Claims Must Be Considered on Merits, Not Rejected for Delay, Per IBC 2016 Ruling. The Adjudicating Authority, addressing an application under Section 60(5) of the IBC, 2016, ruled that a claim rejected by the Resolution Professional ...
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Claims Must Be Considered on Merits, Not Rejected for Delay, Per IBC 2016 Ruling.
The Adjudicating Authority, addressing an application under Section 60(5) of the IBC, 2016, ruled that a claim rejected by the Resolution Professional (RP) solely due to delay must be reconsidered. The applicants provided valid reasons for their late submission, and the Authority directed the RP to accept and verify the claim on its merits. This decision emphasized that claims should not be dismissed solely on procedural grounds, aligning with IBC objectives. Consequently, the RP was instructed to proceed with the claim's verification and determination, resulting in the application being allowed and the matter disposed of.
Issues: Application under Section 60(5) of IBC, 2016 against rejection of claim solely based on delay.
Analysis: The applicants filed a claim under Section 60(5) of the IBC, 2016 against the rejection of their claim by the Resolution Professional (RP) solely on the grounds of delay. The applicants contended that they were unaware of the initiation of the Corporate Insolvency Resolution Process (CIRP) due to being out of station and not receiving public announcements made in newspapers. They filed their financial claims after the deadline, citing lack of awareness. The RP rejected the claim based on untimely submission, stating that it was received after the approval of the Resolution Plan by the Committee of Creditors (COC) and after the expiry of the CIRP period.
The RP argued that they did not have the authority to accept claims beyond the prescribed time limit. However, the applicants relied on legal precedents, including the judgments in "Vijay Kumar Jain vs. Standard Chartered Bank & Ors. 20169 SCC Online 103" and "Swiss Ribbons Pvt. Ltd. v. Union of India 2019 (1) SCC 17," to support their position that the RP's role is limited to receiving, verifying, and correlating claims, not adjudicating them. They also cited a judgment from the NCLT Principal Bench, New Delhi, in the case of "Clutch Auto Limited," which held that the Adjudicating Authority could condone delays in filing claims with valid reasons, especially during ongoing liquidation processes.
The Adjudicating Authority, considering the facts and legal precedents, concluded that the claim could not be rejected solely based on delay. The Authority found that the applicants provided sufficient reasons for the delay and directed the RP to accept the claim for further consideration based on its merits and proper verification. This decision was deemed necessary to align with the objectives of the IBC. Consequently, the RP was instructed to accept the applicant's claim, verify and determine it based on the evidence presented, and proceed accordingly. As a result, the application was allowed, and the matter was disposed of.
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