2022 (6) TMI 7 - Tri - Insolvency and Bankruptcy

Liquidator's Rejection of Claims Without Verification Deemed Improper by Tribunal

The Tribunal found that the Liquidator failed to comply with IBBI regulations by rejecting claims without proper verification. The Liquidator was directed ... Rejection of claim of workmen/employees by the liquidator - veracity of the documents produced also not verified before rejection of such claim - Section 42 of IBC, 2016 - HELD THAT:- It is true that the Liquidator has rejected the claims of the appellants within hours of receipt of the claims, without verifying the veracity of the documents produced - As per Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, the Liquidator was required to process the claims submitted in Form 'E' by the Appellant as claim made by the 'Operational Creditor'. Regulation 20 provides for the processing of claims by other stakeholders and the Appellant were required to prove its claim inter alia on the basis of relevant documents which adequately establish their claim. Under Regulation 23, the Liquidator has the power and duty to call for such other evidence or clarification as he deems fit from a claimant for substantiating the whole or part of its claim. The Liquidator has avoided performing the duty as was required to be performed under the 'I & B Code' and the Regulations. The submission of the Learned counsel for the appellants is accepted that the Liquidator was required to look into the documents and come to the 'best estimate' and give the benefit to the Appellants - Moreover, on verification of the documents such as Form 16, 26AS issued by the Income Tax Department as also the Appointment Order and the salary particulars produced by the Appellants, it is evident that they were working under the Corporate Debtor from various years from 2014 onwards and their income tax TDS has been deducted by the Corporate Debtor. The Liquidator is directed to take steps to process the claims of the Appellants and arrive at best estimate of the amount of claim made by the Appellants and give the necessary benefit to the Appellant in the form of a speaking order considering all the documents produced and the averments made in these Appeals - appeal disposed off. Issues Involved:1. Rejection of claims by the Liquidator.2. Verification and substantiation of claims.3. Compliance with IBBI (Liquidation Process) Regulations.4. Duties and powers of the Liquidator.5. Allegations of non-application of mind and violation of natural justice.Detailed Analysis:1. Rejection of Claims by the Liquidator:The appellants, who were employees of M/s. Albanna Engineering (India) Pvt. Ltd., filed appeals under Section 42 of IBC, 2016, challenging the Liquidator's decision to reject their claims. Each appellant had submitted claims for unpaid salaries and other dues, but the Liquidator rejected these claims, citing a lack of supporting documents.2. Verification and Substantiation of Claims:The appellants argued that they had provided necessary documents such as employment contracts, salary slips, and Form 26AS statements to substantiate their claims. Despite this, the Liquidator rejected the claims within hours of submission, without verifying the veracity of the documents. The appellants contended that the Liquidator should have sought clarifications under Regulation 23 of the IBBI (Liquidation Process) Regulations, which he failed to do.3. Compliance with IBBI (Liquidation Process) Regulations:The Tribunal noted that under Regulation 20, the Liquidator is required to process claims based on relevant documents. Regulation 23 empowers the Liquidator to call for additional evidence or clarification from the claimant. Regulation 25 mandates the Liquidator to make the best estimate of the claim amount based on available information. The Tribunal found that the Liquidator did not comply with these regulations and rejected the claims without proper verification.4. Duties and Powers of the Liquidator:The Liquidator argued that he could not verify the claims due to the absence of books of accounts and other documents from the Corporate Debtor. However, the Tribunal observed that the Liquidator has the duty to call for additional documents or evidence to verify claims, as per Section 39 of the IBC. The Tribunal held that the Liquidator avoided performing his duties and did not make a best estimate of the claim amounts.5. Allegations of Non-Application of Mind and Violation of Natural Justice:The appellants argued that the rejection of their claims was arbitrary and violated the principles of natural justice. They cited Supreme Court judgments emphasizing the need for quasi-judicial authorities to provide reasons for their decisions. The Tribunal agreed with the appellants, noting that the Liquidator's rejection of claims within hours of submission, without proper verification, was inappropriate and lacked application of mind.Findings and Directions:The Tribunal directed the Liquidator to process the claims of the appellants and arrive at the best estimate of the claim amounts. The Liquidator was instructed to issue a speaking order considering all documents and averments made in the appeals. The Tribunal quashed and set aside the communications rejecting the claims and disposed of all the company appeals accordingly.Conclusion:The Tribunal emphasized the importance of proper verification and substantiation of claims by the Liquidator, as per the IBC and IBBI (Liquidation Process) Regulations. The Liquidator was directed to perform his duties diligently and provide a reasoned decision on the claims submitted by the appellants.