Tribunal Rules in Favor of BMW India in Insolvency Case, Halts Liquidation

The Tribunal found in favor of the applicant, BMW India Private Limited, in the case. It held that the Resolution Professional (RP) acted beyond the scope of verifying claims by rejecting the applicant's claim and adjudicating it. The Tribunal directed the RP to admit the applicant's claims as a Financial Creditor, annulled the resolution to liquidate the Corporate Debtor due to improper formation of the Committee of Creditors, and ordered an interim halt to liquidation proceedings. The new RP was instructed to reconstitute the CoC and proceed with the Corporate Insolvency Resolution Process (CIRP) in accordance with the IBC regulations.

---

---

Issues Involved:
1. Rejection of claim verification order.
2. Admission of Form C and Form B claims.
3. Annulment of the resolution to liquidate the Corporate Debtor.
4. Interim order to halt liquidation proceedings.

Issue-wise Detailed Analysis:

1. Rejection of Claim Verification Order:
The applicant, BMW India Private Limited, filed for the rejection of the claim verification order dated 12.05.2021. The Resolution Professional (RP) rejected the claim on the grounds that the applicant is not a Financial Creditor of the Corporate Debtor. The RP argued that the term loan agreement dated 22.03.2017 was novated by the Settlement Deed dated 04.09.2019, thus altering the nature of the financial debt. The Tribunal found that the RP acted beyond the scope of verifying the truth and correctness of the documents and instead adjudicated the claim, which is not within the RP’s purview.

2. Admission of Form C and Form B Claims:
The applicant sought the admission of Form C dated 07.05.2021 and Form B dated 16.05.2021. The RP rejected the Form C claim stating that the financial debt was merged with other claims under the Settlement Deed, making it impossible to identify the financial debt. The Tribunal noted that the RP’s role is limited to verifying claims and not adjudicating them. The Tribunal emphasized that the RP must verify whether the claims are true and correct and not delve into the factual scenario between parties. The Tribunal concluded that the applicant’s claim falls under the purview of Financial Debt as defined under Section 5(8) of the IBC, 2016, and should be admitted.

3. Annulment of the Resolution to Liquidate the Corporate Debtor:
The applicant requested the annulment of the resolution passed by the Committee of Creditors (CoC) on 18.05.2021 to liquidate the Corporate Debtor. The Tribunal found that the formation of the CoC was null and void as the RP did not verify and admit the claims properly before assigning voting shares to creditors. Consequently, the decisions taken by the illegally constituted CoC, including the resolution to liquidate the Corporate Debtor, were deemed vitiated.

4. Interim Order to Halt Liquidation Proceedings:
The applicant sought an interim order to halt the liquidation proceedings until the disposal of the present application. The Tribunal noted that the application filed by the RP for liquidation of the Corporate Debtor under Section 33(2) of the IBC was rejected, and a fresh IRP was appointed. The Tribunal directed the new IRP to reconstitute the CoC with the applicant included as a Financial Creditor and to take further steps for the Corporate Insolvency Resolution Process (CIRP).

Findings and Conclusion:
The Tribunal found that the RP acted beyond his scope by adjudicating the claims rather than verifying them. The Tribunal declared the applicant as a Financial Creditor and directed the new IRP to reconstitute the CoC and proceed with the CIRP. The Tribunal emphasized the importance of protecting the interests of creditors and adhering to the provisions of the IBC and its regulations. The application IA (IBC)/100/KOB/2021 was disposed of with the above directions.

Dated: 18th November, 2021.

---