2022 (3) TMI 950 - AT - Insolvency and Bankruptcy

Appellate Tribunal overturns decision to allow delayed claim in insolvency case, citing efficiency concerns.

The Appellate Tribunal set aside the Impugned Order in the case involving an appeal by the Resolution Professional against the Adjudicating Authority's ... Seeking rectification of mistake - mistake apparent on the face of record or not - Rejection of claim filed by the Respondent by RP - Regulation 12(2) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - HELD THAT:- RP’s claim is that he was not given a notice of application I.A. No. 95 of 2021 and thus not given an opportunity to be heard, and in such a situation he was unable to place correct facts before the Adjudicating Authority. Therefore, this order may be rectified - such a request is not in the nature of seeking correction of clerical or arithmetical mistake and therefore, it was correctly rejected by the Adjudicating Authority. It is clear that 90 days’ period which is provided under Regulation 12(2) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 expired on 17.12.2019. The initial claim was submitted by the Respondent on 26.10.2020, more than 10.5 months beyond the expiry of time limit on 17.12.2019 for submission of proofs of claims. It is also evident that subsequent to the invitation of Expression of Interest on 18.08.2020, the prospective Resolution Applicants were short-listed in the 9th CoC Meeting on 22.10.2020 and even by this time the Respondent had not submitted his claim to the RP. The proposed resolution Plans were considered in the 9th CoC Meeting whereas the claim in question was sent to the RP on 26.10.2020. CoC had short-listed and considered the proposed resolution plans and till then no claim had been received from the Respondent. Thereafter, the Resolution Plans were considered and approved in the 10th CoC Meeting on 07.11.2020 and the approved Resolution Plan was submitted for approval of the Adjudicating Authority vide I.A. No. 5283 of 2020 on 25.11.2020. Thus, it is clear that when the claim was first submitted by the Respondent to the RP, the CoC had already opened the proposed Resolution Plans received on 17.10.2020 and had begun considering them on 22.10.2020. Quite obviously the CIRP was at an advanced stage nearing finalization of the Resolution Plan before the claim was submitted to the RP by the Respondent. In an appeal wherein rejection of a claim is being considered by the Adjudicating Authority, the RP who has rejected the claim should be heard to arrive at a judicious, fair and transparent decision. This has not been done in the present case - since the claim of the Respondent was submitted with inordinate delay and in view of the advanced stage of CIRP, it is held that the claim of the Respondent should not be included in CIRP since such an inclusion would mean that the resolution plans would have to be invited afresh leading to unnecessary delay in the resolution of the corporate debtor which could even jeopardize the eventual insolvency resolution of the corporate debtor. Application disposed off. Issues:1. Appeal against Impugned Rectification Order and Impugned Original Order.2. Rejection of claim by Resolution Professional (RP).3. Rectification application under Rule 154 of NCLT Rules.4. Consideration of delayed claim by Adjudicating Authority.5. Arguments by RP and Respondent.6. Analysis of the impugned orders and relevant regulations.Analysis:1. The appeal was filed by the Appellant, the Resolution Professional of the Corporate Debtor, against the Impugned Rectification Order and Impugned Original Order passed by the Adjudicating Authority in CP (IB) No. 630(PB)/2019. The Respondent, an Excise & Taxation Officer, submitted a claim after 405 days from the initiation of Corporate Insolvency Resolution Process (CIRP), which was initially rejected by the RP. The Adjudicating Authority allowed the claim by condoning the delay, prompting the RP to file a rectification application under Rule 154 of NCLT Rules.2. The RP argued that the claim was submitted beyond the stipulated time frame, as per CIRP Regulations, and therefore, should not be admitted. The RP also highlighted the need for strict adherence to timelines in insolvency proceedings to ensure the resolution process's efficiency. The Respondent contended that the claim, though delayed, should be considered a statutory claim and pointed out the distinction in the present case compared to previous judgments.3. The RP's rectification application under Rule 154 of NCLT Rules sought to correct the order passed by the Adjudicating Authority, emphasizing the lack of notice and opportunity to be heard during the proceedings. However, the Adjudicating Authority correctly rejected the request, as it did not pertain to clerical or arithmetical errors but rather sought a substantive review of the order.4. The Adjudicating Authority's order condoning the delay in the submission of the claim by the Respondent was deemed erroneous by the Appellate Tribunal. The Tribunal noted the sequence of events, including the submission of the claim after the CoC had already progressed significantly in considering and approving resolution plans. The Tribunal emphasized the importance of maintaining the resolution process's integrity and efficiency by not disrupting the timeline with delayed claims.5. The RP's rejection of the claim and the subsequent appeal by the Respondent were scrutinized in light of the advanced stage of the CIRP and the CoC's active consideration of resolution plans. The Tribunal concluded that granting the claim at that stage would disrupt the resolution process and potentially lead to unnecessary delays, ultimately jeopardizing the insolvency resolution of the corporate debtor.6. In conclusion, the Appellate Tribunal set aside the Impugned Order, holding that the Respondent's claim should not be included in the CIRP due to the significant delay and the advanced stage of the resolution process. The parties were directed to bear their own costs in the matter.