Tribunal directs RP to register claim, emphasizes adherence to Insolvency & Bankruptcy Code

The Tribunal partially allowed the application by directing the Resolution Professional (RP) to register the Applicant's total claim as an Operational Creditor and update relevant documents. The RP's rejection of the interest component without reasons was deemed legally unsustainable. The Applicant's claim, less than 10% of the Corporate Debtor's debts, limited opposition to the Resolution Plan. The RP lacked adjudicatory powers, and the Tribunal set aside the RP's communication, emphasizing adherence to the Insolvency & Bankruptcy Code. The application was disposed of with no costs awarded.

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Issues Involved:

1. Admission of the Applicant's claim as an Operational Creditor.
2. Rejection of the interest component of the claim by the Resolution Professional (RP).
3. Powers and duties of the RP under the Insolvency & Bankruptcy Code, 2016.
4. Legal validity of the RP's actions and communications.

Issue-wise Detailed Analysis:

1. Admission of the Applicant's Claim as an Operational Creditor:

The Applicant, M/s. Reliance Industries Limited, filed a claim as an Operational Creditor in the Corporate Insolvency Resolution Process (CIRP) of M/s. Essar Steel India Limited (Corporate Debtor), amounting to Rs. 16,41,67,107/-. This claim was based on work done for the construction of the Singanpur Weir-cum-Causeway Project (SWP) under a Tripartite Agreement dated 09.11.1993. The Applicant contended that the Corporate Debtor and another participating industry, L&T, had defaulted on their pro rata contributions for additional water withdrawal.

2. Rejection of the Interest Component by the RP:

The RP partially admitted the Applicant's claim, recognizing only Rs. 99,07,972/- of the principal amount after adjusting interim payments, but rejected the interest component of Rs. 15,42,59,135/-. The RP's rejection was based on the contention that the liability to pay interest was disputed and that the RP lacked adjudicatory powers to determine such disputes. The Applicant argued that the interest was due as per the terms of the Tripartite Agreement and MoU, which stipulated a 24% per annum interest on defaults.

3. Powers and Duties of the RP under the Insolvency & Bankruptcy Code, 2016:

The Tribunal emphasized that the RP's role is to collate and verify claims and place them before the Committee of Creditors (CoC) for consideration. The RP is not vested with adjudicatory powers to resolve disputes regarding claims. The Tribunal referred to relevant sections of the Insolvency & Bankruptcy Code, 2016, including Sections 21, 25, and 29, which outline the RP's duties and responsibilities, such as preserving the corporate debtor's assets, maintaining an updated list of claims, and preparing the information memorandum.

4. Legal Validity of the RP's Actions and Communications:

The Tribunal found that the RP's communication dated 14.05.2018, which rejected the interest component of the Applicant's claim, lacked reasons and was not in conformity with the provisions of the Insolvency & Bankruptcy Code. The Tribunal noted that the RP should have registered the claim as submitted by the Operational Creditor after verification and included it in the Memorandum of Information. The Tribunal cited precedents, including the Supreme Court's decisions in Arcelormittal India (P.) Ltd. v. Satish Kumar Gupta and Swiss Ribbons (P.) Ltd. v. Union of India, which support the view that the RP does not have adjudicatory powers.

Conclusion:

The Tribunal concluded that the RP's rejection of the Applicant's claim without providing reasons was not legally sustainable. The Tribunal set aside the RP's communication dated 14.05.2018 and directed the RP to update the Applicant's total claim in the relevant documents, including the List of Creditors and Memorandum of Information. The Tribunal also noted that the Applicant's claim was less than 10% of the total debts due by the Corporate Debtor, which limited the Applicant's ability to oppose the proposed Resolution Plan.

Order:

The Tribunal partly allowed the application, directing the RP to register the Applicant's total claim and communicate the updated status to the Applicant. The application was disposed of with no order as to costs.

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