Tribunal dismisses Company Appeal, upholds rejection during liquidation process

The tribunal dismissed the Company Appeal, finding no merit in the appellant's contentions. The delay in filing the appeal was condoned due to valid reasons. The rejection of the appellant's claim during the liquidation process was upheld, emphasizing that claims rejected during the Corporate Insolvency Resolution Process cannot be refiled in liquidation. The appellant's claim to be considered a 'Financial Creditor' was denied as it failed to demonstrate disbursement to the corporate debtor as required by the Insolvency and Bankruptcy Code. The tribunal concluded that the appellant's claim was not maintainable and dismissed the appeal.

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Issues Involved:
1. Condonation of delay in filing the appeal.
2. Rejection of the appellant's claim by the liquidator during the liquidation process.
3. Appellant's entitlement as a 'secured creditor' and its claim to be considered as a 'Financial Creditor' under the Insolvency and Bankruptcy Code (IBC), 2016.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The appellant sought condonation for a 13-day delay in filing the appeal, attributing the delay to the time taken to obtain a certified copy of the order due to the non-functional status of the Adjudicating Authority and local holidays. The tribunal, satisfied with the reasons provided, condoned the delay in the interest of justice.

2. Rejection of the Appellant's Claim by the Liquidator During the Liquidation Process:
The appellant, Axis Bank Ltd, challenged the rejection of its claim by the liquidator, arguing that it had the right to submit its claim again during the liquidation process despite its rejection during the Corporate Insolvency Resolution Process (CIRP). The appellant contended that liquidation is a separate proceeding, providing a second opportunity for claimants. The liquidator, however, opposed this, stating that the appellant's claim had already been considered and rejected during the CIRP and that the appellant did not appeal this rejection.

The tribunal noted that the object of the IBC is to ensure that the CIRP and liquidation processes are completed in a time-bound manner. It held that claims rejected during the CIRP cannot be refiled during the liquidation process, as this would undermine the purpose of the IBC. The tribunal emphasized that the liquidation process is a continuation of the insolvency proceedings and that decisions taken by the Interim Resolution Professional (IRP) or Resolution Professional (RP) cannot be reversed by the liquidator unless new developments arise.

3. Appellant's Entitlement as a 'Secured Creditor' and its Claim to be Considered as a 'Financial Creditor':
The appellant argued that it should be considered a 'secured creditor' as it had disbursed substantial amounts to the corporate debtor based on a tripartite arrangement with the home buyers and the corporate debtor. The appellant claimed that it had a lien over the flats/units financed and that the home buyers had subrogated their rights in favor of the appellant. The appellant also cited various legal provisions and previous judgments to support its claim.

The respondent, however, contended that the appellant's claim was not maintainable as the money was disbursed to the home buyers and not directly to the corporate debtor. The respondent argued that the appellant's claim was based on loan agreements with the home buyers, and thus, the time value of money was in respect of the borrowers (home buyers) and not the corporate debtor.

The tribunal held that the appellant had not demonstrated that the money claimed was disbursed to the corporate debtor for the time value of money as required under Section 5(8) of the IBC. It noted that the appellant had the right to proceed against the home buyers based on the loan agreements but could not claim against the corporate debtor as a financial creditor.

Tribunal's Powers and Jurisdiction:
The tribunal emphasized that it has the power to look behind the judgment on which a creditor bases its proof to decide whether the debt is genuinely due. It stated that the tribunal and the liquidator must act justly and fairly while dealing with claims. The tribunal also clarified that Section 60(5) of the IBC does not confer all-encompassing jurisdiction to resolve any issue related to the corporate debtor unless it pertains to insolvency resolution or liquidation proceedings.

Assessment and Conclusion:
The tribunal concluded that the appellant had not availed the remedy of appealing the liquidator's decision as provided under Section 42 of the IBC. It held that the appellant's claim could not be entertained as it was based on the same debt already rejected during the CIRP. The tribunal found no legal error in the adjudicating authority's decision to dismiss the appellant's application and thus dismissed the appeal.

Result:
The tribunal dismissed the Company Appeal (AT)(CH)(Insolvency) No.261/2021, finding no merit in the appellant's contentions.

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