2022 (9) TMI 1066 - AT - Insolvency and Bankruptcy

Consideration and acceptance of claim filed by the Respondent as a Financial Creditor in Form-C to the Committee of Creditors (CoC) - consideration of reconstitution of the CoC - HELD THAT - The Respondent did not file the claim before the RP during CIRP period therefore, there was no question of considering the same by the CoC at such a belated stage - The Hon ble Supreme Court in GHANASHYAM MISHRA AND SONS PRIVATE LIMITED THROUGH THE AUTHORIZED SIGNATORY VERSUS EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED THROUGH THE DIRECTOR ORS. 2021 (4) TMI 613 - SUPREME COURT , the Hon ble Supreme Court held that the resolution plan approved by the Adjudicating Authority shall also be binding on the Central Government, any State Government or any local authority to whom a debt is owed in respect of payment of dues arising under any law for the time being enforce, such as authorities to whom statutory dues are owed, including tax authorities. However, in the present case, an application for approval of plan was pending before the Adjudicating Authority and the Adjudicating Authority vide the impugned order disposed of the said I.A. and against the same an appeal is also pending before this Tribunal, in which the matter was heard and Reserved for Orders - this Tribunal finds that the Claim of the Respondent is belated and cannot be considered and the finding of the Adjudicating Authority in directing the Appellant / RP to place the Claim of the Respondent in Form-C before CoC per se illegal and unsustainable. Accordingly, the point is answered against the Respondent. Whether the Resolution Professional has power to admit the Claims suo-motu? - HELD THAT - The I B Code, 2016, prescribes the duties to be performed by the Interim Resolution Professional and Resolution Professional as per Section 18 and Section 25 of the Code. The IBBI CIRP Regulations prescribed the procedure to be adopted followed. As per Chapter IV Regulation 7 the claims by Operational Creditor to be submitted with proof to the IRP in Form-B and as per Regulation 8 of the Regulations the Financial Creditors shall submit the Claims to the IRP in Form-C. After receipt of claims, the IRP shall verify the Claims in accordance with Regulation 13 and the IRP maintained list of creditors containing Names of Creditors along with the amount claimed by them, the amount of their Claims admitted and the Security Interest, if any, in respect of such claims. There is no such provision that the IRP shall admit the Claim without filing a Claim either in Form-B or in Form-C. Therefore, this Tribunal, is of the view that the IRP suo-motu cannot admit the Claims without their being a Claim by the Claimants viz. Operational Creditors, Financial Creditors and the Claims by other Creditors. Every Claim shall be submitted by the Claimant with proof. Accordingly, the issue is answered. This Tribunal comes to a resultant conclusion that the Order passed by the Adjudicating Authority is per se illegal and unjustifiable - Appeal allowed.

Summary

Issues Involved:
1. Whether the Respondent's claim qualifies as a financial debt.
2. Whether the claim was filed within the prescribed timelines.
3. Whether the Resolution Professional (RP) can admit claims suo motu.

Issue-wise Detailed Analysis:

1. Whether the Respondent's claim qualifies as a financial debt:
The Respondent, the State of Karnataka, extended a loan facility to the Corporate Debtor under a special incentives and concessions scheme, which included an interest-free soft loan in the nature of deferment of 75% of eligible gross Value Added Tax (VAT). The Corporate Debtor was obligated to repay the loan in 10 equal installments starting from the 11th year. The Appellant argued that the claim did not qualify as a financial debt since there was no disbursement of money and no interest charged. However, the Adjudicating Authority held that the transaction amounted to a "Financial Debt" under Section 5(8) of the Insolvency and Bankruptcy Code (IBC), stating that the definition of financial debt includes interest-free loans advanced to finance business operations. The Tribunal, however, disagreed, stating that the arrangement did not involve the time value of money and thus did not qualify as a financial debt. The Tribunal concluded that the claim might be in the nature of operational debt as defined under Section 5(21) of the Code, which includes statutory dues like VAT.

2. Whether the claim was filed within the prescribed timelines:
The Respondent filed its claim more than 800 days after the initiation of the Corporate Insolvency Resolution Process (CIRP) and almost a year after the approval of the resolution plan by the Committee of Creditors (CoC). The Tribunal noted that the Respondent failed to file its claim within the stipulated period despite public announcements and advertisements. The Tribunal referenced previous judgments, emphasizing that the CIRP is a time-bound process and late claims cannot be entertained as they would disrupt the resolution process. The Tribunal found the Respondent's claim to be belated and thus not admissible.

3. Whether the Resolution Professional (RP) can admit claims suo motu:
The Tribunal clarified that the RP cannot admit claims suo motu without a formal claim being submitted by the creditors. The IBC and its regulations prescribe the procedure for submitting claims, which must be followed. The Tribunal emphasized that every claim must be submitted with proof in the prescribed forms (Form-B for operational creditors and Form-C for financial creditors). The Tribunal concluded that the RP does not have the authority to admit claims without them being formally filed.

Conclusion:
The Tribunal set aside the order passed by the Adjudicating Authority, which had directed the RP to admit the Respondent's claim as a financial creditor and to consider the reconstitution of the CoC. The Tribunal found the order to be illegal and unjustifiable, allowing the appeal and making the interim order dated 03.08.2021 absolute.