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2022 (1) TMI 164 - AT - Insolvency and BankruptcyRejection of claims which are delayed - assignment of debt by United Bank of India in favour of ARCIL - objection to acceptance of ARCIL claim on account of assignment from United Bank of India on grounds of limitation - HELD THAT - The present is a case where Appellant was complaining about the addition of certain claims of the Financial Creditor Respondent No.2, consequent upon assignment by United Bank of India had become barred by time. Section 7 Application was filed by Respondent No.2 on the ground of default as mentioned in the Application. The Respondent No.2 has filed the Application on the basis of inclusion of assignment by ICICI Bank. The objection raised by the Appellant is with regard to assignment by United Bank of India, which objection has been specifically taken in email dated 14th June, 2020 as well as in the Application being I.A. No.415 of 2020 filed by the Appellant. The Appellant s grievance was that there has been increase in the voting shares of Respondent No.2 consequent to admitting assignment of United Bank of India by which voting shares increased by more than 8.4%. The case of the Appellant was that the United Bank of India placed the account of Corporate Debtor as NPA in the year 2015 and the limitation of three years came to an end in the year 2018, hence, the said claim stood barred by time. When an Application under Section 7 cannot be entertained for a debt, which is barred by time and is liable to be rejected, any addition in the claim, which may fall into the category of time barred debt, also cannot be entertained. The Appellant having objected to the addition of claim consequent to assignment by United Bank of India, it had every right to agitate the issue and pray for adjudicatory orders from the Adjudicating Authority, which he did by filing an Application being I.A. No.415 of 2020. The Adjudicating Authority by misplaced observation rejected the Application without considering the merits of the claim. The Adjudicating Authority having not considered the claim on merits, ends of justice would be met in directing for fresh consideration by the Adjudicating Authority - Fresh consideration of Application being I.A. No.415 of 2020 should be done by the Adjudicating Authority, only when Resolution Plan has not yet been approved. In event, the Resolution Plan has already been approved by the Adjudicating Authority, the Application I.A. No.415 of 2020, needs no further consideration and be treated to be as closed. Appeal disposed off.
Issues Involved:
1. Legality of the assignment of debt by United Bank of India to Respondent No.2. 2. Applicability of the Limitation Act, 1963 to the Corporate Insolvency Resolution Process (CIRP). 3. Role and duties of the Resolution Professional in accepting and verifying claims. 4. Jurisdiction of the Adjudicating Authority in adjudicating claims against the Corporate Debtor. 5. Commercial wisdom of the Committee of Creditors (CoC) and its interference by the Adjudicating Authority. Detailed Analysis: 1. Legality of the Assignment of Debt by United Bank of India to Respondent No.2: The Appellant challenged the inclusion of the claim by Respondent No.2, which was based on an assignment of debt by United Bank of India, arguing that the claim was time-barred. The United Bank of India had classified the account of the Corporate Debtor as an NPA in 2015, and hence, the limitation period ended in 2018. The Appellant contended that the dues of United Bank of India should not have been included in Respondent No.2’s claim as they were barred by limitation. 2. Applicability of the Limitation Act, 1963 to the CIRP: The Appellant argued that by virtue of Section 238A of the Insolvency and Bankruptcy Code (IBC), the Limitation Act applies to proceedings under Section 7 of the IBC, and thus, time-barred claims should not be considered. The Hon’ble Supreme Court in B.K. Educational Services Private Limited vs. Parag Gupta and Associates held that time-barred debts cannot be revived under the IBC. The Insolvency Law Committee Report of March 2018 also emphasized that the IBC does not intend to give new life to time-barred debts. 3. Role and Duties of the Resolution Professional in Accepting and Verifying Claims: The Resolution Professional’s duties include receiving, collating, and verifying claims submitted by creditors. However, the Resolution Professional does not have adjudicatory powers. The Hon’ble Supreme Court in Swiss Ribbons Private Limited vs. Union of India clarified that the Resolution Professional's role is administrative and not adjudicatory. Regulation 12 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, allows submission of claims till the approval of a resolution plan by the CoC. 4. Jurisdiction of the Adjudicating Authority in Adjudicating Claims Against the Corporate Debtor: Section 60 of the IBC provides that the Adjudicating Authority has jurisdiction to entertain or dispose of any claim made by or against the Corporate Debtor. The Appellant filed I.A. No.415 of 2020 under Section 60, seeking adjudication on the time-barred claim included by Respondent No.2. The Adjudicating Authority has the jurisdiction to adjudicate on such claims, but it rejected the Appellant’s application based on the commercial wisdom of the CoC. 5. Commercial Wisdom of the CoC and Its Interference by the Adjudicating Authority: The Adjudicating Authority observed that the commercial wisdom of the CoC cannot be interfered with, as established by the Hon’ble Supreme Court in Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta. However, the Tribunal noted that this principle does not apply to the present case, where the issue was the inclusion of a time-barred claim. The Adjudicating Authority should have considered the merits of the Appellant’s claim regarding the time-barred debt. Conclusion: The Tribunal concluded that the order of the Adjudicating Authority was unsustainable and deserved to be set aside. The Tribunal directed fresh consideration of I.A. No.415 of 2020 by the Adjudicating Authority, provided the Resolution Plan had not yet been approved. If the Resolution Plan had already been approved, the application would be treated as closed. The appeal was disposed of with no costs.
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