2018 (3) TMI 573 - Tri - Insolvency and Bankruptcy

Tribunal favors UCO Bank appeal under Insolvency Code, emphasizes procedural fairness

In Re : UCO Bank

The Tribunal ruled in favor of the appellant Bank, UCO Bank, in the appeal challenging the rejection of its claim by the Liquidator under the Insolvency ... Condonation of delay - Rejection of Financial Creditors claim by the Liquidator as per an order of rejection by way of an Electronic Mail - whether the adjudicating authority can condone the delay and direct the liquidator to reconsider the claim on its merits? - Held that:- On reading of Rules 177 and 178, of the Companies (Court) Rules, 1959 and reading section 40(1) of the Code, it appears that one more opportunity can be allowed to the claimant here in the instant case who failed in submission of its claim in time. But there is no undue delay though the reason for the delay in submission of the claim is found not at all satisfactory. Delay condoned. Issues:- Appeal challenging order of rejection of claim by Liquidator under Insolvency and Bankruptcy Code, 2016.- Timeliness of appeal filing under Section 42 of the IB Code.- Delay in submission of claim by Financial Creditor.- Liquidator's rejection of claim and grounds for rejection.- Authority to condone delay in claim submission.- Applicability of Companies Act provisions and Rules in the case.Analysis:1. The judgment revolves around an appeal filed by a Financial Creditor, UCO Bank, challenging the rejection of its claim by the Liquidator under the Insolvency and Bankruptcy Code, 2016. The appeal was filed within the prescribed time limit of 14 days as per Section 42 of the Code, making it timely.2. The case involves a situation where the appellant Bank failed to submit its claim by the specified deadline due to ongoing renovation and repair work at its premises. The delay in submission led to the Liquidator rejecting the claim, citing the lack of power to condone delays beyond the stipulated period.3. The Liquidator's stance was that as per Section 38(1) of the Code, claims must be submitted within 30 days from the commencement of the liquidation process. Since the appellant missed the deadline, the claim was rejected without consideration, highlighting the importance of timely claim submission.4. The judgment delves into the question of whether the Liquidator has the authority to condone delays in claim submission. While the Liquidator argued against such power, the Tribunal analyzed relevant provisions of the Code and Companies Act to determine the course of action in case of delayed claims.5. By referencing Section 40(1) and (2) of the Code, the Tribunal highlighted the Liquidator's duty to verify and either admit or reject claims after due consideration. The judgment emphasized the need for proper verification and assessment of claims before outright rejection based solely on delay.6. Additionally, the Tribunal considered the provisions of the Companies Act, 1956, and relevant Rules to explore the possibility of granting relief to the claimant despite the delay. The judgment cited precedents and legal principles to support the decision to condone the delay in claim submission and direct the Liquidator to reconsider the claim.7. Ultimately, the Tribunal ruled in favor of the appellant Bank, condoning the delay in claim submission and instructing the Liquidator to reassess the claim in accordance with the Code and Regulations. The judgment underscored the importance of procedural fairness and the need to balance strict timelines with equitable considerations in insolvency proceedings.