Consolidation of claims [ Section 38 ] - Insolvency Resolution And Liquidation For Corporate Persons - IBC

Consolidation of claims One of the first duties of the liquidator, upon his appointment, is to collect, consolidate, and verify the claims of stakeholders of the CD. Sections 38 to 41 (both inclusive) of the IBC contain provisions governing, respectively, consolidation, verification, admission or rejection, and valuation of claims by the liquidator. These provisions should be read along with regulation 12 and Chapter V of the Liquidation Process Regulations. Public announcement by liquidator Regulation 12 of the Liquidation Process Regulations deals with the public announcement to be made by the liquidator to call for claims against the CD. (1) The liquidator shall make a public announcement in Form B of Schedule II within five days from his appointment. (2) The public announcement shall- (a) call upon stakeholders to submit their claims or update their claims submitted during the corporate insolvency resolution process, as on the liquidation commencement date; and (b) provide the last date for submission or updation of claims , which shall be thirty days from the liquidation commencement date. (c) provide that where a stakeholder does not submit its claims during the liquidation process , the claims submitted by such a stakeholder, and duly collated by the interim resolution professional or resolution professional, as the case may be, during the corporate insolvency resolution process under the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, shall be deemed to be submitted under section 38 . (3) The announcement shall be published- (a) in one English and one regional language newspaper with wide circulation at the location of the registered office and principal office, if any, of the corporate debtor and any other location where in the opinion of the liquidator, the corporate debtor conducts material business operations; (b) on the website, if any, of the corporate debtor; and (c) on the website, if any, designated by the Board for this purpose. Collection of claim by the liquidator [ Section 38(1) ] The liquidator shall receive or collect the claims of creditors within a period of 30 days from the date of the commencement of the liquidation process. As per regulation 16 of the Liquidation Process Regulations, the claims, including interest if any, are to be submitted by the stakeholders by the last day specified in the public announcement (which is to be within a period of 30 days from the LCD). The claim needs to be proved as on the LCD. Submission of claim [ Section 38(2) ] A financial creditor may submit a claim to the liquidator by providing a record of such claim with an information utility. Provided that where the information relating to the claim is not recorded in the information utility, the financial creditor may submit the claim in the same manner as provided for the submission of claims for the operational creditor under section 38(3) . The form and manner of claim submission by creditors is provided in the Liquidation Process Regulations. Regulation 17 provides for submission of a claim by an OC (other than a workman or employee) in person, by post, or by electronic means using Form C of Schedule II. Regulation 18 provides for submission of a claim by an FC by electronic means using Form D of Schedule II. Regulation 19 provides for submission of a claim by a workman or employee in person, by post, or by electronic means using Form E of Schedule II. Regulation 20 provides for submission of a claim by any other stakeholder in person, by post, or by electronic means using Form G of Schedule II. In the case of workmen and employees, they may submit the claim directly, or an authorized representative may submit one proof of claim on behalf of the workmen or employees using Form F of Schedule II. Importantly, even where a workman or employee does not make a claim, the liquidator may admit their claims on the basis of the CD s books of accounts. Supportive Document [ Section 38(3) ] An operational creditor may submit a claim to the liquidator in such form and in such manner and along with such supporting documents required to prove the claim as may be specified by the Board. Extent of claims to be submitted [ Section 38(4) ] A creditor who is partly a financial creditor and partly an operational creditor shall submit claims to the liquidator to the extent of his financial debt in the manner as provided in section 38(2) and to the extent of his operational debt under section 38(3). Modification in the Claim [ section 38(5) ] A creditor may withdraw or vary his claim under this section within 14 days of its submission. In addition to proving its claim, a secured creditor would also need to prove the existence of security in its favor. As per regulation 21 of the Liquidation Process Regulations, this may be proved on the basis of records available in an IU (if any), or a certificate of registration of charge issued by the Registrar of Companies, or proof of registration of charge with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India. Regulation 22 of the Liquidation Process Regulations provides that, where a person seeks to prove a debt in respect of a bill of exchange, promissory note, or other negotiable instrument or security of a like nature for which the CD is liable, such bill of exchange, note, instrument, or security, as the case may be, shall be shown to the liquidator before the claim is admitted.