Tribunal Upholds Timely Claim Submission Rule to Safeguard Corporate Insolvency Process

The Tribunal held that accepting delayed claims beyond the stipulated period would disrupt the Corporate Insolvency Resolution Process (CIRP) and potentially lead to liquidation, contrary to the intent of the Insolvency and Bankruptcy Code (IBC). Referring to legal precedents, the Tribunal emphasized the importance of timely claim submission for the Resolution Applicant's clarity on liabilities. The Tribunal set aside the Adjudicating Authority's direction to consider a claim filed after a significant delay, as it could jeopardize the CIRP and approved Resolution Plan. The appeal was allowed.

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Issues Involved:
1. Timeliness of Claim Submission
2. Proper Service of Public Announcement
3. Efforts by the Resolution Professional (RP) to Obtain Records
4. Impact of Delayed Claims on the Corporate Insolvency Resolution Process (CIRP)
5. Legal Precedents and Statutory Provisions

Detailed Analysis:

1. Timeliness of Claim Submission:
The primary issue in this case revolves around the submission of a claim by the Respondent after a delay of 287 days. The RP rejected this claim on the grounds that it was submitted well beyond the stipulated 90-day period from the initiation of CIRP, as per Regulation 12(2) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The Appellant argued that accepting such a delayed claim would disrupt the CIRP and extend the process indefinitely, which contradicts the intent of the Insolvency and Bankruptcy Code (IBC).

2. Proper Service of Public Announcement:
The Adjudicating Authority held that service through paper publication is not proper service and suggested that personal service should have been effected. However, the Tribunal found this reasoning erroneous, as Regulation 6 of the IBBI Regulations mandates public announcement as the method for inviting claims, and there is no requirement for personal service. The Respondent admitted to having filed the claim through public notice but argued that certain debts recorded in the Corporate Debtor's books should not be extinguished due to non-filing within the stipulated period.

3. Efforts by the Resolution Professional (RP) to Obtain Records:
The Adjudicating Authority criticized the RP for not making sufficient efforts to obtain records from the ex-management. However, the Tribunal found that the RP had indeed made sincere efforts, including filing an application under Section 19 of the IBC for directions to the ex-management to provide records. This effort was not disputed by the Respondent, leading the Tribunal to conclude that the RP had fulfilled his duties as per the IBC and Regulations.

4. Impact of Delayed Claims on the Corporate Insolvency Resolution Process (CIRP):
The Tribunal emphasized that accepting claims after the extended period would disrupt the CIRP and could lead to liquidation, defeating the purpose of the IBC. The Tribunal cited previous judgments, including the case of Office of the Assistant State Tax Commissioner State Tax Department, Government of Maharashtra, which held that allowing late claims would result in complete disruption of the CIRP and potentially lead to liquidation. The Tribunal also referenced the case of Harish Polymer Product, highlighting that accepting late claims would burden the Resolution Applicants and could push the Corporate Debtor towards liquidation.

5. Legal Precedents and Statutory Provisions:
The Tribunal referred to the Supreme Court's judgment in CoC of Essar Steel India Ltd., which held that a successful Resolution Applicant should not face undecided claims after the Resolution Plan has been accepted. All claims must be submitted and decided by the RP to ensure the Resolution Applicant knows exactly what has to be paid. The Tribunal also noted that the Hon'ble Supreme Court in Brilliant Alloys Pvt. Ltd. had held that the stipulations in the Regulations are directory and not mandatory, depending on the facts of each case.

Conclusion:
The Tribunal concluded that the Adjudicating Authority had erroneously directed the RP to consider the Respondent's claim, which was filed after a delay of 287 days and after the CoC had already approved the Resolution Plan. The impugned order was set aside, and the appeal was allowed.

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