIRP would be jeopardized and the Resolution Process may become more difficult. Keeping in view the object of the IBC which is resolution of Corporate Debtor in time bound manner to maximize the value, if such request of claimant is accepted the purpose of IBC would be defeated - the Ld. Adjudicating Authority has erroneously directed the RP to consider the claim of the Respondent which is apparently filed after a delay of 287 days, before that the CoC has already approved the Resolution Plan. Appeal allowed.

Issues Involved:
1. Timeliness of Claim Submission
2. Proper Service of Public Announcement
3. Efforts by the Resolution Professional (RP) to Obtain Records
4. Impact of Delayed Claims on the Corporate Insolvency Resolution Process (CIRP)
5. Legal Precedents and Statutory Provisions

Detailed Analysis:

1. Timeliness of Claim Submission:
The primary issue in this case revolves around the submission of a claim by the Respondent after a delay of 287 days. The RP rejected this claim on the grounds that it was submitted well beyond the stipulated 90-day period from the initiation of CIRP, as per Regulation 12(2) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The Appellant argued that accepting such a delayed claim would disrupt the CIRP and extend the process indefinitely, which contradicts the intent of the Insolvency and Bankruptcy Code (IBC).

2. Proper Service of Public Announcement:
The Adjudicating Authority held that service through paper publication is not proper service and suggested that personal service should have been effected. However, the Tribunal found this reasoning erroneous, as Regulation 6 of the IBBI Regulations mandates public announcement as the method for inviting claims, and there is no requirement for personal service. The Respondent admitted to having filed the claim through public notice but argued that certain debts recorded in the Corporate Debtor's books should not be extinguished due to non-filing within the stipulated period.

3. Efforts by the Resolution Professional (RP) to Obtain Records:
The Adjudicating Authority criticized the RP for not making sufficient efforts to obtain records from the ex-management. However, the Tribunal found that the RP had indeed made sincere efforts, including filing an application under Section 19 of the IBC for directions to the ex-management to provide records. This effort was not disputed by the Respondent, leading the Tribunal to conclude that the RP had fulfilled his duties as per the IBC and Regulations.

4. Impact of Delayed Claims on the Corporate Insolvency Resolution Process (CIRP):
The Tribunal emphasized that accepting claims after the extended period would disrupt the CIRP and could lead to liquidation, defeating the purpose of the IBC. The Tribunal cited previous judgments, including the case of Office of the Assistant State Tax Commissioner State Tax Department, Government of Maharashtra, which held that allowing late claims would result in complete disruption of the CIRP and potentially lead to liquidation. The Tribunal also referenced the case of Harish Polymer Product, highlighting that accepting late claims would burden the Resolution Applicants and could push the Corporate Debtor towards liquidation.

5. Legal Precedents and Statutory Provisions:
The Tribunal referred to the Supreme Court's judgment in CoC of Essar Steel India Ltd., which held that a successful Resolution Applicant should not face undecided claims after the Resolution Plan has been accepted. All claims must be submitted and decided by the RP to ensure the Resolution Applicant knows exactly what has to be paid. The Tribunal also noted that the Hon'ble Supreme Court in Brilliant Alloys Pvt. Ltd. had held that the stipulations in the Regulations are directory and not mandatory, depending on the facts of each case.

Conclusion:
The Tribunal concluded that the Adjudicating Authority had erroneously directed the RP to consider the Respondent's claim, which was filed after a delay of 287 days and after the CoC had already approved the Resolution Plan. The impugned order was set aside, and the appeal was allowed.

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