Insolvency claims must be properly substantiated; dividend entitlement may be examined, but recovery-driven claims are excluded.

The Tribunal dealt with three insolvency claims and distinguished between substantiated entitlement and recovery-driven demands. A dividend claim supported by shareholding documents was directed to be considered in accordance with law because the Resolution Professional had not placed the basis of rejection before the Tribunal. Claims founded on loan documents, dishonoured cheques and pending enforcement proceedings were not entertained, as the insolvency process cannot be used as a recovery forum where other remedies are already being pursued. A claim based on an unregistered memorandum of understanding and incomplete supporting material was also rejected, especially where civil and criminal proceedings were pending.

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Issues: (i) Whether the Resolution Professional was required to consider the first applicant's claim for dividend based on the shareholding documents and connected materials. (ii) Whether the second applicant's claim founded on loan documents, dishonoured cheques and pending recovery proceedings could be admitted in the insolvency process. (iii) Whether the third applicant's claim based on an unregistered memorandum of understanding and allied materials could be entertained in the insolvency process.

Issue (i): Whether the Resolution Professional was required to consider the first applicant's claim for dividend based on the shareholding documents and connected materials.

Analysis: The claim was rejected by the Resolution Professional on the premise that the applicant was not a preference shareholder as reflected in the latest audited balance sheet. The Resolution Professional did not place any objection before the Tribunal or produce the balance sheet relied upon. In these circumstances, the Tribunal directed the Resolution Professional to take appropriate action on the claim in accordance with law.

Conclusion: The first applicant's claim was directed to be considered in accordance with law, in favour of the applicant.

Issue (ii): Whether the second applicant's claim founded on loan documents, dishonoured cheques and pending recovery proceedings could be admitted in the insolvency process.

Analysis: The claim was linked to a settlement already pursued before the Lok Adalat and an execution proceeding was pending for enforcement of the same amount. The Tribunal held that the insolvency forum cannot be used as a recovery forum, and that where the applicant had already invoked the appropriate enforcement mechanism, the claim could not be pressed into the corporate insolvency resolution process for recovery of money.

Conclusion: The second applicant's claim was not entertained and the application was dismissed, against the applicant.

Issue (iii): Whether the third applicant's claim based on an unregistered memorandum of understanding and allied materials could be entertained in the insolvency process.

Analysis: The Tribunal noted that the applicant admitted that no right, title or interest had passed under the memorandum of understanding and that the claim lacked substantiation through a proper registered document. As parallel civil and criminal proceedings were already pending, the Tribunal held that the insolvency process could not be used as a money-recovery forum on such an incomplete basis.

Conclusion: The third applicant's claim was dismissed, against the applicant.

Final Conclusion: The Tribunal granted relief only on the first claim and declined the other two claims, leaving the applicants to pursue their remedies in the appropriate proceedings already invoked.

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